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Elliot Zibel, CEO of Select Dental Management, joins Bill Neumann on the Group Dentistry Now Show. Elliot discusses the rapid growth of Select Dental Management, a Dental Partner Organization. He also discusses doctor recruitment, clinical education, mentorship and how to strategically grow your DSO. Select Dental Management was a winner of the 2020 Emerging Groups to Watch awards – HERE. To find out more about Select Dental Management contact Elliot Zibel at ezibel@selectdentalmanagement.com or visit Select Dental Management.
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Full Transcript:
Bill Neumann:
Hey, I’d like to welcome everyone to the Group Dentistry Now Show. I am Bill Neumann. As always, we really appreciate everybody for watching us on YouTube or listening in on Apple, Google, Spotify or any one of the number of listening platforms that you can hear us on. Without an audience, we wouldn’t have a show. Of course, without great guests, we wouldn’t have an audience.
Bill Neumann:
So, we have another great guest and we’re going to talk really about the building of a DSO, relatively recently too that the DSO just started back in 2018 and has already grown pretty substantially. So, we’ll go through that journey a little bit and kind of figure out the “how” and the “why” behind that. Without further ado, I’d like to introduce the CEO of Select Dental Management. We have Elliot Zibel. Elliot, thanks for joining us.
Elliot Zibel:
Thanks for having me.
Bill Neumann:
You may know Elliot. You’ve probably seen him around several meetings, although I guess with COVID, have you been to any lately?
Elliot Zibel:
Honestly, not as many as I’d like to. It’s something that I really early on went to tons of meetings, and it was really beneficial. Lately, between COVID and just the time constraints of growth it’s been a little harder to get away. But I’m getting back on the circuit pretty soon.
Bill Neumann:
Yeah, I guess the larger you get the less important probably… Not necessarily important the meanings are from a networking perspective, but the less time to you have to attend those meetings. So, you probably have to be selective.
Elliot Zibel:
They’re great. They’re great. There’s just so many of them you could be at one. As you know, Bill, every other week. I always get a lot when I go there, it’s just a matter of carving out the time for our guys.
Bill Neumann:
For sure, yeah there are a lot. Thank goodness they’re back in person, which is a positive. Just a little bit of background on Elliot, like I mentioned earlier, at Select Dental Management, started in 2018. So, a relatively short time ago. Then when you kind of figure COVID into that mix, it’s like half the lifecycle of Select Dental Management has been during COVID, right?
Elliot Zibel:
Yeah.
Bill Neumann:
So, kind of interesting.
Elliot Zibel:
I’ll give you the sort of background of how I got into dentistry. Select Dental Management was founded in 2018 by myself and one of my very close friends, who I’ve been friends with since I was five years old, named Dr. Jonathan Mason. The way that we started Select was actually through John’s experiences as a clinician and then as a practice owner. John practiced in private practice actually working for his father for about seven years at a large PPO, fee-for-service practice. Then he decided he wanted to live a different pace of life, and he bought a [inaudible 00:03:15] fee-for-service practice up in Manchester, Vermont by Stratton Ski Mountain, for those of you guys who like to ski. That was in 2015.
Elliot Zibel:
I ran into John a couple of years later. I asked him how his practice was going and he had told me it was going really well. He had, I think when he bought the practice there, doing like $800,000.00 a year in collections and he had grown that to over $1.7 million in a little less than two years. That sort of got my attention and I started asking him how he had driven that type of growth. The way was really just doing a very good job of helping patients understand the importance of their oral and systemic health, and incorporating things into the practice such as co-diagnostics and internal camera pictures, and perio protocols, and other things just designed to provide great care to patients that really resonated and helped drive the growth in his practice.
Elliot Zibel:
The other component of what he was experiencing was he loved being a dentist. He didn’t really like being a business owner. In his mind, he wanted to just come do his dentistry and leave. He didn’t want to do anything that didn’t require a dental agree. Yet, as everyone listening to this call who’s a dentist understands, there’s a lot that goes into managing a dental practice between HR and finance, and marketing and regulatory, and OSHA, HIPAA. He was sort of a little overwhelmed and didn’t want to be doing that the rest of his life. John and I decided hey, maybe there’s a way we could help other practices experience real growth by focusing on quality of care, and we could also help alleviate some of those non-clinical responsibilities that anybody could really manage.
