The Group Dentistry Now Show: The Voice of the DSO Industry – Episode 129

Chip Fichtner from Large Practice Sales joins the podcast for the second time to discuss the current market and what the future looks like.

Podcast highlights:

• Current multiples
• Fast exit vs. long term partnership
• Invisible DSOs
• The rise of specialty DSOs
• IDSO vs. staying independent

Learn much more by listening to this podcast.

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Our podcast series brings you dental support and emerging dental group practice analysis, conversation, trends, news and events. Listen to leaders in the DSO and emerging dental group space talk about their challenges, successes, and the future of group dentistry. The Group Dentistry Now Show: The Voice of the DSO Industry has listeners across North & South America, Australia, Europe, and Asia. If you like our show, tell a friend or a colleague.

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Full Transcript:

Speaker 1:

Welcome to The Group Dentistry Now Show, the voice of the DSO industry. Kim Larson and Bill Neumann talk to industry leaders about their challenges, successes, and the future of group dentistry. Visit groupdentistrynow.com for more DSO analysis, news, and events. Looking for a job or have a job to fill? Visit joindso.com. We hope you enjoy today’s show.

Bill Neumann:

Welcome, everyone, to The Group Dentistry Now Show. I am your host, Bill Neumann. As always, we certainly appreciate you listening in, whether you happen to be on Apple, Spotify, or Google platforms. Thanks for listening in. Without a great audience that keeps coming back every week, we wouldn’t have great guests like the next guest we have on the podcast. This is actually Chip’s second time on The Group Dentistry Now Show. Chip was on a couple years back, so we’re going to get some updates from him. Boy are there a lot of updates. But welcome, Chip Fichtner of Large Practice Sales, to The Group Dentistry Now Show. Welcome back, Chip.

Chip Fichtner:

Bill, thanks for having me. A lot of interesting things going on today.

Bill Neumann:

Yeah, yeah, there sure are. It’s been a heck of a year and we’ll talk about that in a second. Yeah, so I’ve known Chip for probably over a decade now, so it might be great to fill people in on your background before you launched Large Practice Sales, because you’ve got a really interesting business history.

Chip Fichtner:

Thank you, Bill. I think interesting is a compliment. I appreciate that.

Bill Neumann:

It is.

Chip Fichtner:

Odd is what many people would say. But no, I’m 63 years old. I’m one of the old guys now and I’ve done a lot of different things over the last 45 years. I started out working with Merrill Lynch and then Bear Stearns back when Bear Stearns was small and learned, we’ll call it, the brokerage and investment banking business from those experiences and then left and started buying and starting companies in a broad variety of industries ranging from auto parts to video conferencing back before there was an internet to pet food. We managed to buy, build, and monetize either by taking them public or by selling them to other folks, various businesses in various industries. I stumbled into the dental industry about 12 years ago.

A friend of mine was a venture capitalist. He had invested in a dental related business, which was not doing what he thought it should be, and said, “Hey, go take a look at this and you’re a marketing guy. Maybe you can help us.” I went and saw what they were doing, came back and said, “You know what? This is a phenomenal company. I will not help you market it, but I will buy it.” So we bought a company about 12 years ago and I learned about dental starting back then. We built that company and sold it about five years ago. One of the clients from that dental business called me up and said, “Hey, Chip, why don’t you help me sell them by practice?” I said, “I don’t know anything about selling dental practices, but I’ll learn if you’ll pay me enough.”

So we managed for our first transaction at Large Practice Sales to do a $45 million transaction and they paid us a $3 million fee. I was like, “You know what? Maybe this is a business.” Fortunately since then, we were lucky enough to pick a strategy that was different from everybody else in the advisory to dentists trying to monetize all or part of their practice. That strategy was we will be the only guys in the business, who are only paid by the doctors, not by the buyers and the doctors. So, our sole allegiance is to our doctors in achieving the highest value for them. The way we’re able to do that is because we get to show our clients to everybody, not just the invisible DSOs, as we call them.

