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Corporate Dentistry:Making an Informed
Practice DecisionW. Carter Brown, DMD, FAGD
AGD President-ElectChair, AGD Practice Models Task Force and Corporate Dentistry Task Force
Aaron Bumann, DDSMember, AGD New Dentist Committee
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Weighing the Options
Practice Ownership
Specialization
Associate, Traditional Large Group Practice
Associate, Small/Solo Practice
Public Health
Corporate Dentistry
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Dentistry
Trends in Insurance Benefits
The Economy
Corporate Practices
Health Care
Reform Act Changes
in Oral Health Status
Midlevel Providers
Rising Student
Debt
New Dental Schools
Source: American Dental Association, “Shedding Light on the Invisible Hand,” by Marco Vujicic, PhD, 2011
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Projected GrowthLargest Groups
Source: American Dental Association, Health Policy Resources Center, Large Group Practices, Sampling Frame, Unpublished Data, July 2009
Hypothetical Market Share of the Largest GroupsAmong Private Practitioners
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A Few Definitions
Dental Service Organization (DSO):o The structure which deals with the
delivery of patient care
o Can be a large group practice or multiple PC units
o They often contract with a DMO for management services
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A Few Definitions
Management Service Organization (MSO):o The top-tier structure for decisions
affecting the overall business aspects of the corporation
o They make money from the DSO components
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A Few Definitions
Dental Management Service Organization (DMSO):o A structure where both the business
decisions and patient care are combined
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A Few Definitions
Dental Directors:o In some models, they are employees of
the management organization and in others they are the directors of the large group practice that contracts with the management organization
o In some models, they are responsible for quality assurance
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A Few Definitions
Practice Ownership:o In almost every case, when a DSO talked
about the opportunity for dentists to “own” a dental practice, they were referring to ownership of patient records only
o Ownership generally does not include the building or equipment
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A Few Definitions
Corporate Dentistry:o “A variety of practice modalities in which
management services, at a minimum, are provided in a manner that is organizationally distinct from the scope of activities performed by a dentist within only his or her practice”
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A Few Definitions
EBITDA and EBITA:o Earnings Before Interest, Taxes,
Depreciation, or Amortization
o The way equity firms (for-profit) determine market value
o Resale value in five years or so versus net revenue
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A Few Definitions
Equity Firm:o An outside, for-profit investor
o Raises capital for the DSO
o Privately- or publically-traded
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A Few Definitions
Professional Corporation (PC):o Many dentists form PCs even for a single
doctor, single office
o Relative to DSOs, the management company has business contracts with one or more PCs
o Each PC could run multiple offices—there may be a single PC owning all offices within a state, or even multiple PCs owning offices across multiple states
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Reasons for ChoosingDSO or Non-DSO
Future Owner Flexible
Schedule No Bus. Resp. Less Ins.
Involv. Student Loans
0
10
20
30
40
50
60
Non-DSODSO
Source: American Dental Association, Group Practice Survey, Unpublished Data, January 2012
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o The question of “Work-Life Balance” ended up 50/50, so this was a factor no matter which model or group you are in.