Elliot Zibel:
Prior to that, and prior to this summer of 2017, when I John and I first talked and we started to select actually less than six months later when that first conversation happened, but prior to that I worked in finance as an institutional investor investing in all sorts of different types of companies ranging from startup companies with no revenue, but primarily focused on large multi-billion dollar companies, public market companies, and was very much a longterm investor working with leadership teams and boards of directors to create value for shareholders. I got a really good education from my successes and from my failures on consistent things that work to create successful companies, and also consistent things that can create no-so-successful companies or companies that are in crisis or have struggles.
Elliot Zibel:
When John and I met and we sort of decided to really look into the dental industry in more detail, that was something I was very familiar with, getting up to speed on different industries. I can bore you with the details of why I decided to leave Wall Street and get into dentistry, and what gave me that conviction if that’s helpful, but my goal was really to leverage what I had learned in other industries and to apply that to dentistry.
Bill Neumann:
It would be interesting, Elliot. What’s interesting about this is that what Dr. Mason, you’ve probably known him longer than probably anybody else, anybody else that’s known one of the partners at a DSO. You do hear this where maybe somebody that has been a college roommate, one went the MBA route, the other went the dental school route and they kind of connected back. Your roots go much further back with Dr. Mason. It probably sounds like nursery school or preschool time. So, quite a while.
Elliot Zibel:
Yeah. I think when I dug into the industry, and some of this is going to be fairly obvious, but what I noticed was number one, it’s a great industry, recession-resistant, highly recurring revenue, lack of reimbursement risk if you don’t focus on Medicaid, which we do not. On top of that, I noticed that the students graduating dental school, the cost of tuition increases 7-8%+ a year, but income levels has stayed flat. So, the debt-to-income levels of these dental school students has really more than doubled over the past 10 years as their income levels have been flat, but the amount of student loan debt on average has grown to over $300,000.00.
Elliot Zibel:
At the same time, you have this dynamic in dental and every other industry, driven by demographics of more 65+ year old dentists looking for transition solutions and liquidity. On top of that, when I looked at dental and the fragmentation compared to other types of medical industries, whether it was vet or the primary care industry, dental at the time when I started Select was about 10% penetrated across the US, and much less so in our markets versus other industries that were in 60, 70, 80% penetrated.
Elliot Zibel:
Kind of putting all of that stuff together gave me the conviction to say, “Hey, there’s definitely going to be growth in consolidation in this industry.” I think what really we challenged ourselves to think about is, how can we be different and what can we learn from what others have done? Unfortunately, I also realized I wasn’t the first person to think about doing this in dental. There are a lot of models. Almost every private equity group had a play in this space in some way.
Elliot Zibel:
So, we really dug deep. We were fortunate to be able to get a lot of information, financial information, analytical information from bankers, and also have conversations at some of these events that we talked about where I was able to really get in front of the CEOs of a lot of larger groups. We also hired a consultant who is the COO of InterDent prior to be acquired by [inaudible 00:08:49] Alliance to help get us up to speed.
Elliot Zibel:
From there, what was obvious to me was you had all these different models out there, and generally what I found was most models were really good at acquiring practices, but not really good at actually growing them and improving them post acquisition. We found some models that actually worked, growing in [inaudible 00:09:10] and things post-acquisition. The driver and the difference was all down to doctor retention. We found there was a 98% correlation between post-acquisition growth and doctor retention, which made sense to me.
Elliot Zibel:
I’m like, I’ve been going to the same dentist for 25 years. I don’t want to go to a different dentist every three years or every two years. That’s not something I want, and I would assume that’s not something anybody wants. When we understood that, we said “Hey, let’s create a model that’s really focused on being dentist-centric, and in turn patient-centric, and success is going to be driven by our doctor retention rate, and that’s it.”
Elliot Zibel:
We didn’t know obviously all the ins and outs of dentistry or how to scale an organization, but we knew that we had to lead with focusing on the patients, providing them the care that they need, the experience that they want, and really retaining our doctors. That’s really how we started out in 2018, and I’m happy to kind of continue to journey, or stop and answer any questions you have from what I’ve said.
Bill Neumann:
It’d be great if you start at the beginning with 2018. Did you just start with Dr. Mason’s practice and then you had… It’s an acquisition model, correct?
Elliot Zibel:
Yes, correct.