Our doctors end up with at least 6 bidders and sometimes 18 bidders. So, the doctors, A, get a higher value because of the number of bidders, but more importantly, they get to choose from multiple groups, because ultimately, these transactions are marriages. You don’t get a check and go home. So, you got to pick the group that’s the right fit for you. So, I’m ahead of myself, but that’s our brief genesis.

Bill Neumann:

Yeah, that’s great. I guess you’re right, when I think back, it’s probably been a dozen years when you acquired that dental company that you had mentioned. That’s when I met you. So, let’s talk about, you also mentioned this term and we love our acronyms in the dental industry, IDSO or Invisible DSO. That is a term that was coined by Large Practice Sales. So, can you explain what that is and why it’s different from traditional DSO?

Chip Fichtner:

Yeah, absolutely. Invisible DSO is a term that we use to describe a group that is in the business of partnering with great doctors, not buying practices. So, in a traditional DSO, which have been around for 40 years, the DSOs will typically buy 100% of a practice. They will often rebrand that practice. Often, it’s from doctors at the end of their careers eager for an exit strategy. An invisible DSO is very different in that they will generally never buy 100% of anything. They’re interested in partnering with doctors by buying anywhere from 51 to 90% of the practice for cash up front.

The doctors retain ownership in the balance and they functionally gain a silent partner whose goal is not to micromanage or homogenize their partner practices, but rather to provide them with support services in the background to help them grow bigger, better, faster, more profitably. So, an invisible DSO becomes your partner. You stay as an owner. You continue as the leader of the practice with your brand team strategy and full economy. These groups have no desire to tell you who to hire, who to fire, what products to use or not use, what labs to use or not use, what payers to take or not take.

What they want to do is invest in great practices that are uniquely successful and not break the formula that made them successful and yet can come in and take over banking, accounting, payroll, benefits, compliance, credentialing, and payer and vendor negotiations. Because of their size, they’re able to do those things better than an independent dentist can. Really, where that’s becoming even more impactful today is, yeah, great, you pay less for supplies, but that’s not really relevant.

What becomes relevant is when they have leverage with payers. So, these groups, not all of them, but many of them are getting reimbursed at higher rates than independent dentists. Ultimately, that’s part of what’s driving consolidation. So, the invisible DSOs want to be your silent partner. They don’t want to tell you what to do or tell you what color to paint your lobby.

Bill Neumann:

So how many and how big are these invisible DSOs?

Chip Fichtner:

The invisible DSOs are by far the fastest growing segment of the dental consolidation space. They have attracted, just in the last call it six months, at least $6 billion worth of new capital that has been invested by groups that have never invested in dental before and are not private equity firms. One of the great myths in the dental consolidation frenzy is that it’s all private equity firms. The reality is that’s not true. We’ve done a half a billion dollars in transactions with family offices in the last three years, not private equity. Certainly, we deal with private equity backed invisible DSOs every day, but you also have sovereign wealth funds that have now invested in US dental consolidation.

You have traditional large investors like BlackRock, which is the world’s largest asset manager with $10 trillion under management. They have just recently dipped their toe in the water with a $2 billion investment in an invisible DSO. So, the invisible DSOs, they’re far more invisible DSO than branded DSOs. They are attracting the great majority of the new capital that’s going into dental consolidation because their model appeals to younger doctors. We did $102 million in transactions last year out of our $612 million in total for doctors in their 30s. The perception in the dental community is that you only consider one of these things if you’re nearing the end of your career. Well, that is just not the case anymore.

When you have doctors in their 30s partnering with these in invisible DSOs, they’re doing it because they believe the upside in their remaining ownership will be far greater than staying independent for the next 20 or 30 years. So, you’ve had a dramatic change of doctors now grasping that, “Hey, I can get a silent partner that’s not going to tell me what to do, and I can do it at an extraordinary value today. So, this makes sense.” I expect we’ll do probably over $250 million of transactions this year for doctors in their 30s.

Bill Neumann:

So the age of the doctors that are partnering with invisible DSOs is coming down, right? You’re seeing a trend of these younger dentists actually realizing, “Hey, I’m better to partner with somebody now. I’m going to see more return ongoing than I would if I was on my own.”

Chip Fichtner:

Absolutely.