Reasons for ChoosingDSO or Non-DSO
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Number of Establishments
Source: U.S. Census Bureau, Economic Census, www.census.gov/econ/census07, Accessed March 14, 2011
Overall decrease of 240 corporations, but numbers of establishments grew,
meaning that there is movement toward fewer, but larger corporations
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o DSO with internal management (no management contract)
o DMSO (with management contract) without outside equity owners
o DMSO (with management contract) with outside equity owners
o Geographic/multispecialty group practice (not a true corporate model)
Types of Corporate Dentistry
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o Geographic/multispecialty group practice (not a true corporate model)
o Often grouped in with Corporate discussions, but will not be a major part of this presentation
Types of Corporate Dentistry
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DSO With Internal Management
Board of Directors
President
Chief Administra
tor
Regional Operations Manager
Group Doctor Mentor
Practice Doctors
Practice Managers
Collaborative Practice Management Team
o Dentist practice owners are the shareholders of the DSO
o Common mission, values, guidelines/protocols set by Board
o Business management through a centralized, internal team
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DMSO (With Management Contract) Without Outside
Equity OwnersMSO
PC/DSO1
PC/DSO2
Dental Office 1
Dental Office 2
Dental Office 3
Dental Office 4
PC/DSO3
Business Services
Contracts
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o PC-owner dentists own the patient records and are responsible for clinical functions
o Each PC contracted with same outside management company (MSO)
o PC owners administer/implement the business direction from the MSO
o NOTE: The company with the primary corporate revenue interest is not the same as the dentists who have the primary clinical interest
o The management company may be owned by one or more individuals who may or may not be dentists
o The profitability of the company is based entirely on business service agreement fees instead of market valuation; fees vary with each practice’s income stream
DMSO (With Management Contract) Without Outside
Equity Owners
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DMSO (With Management Contract)
With Outside Equity OwnersEquity Firm(s)
DSO/MSO
Dental Office 1
Dental Office 1
Dental Office 1
Dental Office 1
Dental Office n
Business Services Contract
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DMSO (With Management Contract)
With Outside Equity Ownerso There will now be interest in maximizing
the “enterprise value”
o Enterprise value is the present value of future cash from the business operations reflected as a multiple of EBITDA or EBITA
o Bubble
o Increasing enterprise value versus patient care
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Key Observations From Interviews
DSO – Internal Management – No
External Management
Contract
DMSO – Business Services Contract – No Outside Equity
Ownership
DMSO – Business Services Contract –
With Outside Equity Ownership
Ownership (Beyond Patient
Records)
Licensed dentistsas S/H
The managemententity (MSO)
Private equity firms (varying % ownership)
Contract For Business Services
No – but centralized protocols established
by board of S/HYes – with MSO Yes – with MSO
Productivity/Revenue
Goals
Yes – set by licensed owner dentists
Yes, revenue goals administered by PC
Yes – volume expectations (number
of patients, supply limits, etc.) set by
DMSO
Career Growth Associate to S/H Associate to PC
ownerAssociate to dental
director
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Commonalities Between Models
o CE in clinical and practice (varies by company [not model-consistent] based on internal or external)
o Entry into modality as dental associate
o Control of business services by someone other than the practicing dentist of a given practice
o Revenue expectations (although the details differ)
o Shift in focus to populations between Medicaid-eligible and employer-insured
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Takeaways FromThe Presentation
o The AGD’s pamphlet of questions to ask
o Consult with your own independent counsel or accountant who is knowledgeable in the field
o Clinical decision-making and understanding your ultimate responsibility
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Making Informed Decisions:
Questions to Asko Who owns patient
records?
o What are my employer’s expectations regarding my productivity, patient volume, and revenue?
o And more…
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Responsibilityo Regardless of who holds the responsibility for
business decisions, dentists hold the responsibility for their clinical and ethical decisions, whether before a state dental board, a court of law, or the court of public opinion.
o Every dentist should consult with his or her own independent attorney, accountant, or other appropriate professional who is familiar with varying modalities of business practices in health care delivery, regardless of the modality of practice that he or she may be considering.
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What Can the AGD Do For You?
o Contract review for members
o Practice management assistance
o Education to help you become the best dentist possible, regardless of practice modality
o CE-based awards: Fellowship! Mastership!
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Thank You!•AGD Practice Models Task Force
•W. Carter Brown, DMD, FAGD, Chair/AGD President-Elect •Craig S. Armstrong, DDS, MAGD
•Myron J. Bromberg, DDS•Richard W. Dycus, DDS, MAGD•Willis S. Hardesty, Jr., DDS, FAGD
•Dr. Edgar Radjabli, DDS
• Consultants to the Task Force•L. Jackson Brown, DDS, PhD•Jerry Caudill, DMD, MAGD
•Jeffrey M. Cole, DDS, MBA, FAGD, AGD Immediate Past President•W. Mark Donald, DMD, MAGD, AGD Vice-President•Linda J. Edgar, DDS, MEd, MAGD, AGD President