Bill Neumann:
So, you had I guess prospects out there, it’s a certain type of practice that you were looking to acquire, and a certain geography. So, you started to grow that way. If you wouldn’t mind, kind of take us through about late 2019 because you were one of our 2020 emerging groups to watch. What I wanted to do was kind of maybe stop at that late 2019 point, if you can remember where you were then anyway. It was right before COVID hit.
Elliot Zibel:
Absolutely.
Bill Neumann:
Then we’ll pull up the screen here and we take a look a little bit about what you said in early 2020, and then maybe we can take things to the present from there. That might be fun.
Elliot Zibel:
That’s great. I think that’s a great idea. Yeah, we started out… We financed the business early on. I left my job on Wall Street and ran the business Select full-time. John was my Chief Clinical Officer. Interestingly enough, we didn’t buy John’s practice first because if you think about it from his perspective, he had just started to have a lot of success on his own. It was a big risk for a 36 year old dentist at the time to give up that upside. Honestly at that point, I hadn’t proven myself to him that I really knew what I was doing and could really scale this business. We started out actually acquiring… We acquired four practices in 2018. Honestly, if I look at those practices versus what we have today, much different profiles.
Elliot Zibel:
Our model today is completely based on partnership, doctors retain ownership. They’re typically staying on for three to five plus years, but early on we didn’t really have access to that market. We had doctors that were looking to leave yesterday. So, it was almost like a quasi DeNoble model in certain respects. Year one, we partnered with four practices. We were able to grow them organically more than 50% the first year we partnered with them. I don’t want you to think that we were so targeted and focused. We tried a lot of different things. We were able to improve patient retention and level of care, and be collaborative about how we’re doing things, but we messed up a lot of things as well at the same time, particularly on the integration side.
Elliot Zibel:
We were able to grow these practices substantially. We kept all of our doctors, we kept all of our team members, and as I mentioned, improved patient retention. And we did it in a collaborative way. From there, we started getting a lot of traction because I think if you look at the, call it the group practice space, we call ourselves a Dental Partnership Organization. I know we’re not the only people to call ourselves that. I think there’s a substantial dichotomy in the way people approach supporting practices. One approach is more “Hey, we have a square peg here, and we’re going to put it in this round hole. We might have a round peg or a square peg, but it doesn’t matter. It’s going in this round hole one way or another because we’re going to standardize everything and we believe we know how to manage this business and scale this business.” That’s more important to us than really preserving the identity of that practice.
Elliot Zibel:
The partnership model in my mind takes… There’s all sorts of different shaped pegs, and we just try to make sure that we’re putting the right people in our model that are sharing our values and vision, and so on, but we really are more focused on saying “Hey, you’ve grown this practice to be a top .1% practice. The last thing we want to do is tear that down and break that. We really want to take this existing base and we want to help you enhance it, and to grow.” Our role is to add value. How can we add value to that practice, to that level of care, to that patient experience? There’s a million ways we can do it, but we do it more of a customized basis if you will, because I always give the example of if you go in and have a comprehensive exam, if you have periodontal disease, okay you’re going to have scaling, or you’re going to the periodontist.
Elliot Zibel:
If you have nothing wrong with you, they’re not going to send you to the periodontist. It doesn’t make sense to reinvent things that are working really well. Our model has been, “Hey, let’s look at the patient. Let’s look at the practice. Let’s evaluate the opportunities collaboratively,” because again we don’t have all the answers. The doctors and team members in that practice have a lot of answers. “Let’s work collaboratively to find out how we can focus and really improve care and experience for the patients.” To get to ’19, we did really well in ’18. Those four practices, we added another six in ’19. We were challenged, and we can go down this rabbit hole if you want, but with a traditional lender we had partnered with, and honestly that put a lot constraints on our ability to build our infrastructure in addition to grow acquisitions.
Elliot Zibel:
It was really challenging to even just get deals done. I was spending so much time trying to get these guys the information and get them comfortable with everything. I realized in 2019 that, hey this is not sustainable. I can’t grow and capture the opportunities that I see if I don’t have a partner that will allow me to build the infrastructure and will make this easier for me. So, we refinanced our debt in 2019. We brought on I would call an institutional healthcare-focused lender. The cost of capital, just for those of you that look at interest rates, was twice as much as it was in the commercial bank. But that group allowed us to build a centralized infrastructure. By building that infrastructure ahead of our anticipated growth, that enabled us to really explode in 2020 and ’21. So, the modestly higher cash cost from having a higher interest rate really were not even close to as important as the flexibility in convenance and also the flexibility in just being able to drawn down capital that was committed and sitting there. It just made it a lot easier for me to focus on the business.