Bill Neumann:

You mentioned a couple of different, which is a great point about not all invisible DSOs are owned by private equity, which is definitely something that people assume or think. You mentioned a couple different other investors or owners of these invisible DSOs. You mentioned family offices. You mentioned private equity, sovereign wealth funds. I mean probably a lot of people in the audience know the differences, but for maybe some of the folks that don’t, can you go through, just spend a little bit of time on what’s the difference between a family office versus private equity versus a sovereign wealth fund and then BlackRock?

Chip Fichtner:

Yeah, sure, absolutely. They’re interesting differences. So, a traditional private equity firm uses other people’s money to make investments in a variety of industries across multiple businesses in a variety of industries, and they’re functionally a money manager of other people’s money. So, they want to make sure that they make great investments for their investors, because ultimately, their compensation as private equity fund managers is to get a percentage of the profits of the investments that they make. That is their business. There are thousands of private equity firms out there, and many of them have invested in dental, but many more will be coming. So, a family office on the other hand, while their strategy is the same, they want to invest money and make a profit.

The difference there is you often have one individual or several members of a family who are, let’s call them billionaires, and they’re making the decisions. It’s their money. It’s not somebody else’s money that they’re managing. It’s their money. So, they’re much different group to deal with from our perspective, because in a private equity group, you have multiple decision makers that operate as a committee, or in the family offices, there’s ultimately one decision maker because it’s his money and he’s writing the check. We like family offices because there tend to be fewer layers to deal with in trying to create a great partnership for our clients.

Now, the sovereign wealth funds are a little different in that the sovereign wealth funds are using the country’s money. Largest sovereign wealth fund in the world is China. Number two is Norway, and number three is the country of Abu Dhabi, which is a relatively small oil-based economy, but they have almost a trillion dollars under management of the country’s money. Their goal is similar to that of a private equity firm or a family office. They want to invest their capital. They often have a longer term view of the world than the private equity groups who are typically going to try and monetize their investments in five years or less. The family offices, their timeframes will vary.

One of the largest invisible DSOs in the country is owned by a family office out of Switzerland, and they’re very clear that they never want to monetize that investment. They merely want to grow it. So, each of them are going to have different goals. The sovereign wealth funds will invest in private equity firms and provide the capital for them. They will also invest directly in businesses as Abu Dhabi did into one of the 10 largest invisible DSOs in the country that deal closed in the fourth quarter of 2022. They just dip their toe in the water with a billion dollars. When you’ve got a trillion dollars, a billion dollars, it’s not that much money, but it rang a bell for other sovereign wealth funds that are now looking at dental consolidation. They have very, very deep pockets.

When new capital comes into the dental consolidation business, it drives up not only the values of practices, but it drives up the number of bidders for practices. So, another interesting dynamic. Now BlackRock as the world’s largest asset manager with almost $10 trillion under management, they have various divisions that are investing for the long term, the short term. They have a private equity group subsidiary. They have multiple real estate investment funds. Again, they’re taking different term views depending on which fund they’re using, but it’s an interesting source of capital that is new to dental consolidation. So, that’s really changing the dynamics. It’s driving up the number of bidders. It’s driving up the number of new invisible DSOs that have very large capital access.

So, that’s changing the dynamics of what we do every day. Just as an interesting note, in mid-April, we had bids for two great practices that we had. One was an oral surgery practice. One was a pedo practice. We would normally have expected to have 6, 8, maybe 10 bidders for those practices each. We ended up with 18 bidders on the oral surgery only practice, and we ended up with 13 bidders on the pedo practice. Many of those were from newer groups that had fresh capital and plenty of access to credit. So, contrary to popular belief, values are actually up and the number of bidders for great practices is actually up.

Bill Neumann:

Thank you. That was a great 101. I really appreciate that. I’m sure the audience is going to appreciate that as well. So, I think let’s talk about probably the biggest topic of conversation that I have and I’m sure you do as well, our current economic situation. So, we find ourselves in a radically different place than we did this time last year. So, we have inflation. We have interest rates much higher than they’ve been in the past. We have this bank crisis going on. So, a lot of things that we see seems like the economies in flux might be an understatement. So, that being said, when you talk to dentists looking to sell their businesses and you talk to these invisible DSOs and what you’re seeing on both sides, what does the market look like today versus this time last year?

Chip Fichtner:

Well, ultimately, the number of bidders and the values that we are achieving for practices today are setting new records every day. That would be across specialty and GP. A couple of real world examples, the oral surgery practice with 18 bidders, although we did $250 million of oral surgery transactions last year, this one, which was not a particularly huge oral surgery practice, they had about 12 million in collections. This one achieved the highest multiple of EBITDA that we have ever gotten for an oral surgery practice. Now, I give them that they are in Florida and Florida’s a very hot place to be at the moment, but it was a new record number of bidders and a new record high value.

The pedo practice, same thing. A new record value with a record number of bidders, and then to take it further west, let’s go to Arkansas, great perio practice there. Record number of bidders, new record value. Again, these are all in the last couple of weeks. These are post-bank crisis. Bank crisis isn’t over, but certainly, the initial shocks of two of the three largest bank failures in US history have occurred in the last 90 days. So, that’s a little scary. Then we got over 10 times multiple for a 4 million in collections GP practice in Michigan two weeks ago. All of those are records with record numbers of bidders. I can’t tell you why. I’m just telling you that that’s what’s happening. Now, on the other end of the spectrum, the biggest challenge to dental practices today is margin compression.

Your costs are going up, and in some cases, you can raise your fees. In other cases, you’re taking insurance, and therefore, your fees are dictated by the payers. So, what we see in a lot of practices is that although they may be growing on the top line, their bottom line is actually decreasing due to the dramatically rising costs of labor, supplies, utilities, taxes. Everything’s going up. So, doctors who are unable to raise their fees because of their payer contracts are seeing a reduction in their EBITDA. When they see a reduction in their profitability, they see a reduction in the value of their practice. So, that’s causing challenges for some groups. In ortho, we’re seeing some practices with new case start declines.

Some of them are offsetting that with fee increases, but ortho, depending on which expert you listen to, had an 8% decline in 2022 of case starts. Really, what we’re seeing in ortho is an interesting divergence of those doctors who have grasped the fact that they have to be direct to consumer markets and can no longer rely on the old standard referral networks. Those who have grasped and mastered the direct to consumer marketing are actually growing. I mean, we have multiple ortho clients that will grow 20, 25% this year. In some cases, we also have ortho clients that have not mastered the direct to consumer marketing that are seeing 10 and 15% clients in case starts this year. So, there is a divergence.

Another interesting area is the implant focus practices. Just in the last year, there have been six new invisible DSOs started by very well capitalized investors that are eagerly partnering with any practice that has at least 30% of their revenues coming from implants. Those could be perios. They could be oral surgeons. They could be what we call a super GP. That percentage of revenues would include not just the implant itself, but also the extractions, the bone grafting, the imaging, and whatever else goes with it. So, that is a whole new development in the last 12 months.

Now, in addition to the implant only focused invisible DSOs, the multi-specialty groups are also bidders on the implant focus practices. If they’re oral surgeons, they’re going to have one of the 15 oral surgery only invisible DSOs as a bidder, which interestingly is up from zero six years ago. If you’re a perio practice, there are multiple perio only invisible DSOs plus what we call the surgical trifecta DSOs. These are groups that are interested in perio, endo, oral surgery only in the same communities. So, a lot of changes going on in this business, all of which are good for dentists. I can’t think of anything going on right now that’s actually bad for dentists except for cost increases of their supplies, labor, rent, taxes, et cetera.

Bill Neumann:

What do you think 2023 and beyond looks like? We’re going through some changes here. At least for the dental industry, valuations are at all-time highs in a lot of cases, at least from what you’re seeing at large practice sales. So, what are your thoughts? Obviously, get your crystal ball out as best you can and maybe make some predictions.

Chip Fichtner:

I don’t think you’re going to see a reduction in the number of bidders. I think you’re going to see groups looking for better practices, meaning the higher quality your practice is and the faster its growth rate is going to dictate the number of bidders and the value that you achieve. If you have a declining practice, you have a problem in my world. When we have practices that are declining, we will often say, this is not the time for you to do something. You should focus on getting your costs down and your revenues up and let’s talk again next quarter or the quarter after. A declining practice today is a very tough thing to achieve a great value for. So, I don’t see any changes in the number of bidders.