Bill Neumann:
This a common issue you hear about. What was that inflection point where that traditional lender all of a sudden just couldn’t see their way to lending to you? Was it four locations? Was it six locations? Was it a certain… What was it? They seem to stuck, and they don’t want to lend, or they look at it as being… I guess it’s just not in their wheelhouse.
Elliot Zibel:
It’s hard for myself and for anyone to understand that you really want a lender that understands where you’re trying to go. As long as you’re executing, you’re supportive of funding that growth. I think when I started, I don’t know if things have changed in that market, but lending to multi-group DSOs when you didn’t have $10 million+ of EBITDA was not a thing that TD Bank and B of A, the big lenders, were not doing that. There were some groups that were just starting to get into it because they saw the growth that was happening. I’m not sure how that’s all evolved. My biggest challenge was, I didn’t think it made any sense to go out, okay buy 25 practices, have no infrastructure to support them, and you’re going to look a lot better on a leverage level than if you go out and have a revenue cycle management team, you put in compliance in regulatory. All the things that could prevent you from really screwing this up, we were really able to do.
Elliot Zibel:
Our debate was more around the centralized infrastructure, what’s non-recurring, what’s recurring. I think that’s where we sort of had substantially different views that our lenders was “Hey, if we don’t build this infrastructure, not only are we risking the collateral of your loans, but we’re not going to be able to achieve the growth that we want to achieve in the future.”
Bill Neumann:
That’s a great explanation. Let’s jump over here real quick because in late 2019/early 2020 we did our Emerging Groups to Watch list, which we do every year. Can you see my screen, Elliot?
Elliot Zibel:
Yeah.
Bill Neumann:
Great. This is kind of interesting, and I have to let everybody know that I told Elliot right before the call that we were going to look at this and see whether it lined up with where things are today. If we kind of take a look, you mentioned about starting in February 2018 or actually founded, right? You talked about really the summer of 2017, right?
Elliot Zibel:
Yep, and we started in ’18. Yep, so this is looking… I was scared to see this, but it’s looking pretty good right now.
Bill Neumann:
Yes, it sure is. It definitely is. A couple of points here which I think are really important to kind of focus on, you talked a little bit about that DPO model, that partnership model which you said the first four practices weren’t necessarily that partnership model, but then as you matured and kind of figured out what the model was going to look like, and more to a partnership-focused model. You also talk a lot about the ability to mentor and train the clinical staff. Talk a little bit about that, because I know we talk about cultivation.
Bill Neumann:
You have your group’s philosophy and commitment, comprehensive care, continuity, cultivation, community. But that mentorship really kind of hits home, and maybe that relates to some of that when you talk about being able to retain the clinicians, I’m sure that helps.
Elliot Zibel:
100%. I think what the big evolution for our group was, was really… This is something we intended to do from day one. We wanted to have doctor owners in every practice, and the reason is because if you look at any industry, I’m just going to give this example of McDonald’s, McDonald’s has a lot of stores that are owned by franchisees that literally take 100% of the profits that are available for themselves and they have other stores that are owned by corporation or McDonald’s. If you look over time, almost every month, or every quarter, certainly every year, franchisees, they grow faster, they have better profitability and better team member satisfaction. Why is that? It’s because there’s a huge difference between an owner and an employee.
Elliot Zibel:
An employee is coming for a paycheck. That’s what their focus is on. An owner is focused on everything, got to make sure everything is working for this to be successful. Part of the reason we drove growth early on this practice is we didn’t have the selling doctors retain ownership, but we gave the associates that came in the opportunity to become owners. With that opportunity, they really acted owners and they made the changes that no associate would ever do if they were just an employee. They improved hygiene. They improved clinical protocols and processes. They helped us go digital. We had doctors that were really driving substantial growth [inaudible 00:21:14] because of that ownership component.