I think they’re going to be a little more selective as to the quality of practices that they’re interesting in. Bigger is always better in my world. The bottom end of the practices that we deal with will typically be praxis with $1.5 million in collections if they’re specialist and $2 million in collections at their GP. Again, the values that we calculate have nothing to do with collections. It’s all about bottom line profitability. But I think we’re going to continue to see a great 2023 and a great 2024 as we lead into the elections in late 2024, but I think doctors have got to keep an eye on their costs very carefully. One of the things that I admittedly am completely ignorant on, and that is dental technology, but I had an interesting conversation.

I was at a very select symposium this weekend in the Bahamas with a group of 10 great doctors each with over $10 million in collections, all young. They were talking about the impacts of technology on their practices. One in particular had about a $15 million in collections practice. He said the biggest change in his world in the last three years has been implementing AI into his diagnostic processes and that AI is able to see things within images or x-rays, because I’m old, I can say x-ray, that the human eye can’t catch. Their implementation of AI has driven up their revenues by 15%, which is a mind-boggling number. It’s just not that expensive to implement.

So, when I start hearing about new technologies that are impacting dentistry, it to me will drive consolidation, because many independent dentists can’t necessarily adapt, adopt, or pay for some of the new technologies that are coming down the road. This is across all segments of dentistry. That doctor was, in his case, a GP practice, and it was changing his already massive practice. So, I think doctors need to understand will they and can they adopt modern technologies into their practices because it’s going to make a difference and that’s starting now.

Bill Neumann:

Yeah, that is a great point. To your point that some of technology, the cost factor may not be an issue, but in other cases, it’s going to be a huge issue. Invisible DSOs are going to have the money and also the support behind the technology, the education, the service contracts, whatever they need to continue to support that technology. Whereas an independent clinician may not be able to do all that. Maybe that was one reason already. Why would a doctor want an invisible DSO partnership versus staying independent today? You mentioned the one which was us going up. What are some other reasons?

Chip Fichtner:

I’m old and conservative. So, one of the things that drives my discussions with doctors is the fact that in most cases, their practices are their primary asset. In most cases, that leader doctor, even if he has multiple doctor partners or multiple team members, that leader doctor, if gets hit by a bus tomorrow, you have a problem. That means a big piece of your net worth is tied to your practice. In times of trouble, which I consider where we are now, liquidity is always a very valuable thing.

The great thing about an invisible DSO partnership is it enables you to monetize a part of your life’s work for cash up front, in our case, millions and millions of dollars, and do that at long-term capital gain tax rates and therefore diversify your risk, have some liquidity to take advantage of opportunities that no doubt always come in times of economic trouble. Yet you remain as an owner, you still have the upside in the performance of your practice. To me, that’s the ultimate benefit of an invisible DSO partnership is putting money in your pocket at low tax rates and yet continuing to have the upside of your practice.

Bill Neumann:

Here’s something that I hear about quite a bit. You have different horizons for when dentists would like to exit, to retire. So, maybe talk a little bit about dentists that are looking for a fast exit versus maybe some of those younger dentists that are looking for a longer term partnership.

Chip Fichtner:

It varies based on a lot of different factors. In our business of creating invisible DSO partnerships, these groups are looking for doctors who have at least a three-year time horizon to continue leading their practice. Five is preferred. The younger the doctor is, the more valuable they are, because they see a doctor who’s 40, who may have 20 or 25 years left in their career. Whereas when they look at a 60-year-old doctor, that’s a doctor with three to five years left. So, there is a value differential today that really didn’t exist as much three years ago, where the younger you are, the more valuable your practice is.

One of the challenges facing doctors today is if you have built a great practice, a large one with $2 million or more in collections, it is very difficult to monetize that under the old doctor to doctor model. A, it’s not going to get you the value that an invisible DSO partnership will get you, but there are fewer and fewer doctors that are interested in becoming entrepreneurs in buying practices. I think the ADA would tell us that 10 years ago, about 15% of the dental school graduates went to a DSO and the rest of them went into private practice or independent practice. I think last year, the number will come out somewhere north of 30% of those graduates went to work for a DSO or an invisible DSO, which is reducing the pool of potential buyers for a doctor who’s looking to retire or transition as they say in the business.