Elliot Zibel:
From there, we really sort of rebranded ourselves as what we call now, which is a people-centric partnership. We actually started with patient-centric partnership, meaning that hey, we are working together to provide better outcomes and care for our patients, and we’re really focused on the patients. As I got into this more, I realized wait, if we don’t have the right team members and they don’t have the right resources, and systems and processes of training, then it doesn’t matter how focused we are on the patients. We’re not going to do a good for them. So, we sort of morphed that to be people-centric. We are focused on partnering not only with the patients, but also our role is to support the people on the front lines, the doctors, hygienists, assistants, et cetera to provide great care to patients.
Elliot Zibel:
On the partnership side, I think we were really sort of thinking more about, and we’ve always thought about this from day one, what are the things that doctors value. That top one, forget a doctor. I know everyone has their challenges, but none of us want to hire a doctor we don’t think is going to be exceptional. I can probably pretty clearly say that. We’re no different. I say we hire top 1% doctors that can communicate well, that are ambitious, that are growth oriented and really live our values. The way we did that, we just put on a piece of paper, what do doctors want generally? Number one, its clinical autonomy. If you can’t provide clinical autonomy, the rest of it doesn’t matter at all. I would argue clinical autonomy isn’t just are you being micromanaged [inaudible 00:22:44], but it’s also can you use the labs and supplies that you want? To me, that’s a component of clinical autonomy that we take very seriously.
Elliot Zibel:
The second thing clinicians want is, they want growth. The ones we want to partner with, they want to grow, they want to improve their skill sets, they want mentorship, they want continuing education. So, we have even from day one really leaned on providing almost unlimited CE and education for our doctors that want to grow and expand. We’ve since developed pretty robust mentorship programs that we’re working to even more further develop to help take a doctor not just from one or two years out of a GPR program or whatever it is, to ultimately have the clinical skills to be what we call a lead clinician. We’re also working on top of that to help them be leaders, because most doctors don’t learn how to be leaders in dental school. It’s not something that’s taught, but it’s critically important to being successful as a practice owner.
Elliot Zibel:
Then the last component of what we’ve done is basically say, “Hey, the selling doctors now in our model, they retain on average about 25% ownership.” Again, we’re all aligned. We win together. We lose together. Then we’ve also really crystallized our path to ownership from associate doctor to an owner doctor, and how we get from Point A to Point B within a very well defined time horizon, unlike what we see in private practice all the time, which is “Oh my God, you just brought this practice. So and so has been telling me for nine years [inaudible 00:24:16] and then he or she just sold it to you and I have nothing to show for it, and I’ve built that practice.” We would basically address that issue and gave a lot of clarity around how those doctors could grow to be owners.
Elliot Zibel:
Also, conversely, we were very fair with them and said, “Hey, if your practice is $1.2 million in collections, and you join and you grow into $2.5 million, we’re not going to make you buy in at $2.5 million,” because then they’re not really incentivized. They’re growing and doing all this stuff, but they have no benefit for it.
Bill Neumann:
Right, they have to pay more. Right.
Elliot Zibel:
Exactly. So we kind of said, “Hey, this is the starting point. The starting point is, you’re coming in wherever we came in. We’re not trying to screw you over here. We’re just trying to make sure we’re all aligned.” I think honestly that alignment has been critical for us. So yeah, now we have with that model, and frankly with the organic growth we’ve been able to consistently drive in a way that hasn’t disrupted our team, we’ve had 98% doctor retention to date. We’ve got over 100 doctors today. We’ve had, knock on wood, about 100% associate retention rates, which is probably what I’m most proud of honestly, because frankly, a lot of the doctors are locked up with pretty onerous contracts but the associates can do whatever they want. They can go. That’s typically where you see the turnover in those organizations.
Elliot Zibel:
Because of that, because of that retention we have 90%+ patient retention. When you have 90%+ patient retention, guess what, it’s a lot easier to grow. We all want to talk about growth, and we’ll talk about it more, but if you have a bucket with a huge hole in the bottom of it, it’s pretty hard to fill up. If that bucket is solid, you don’t need to grow new patients all that much to kind of have a successful growing practice. That’s really the way we’ve approached it. We talked about here continuity. We want those lifelong patient and team relationships. It’s a much easier business to manage if you have the same people. If you have a different doctor, different assistants, different front desk, think about how disruptive that is to the business and to the patients.
Elliot Zibel:
That’s really what we have leveraged on to, again that partnership mentality, that people-focus, and that’s enabled us… COVID was obviously a challenge, but we were able to really come together as a management team. We implemented, which I’m sure everyone is familiar with at this point, EOS, which is an operating system to help ensure that we’re all on the same page and focusing on rowing in the same direction, and very much goal oriented in creating accountability in our system which is critically important for anyone trying to scale. I would say if you don’t know where you’re headed, we don’t know what the goal is. If we’re going to Boston, we can figure out how to get to Boston. If we have no idea where the car is going, we’re not going to get anywhere. Where the hell are you going?
Elliot Zibel:
So, I think as a CEO, I didn’t know that when I started. I had no idea about being a leader and riving culture, and vision, and so on. But when I started to realize that hey, people aren’t going where I want them to go. Why? I was like, “Why is it not happening?” And I realized it’s because I’m not doing a job as a leader of giving them clarity, and we’re not all on the same page. That’s something the EOS kind of helped us establish. Once that occurred, we came out of COVID just gang buster. We’ve now grown to 36 practices in eight states. There’s just tremendous demand in our backlog. Honestly, now it’s coming all from our existing network of doctors. Every time I partner with one doctor, three months later I get on average three to five referrals because they’re happy. The transition went well, we’re not screwing up what they have, we’re adding value, their team members are taken care of.
Elliot Zibel:
So, we’ve created, I think, a differentiated value proposition. By having those now 100 doctors out there that are happy, it’s just feeding of itself. That’s how we’re growing. Everyone has business development. I am doing business development part-time. I probably spend 10% of my time doing business development. There’s no one else in my organization that does it right now. I have an analyst that supports me there. Yet, we’ve been able to kind of I think grow substantially faster than many large groups that have five or six business development people, and it’s all coming from referrals. That’s it. That’s really the way. [inaudible 00:28:41] doctors, brokers we worked with who had placed people with us that are happy. So it’s really I think again, it took us a couple of years to really hone in on our value prop, but I think right now we’re really clear on how we differentiate [inaudible 00:28:55].
Bill Neumann:
That’s a lot to unpack there. It looks like for the most part you were… This Emerging Groups to Watch list, you were pretty much right on, and this was before we knew COVID was going to happen. For the people that are listening in that actually can see the video, I’ll drop a link in the show notes. It’s on our website, GroupDentistryNow.com. You can just search “Emerging Dental Groups to Watch” and you can read all about Select Dental Management there. Of course, that was 2020. Elliot, say that again now, you’re in eight states. What’s the practice count?
Elliot Zibel:
About 36.
Bill Neumann:
36, okay.
Elliot Zibel:
Over 40 by the end of the year.
Bill Neumann:
One thing I wanted to unpack about that conversation there is you talked about doctor retention, and then you talked about the associate dentists there. Do you feel that the retention you have with those associate dentists is really because of that ownership opportunity? That’s one question. Then, do you feel like a lot of the associate dentists want ownership? Sometimes it’s not offered to them, but I’d love to just know that. What are their thoughts? You think, oh they’re associate dentist. Maybe they just want a 9:00 to 5:00 job and that’s it. What do you think?
Elliot Zibel:
It’s a good question. I think that ownership isn’t for everybody, but ownership in a model where we’re substantial support for all of the nonclinical stuff and the scheduling, it’s a much different ownership responsibility than it would be if they were on their own. All of those nonclinical things we mentioned that are really hard to manage, we manage. That’s the value proposition we’re providing to them. Does every doctor really wake up and strive to be an owner? No. If you’ve been an associate for 20 years, you’re pretty much saying even though you articulate it differently, you’re saying to me that that’s not something that’s so important to you or else you would have probably figured that out.
Elliot Zibel:
I do think there are people that want to just be associates. I do think there’s another cohort of people that are 25-30 years ago when the barriers to entry to starting a practice were much lower, would have totally been practice owners. Because of the stuff we’ve talked about, or because one might have a better work/life balance or whatever, they’re sort of ambitious but may be stuck in an associate position. Those are the doctors we target because ownership means different things to different people. Our ownership programs are not one size fits all. The traditional ownership model you think of is, “Hey, why don’t you go and take a huge loan out and buy into the practice?” That’s a very good way to do things.