So, that’s a changing dynamic such that particularly in some of the specialty practices, we see doctors that don’t have that exit option at all. It’s particularly true in oral surgery at the moment in that probably half of the graduates from residency in 2022 went to work for an invisible DSO, and the other half, which leaves about 100 when you take out those who didn’t go into private practice but instead went into public service. So, there were roughly 100 recruitable oral surgeons out there. So, if you’re one of the thousands of oral surgery practices where your dream was to work until 55, hire an associate who buys you out, that is not happening anymore.

So, you’ve had a dramatic change across all of dentistry, but very, very true in oral surgery at the moment in that these doctors don’t have an exit at all. Because they’re too old, the invisible DSOs are not interested in them. Because of the size of their practices and the fact that they can’t recruit oral surgeons, many of these oral surgery practices are locking the doors and retiring. That’s an ugly scenario. So, it pays to understand what’s going on, not just nationally, but in your community, because each community is a little different. When an invisible DSO comes into your town, they can be a fierce competitor, because they’re still operating under the local brand name of the dentist down the street. But that dentist is armed with resources that the independents don’t have.

They’re getting reimbursed at higher rates. They’re paying less for team benefits. They’re paying less for supplies, and therefore, they can be pretty fierce competitors and they’re going to have first access to the modern technology. They’re accessing professional planned marketing and they can recruit. One of the biggest challenges in dentistry today is the ability to recruit team members and doctors. The invisible DSOs have a leg up in recruiting, because if they want a great associate, they have the ability to offer that associate equity ownership in the group, which not only is a great way to attract team members and doctors, it’s a great way to lock them in.

Once the doctor is recruited as an associate, he gains equity ownership in the parent company or the practice itself. That doctor now has golden handcuffs. He’s not leaving. The revolving door of associates stops. So, all of those tools are helping the groups that are affiliated with invisible DSOs and it’s become a competitive challenge to those who are not and that divergence will accelerate.

Bill Neumann:

So, as we start to wind this podcast down, I had a couple final questions for you, Chip. You mentioned special specialists quite a bit. Maybe just paint a picture, if you wouldn’t mind, of specialists, whether it’s oral surgery, ortho, perio, whatever it happens to be, endo, versus GPs when it comes to these invisible DSO partnerships. So, for instance, I would imagine that oral surgery and endo, especially after COVID, that that was all the rage. So, we saw especially DSOs form specific to endodontics or oral surgery, but it seems like there are a lot of options for specialists now.

Chip Fichtner:

Yeah, there are. I mean if we look back seven years ago, there were no ortho only invisible DSOs. Today, there are 13. Six years ago, there were no oral surgery only invisible DSOs. Today, there are 15. Three years ago, there were no perio only invisible DSOs. Today, there are functionally 10. Endo has seen a dramatic increase from the eight endo only invisible DSOs that didn’t exist five years ago. So, what’s happened in specialty, GP focused invisible DSOs have been around for 35 years, but you saw a dramatic increase in the number of invisible DSOs focusing on specialty. Really, one of the most interesting ones is what we call the dental trifecta invisible DSOs. These are the groups that are partnering with pedo, ortho, and oral surgery in the same communities.

We helped build the first big one of those starting in the summer of 2019. We partnered 110 of our clients with that group. In 35 months, they went from an idea to a recapitalization, meaning that their investors sold the majority interest in the business for $2 billion. So, from startup to $2 billion valuation in September of 2022, and our 110 clients in that transaction were really, really happy. Some of them saw gains on their retained ownership value of over 500% in less than three years. So, the dental trifecta invisible DSOs, once that one recapitalized in September at a record multiple because they had done something that very few invisible DSOs get to do was they had rapid internal growth.

If you own 20 pedo offices in an area and buy five ortho offices that overlap them, the pedos are going to refer to the orthos that are in the family, driving up organic growth within the group. When you have rapid organic growth, you are the most valuable of all DSO types. So, there are now 10 dental trifecta DSOs up from two a year ago. So, you’ve had this dramatic increase in specialty. However, that is not crowded out, the GP markets. GPs are still the most consolidating because there are more GPs than all the specialists. But yeah, it’s interesting changes. Really interesting changes.

Bill Neumann:

So final question here and then we’ll make sure we give people the opportunity and the information to reach out to you and connect with you if they’re looking, whether they’re specialty or GP and they’ve got a large practice, that they’d be interested in talking to you or somebody on your team about potentially partnering with one of these invisible DSOs. We talked a lot about this actually, but I don’t know if there’s any final thoughts about how these invisible DSOs and DSOs are changing the landscape of dentistry. I mean, I have my own thoughts. I’ve seen the consolidation, but I wonder maybe there’s some other changes that you’re seeing as well.

Chip Fichtner:

Dental consolidation is not new. The ADA came out with a report last week and said the most consolidated of all dental practice types with orthos were orthos with about 18% of orthos now affiliated with an invisible DSO or DSO. They think the number for GPs is 13%. I would argue that and say it’s probably closer to 20. But in any case, we are in the first innings of dental consolidation and we can look at other provider-based businesses. We’ll use medical doctors as an example. 78% of all MDs today are affiliated with a group, a hospital, or an insurance company. Consolidation is coming to dentistry just as it did to medical, maybe for different reasons.

I personally don’t think we will see 78% of all GPs working for a group or a hospital or an insurance company, because many GP practices are not consolidatable. They’re not big enough, but it’s common and we’re still in the early innings of it. Fortunately, right now, values are extraordinary. But every doctor, I urge every doctor to at least have a conversation with me, because I probably have a little bit of an idea of what’s going on in their particular community. We’re in the education business. Our goal is to help doctors understand what these partnerships can mean. It may or may not be right for them and it may or not be the right time for them, but all doctors should really understand what’s going on. I’ll give you a final real world story as to why.

We had a large ortho client. He was large because he was one doctor, no associates doing $6 million in collection, which is phenomenal. This is a guy who worked hard and he became our client. The partner we chose for him, this was in a town of about 100,000 people in the Midwest. The partner we chose for him happened to own the five large pediatric practices in that same town. He had never received any referrals from those pediatric practices. Once they partnered together, as you can imagine, those 1,500 ortho case referrals that were going to the other four orthos in town were no longer going there. Instead, my client picked up those 1,500 per year ortho case referrals. His practice more than doubled in size.

The problem was the other four orthos in town saw about a 25% decline in their production. So, it was, I won’t say death to them, but a practice that’s declining by 25% does not have a whole lot of value in my world. So, you need to keep an eye on what’s going on in your community because invisible DSOs are either there or they will be there shortly. If nothing else, you need to at least become educated as to what these things look like, because ultimately, you’re either going to join one or compete with many.

Bill Neumann:

I think those are some great final thoughts, Chip. If practice owners, clinicians want to get in touch with you or someone on your team, how do they do that, Chip?

Chip Fichtner:

largepracticesales.com. Pretty simple. Go to our website and learn and there are contact buttons in there to contact us either via email, via text, via phone. I personally talk to every single doctor. It’s the great thing I get to do every day, because I get to learn from great doctors all over the country every day.

Bill Neumann:

Great information. So, just so everybody knows, we will make sure we drop largepracticesales.com. We’ll drop the URL on the show notes and we’ll make sure that there’s a link and you’re able to reach out to not only Chip, but anybody on Chip’s team. So, Chip, it’s great to have you back on the show. Things certainly have changed since we first spoke. A lot of great words of wisdom there. I think that the time is right to have a conversation with Chip and his team at Large Practice Sales to at least explore the opportunity, find out a little bit more about what a partnership with an invisible DSO looks like and the upside for you and your future. So, Chip Fichtner, principal of Large Practice Sales, thanks again for joining us on The Group Dentistry Now Show.

Chip Fichtner:

Bill, thanks for having me. I really appreciate it.

Bill Neumann:

Thanks everybody for listening in. Until next time. This is GDN.