Elliot Zibel:
There’re other ways to do things. There’s profit sharing plans. Okay, so you don’t own 100% of the business, but maybe you have a 10% ownership interest and that gives you an extra $80,000.00-$100,000.00 of income a year. Forget the income. It’s not even just about the income. What about just being in the room… My wife loves Hamilton, so I listened to the soundtrack 850 times, but there’s that sound about being in the room where it happens. Everyone wants to be in that room. Sometimes, people just want to be part of the strategy. They want to have an opinion. We’re building out ops, we’re hiring people. They want to be a part of that. So, ownership means different things to different people. It’s our job to figure out is that something that motivates this doctor or that doctor. It’s not for everybody.
Elliot Zibel:
But again, I think ownership in our model requires less risk and honestly less certainly nonclinical responsibilities than in a traditional model. We’ve found people that may not have ever wanted to go out on their own, but that actually would be confident in approaching this model. We can do it in a way where put up $0.00 day one. So, there’s absolutely… Now, if they leave, there’s no value so they’re not building up that equity value. There’re ways we can do that as well, but I think it just depends on the doctor and what their longer term goals are.
Bill Neumann:
It sounds like you’ve got a lot of flexibility.
Elliot Zibel:
I think that’s the key to this whole model, and not just with associates, but with acquisitions. Not everyone wants equity. Not everyone wants an earn-out, and that’s okay. I think what we try to make sure is are we all aligned, because if we’re not aligned then it doesn’t work. For us, alignment means ownership for most of our practices, but I think it’s important to be able to be flexible and think again when you’re listening to that doctor, listen not to respond but listen to actually figure out the solution. I’ll tell you, a lot of the ways we’ve won on deals is that the doctor will say to me a couple of things that are really important to them, and we address them in our partnership proposal.
Elliot Zibel:
And guess what, the other groups, they just give them “Here’s the square peg. This is how we do it,” and I gave them a hybrid. “Here’s a pentagon, and here are the things we’re going to do.” I think people just appreciate that you’re listening to them and you’re trying to make it a win/win for everybody.
Bill Neumann:
You talk about alignment. Let’s talk a little bit about how you at Select measure success. Just define it, and how do you measure it? What do you see… Sorry, that’s the first question. I’ll stop there and let you answer that one.
Elliot Zibel:
There’s a lot of different ways to measuring success. Are we talking quantitative? Are we talking qualitative? From my perspective, again I started out with patient retention and doctor retention, and employee retention. Those tell me a lot about how things are going with the overall business. Then from a quantitative perspective, the way I think about the world in dentistry in our business, in our practices, is it should be a highly recurring business almost like I refer to a subscription business where when you come, you’re staying for a very, very long period of time. In that model, there’s only two drivers of growth. Its active patients, which we define as a unique patient that’s been in the practice over the past 18 months. Then it’s really a function of your pre-appointment rates, or what percentage of those patients are scheduled for future treatment?
Elliot Zibel:
We really try to start out really at the basics and focus on are we doing a good job of growing active patients? That’s driven by retention as we’ve discussed. That’s driven by reactivation, which is critically important and most practices don’t have any visibility or accountability around. Lastly, we do think about new patient growth as well. Then the flip side of the pre-appointment rates that we look at is like, are we doing a good job of keeping patients in regular re-care? Because if we’re not, then we’re not doing the right thing for the patients. Obviously, most of the dentistry in our practice at least comes out of the hygiene chair. I think we look at those growth in active patients, pre-appointment rates as well, and then we’ve created a whole scorecard effectively, or dashboard, or whatever you want to call it, that have all the key attributes of what we believe an excellent practice has, and that ranges from leadership.
Elliot Zibel:
One thing we haven’t talked about is, if we don’t have a great clinical and practice leader in that practice, we cannot achieve what we want to achieve. It’s impossible. We need strong local leadership. They need to communicate. Morning huddles, weekly meetings, monthly meetings, goals. There’s got to be something that everyone is shooting for there. We also look at treatment plan presentation. We look at scheduling. We look at all the different things on appointment confirmations and things like that. Then at the end of the day, yes there has to be some financial component to measure success because again, how do we all know if we’re being successful if we don’t have a scoreboard or some way to measure that?
Elliot Zibel:
So, we look at collections growth, growth in patient visits, we look at all sorts of other metrics on efficiency. So, are we providing excellent care? Obviously that’s our focus, but can we do it efficiently? Because the more efficiently we can provide that care, the more we can reinvest in technology and our team members. It’s really a blend between more traditional finance metrics, and more qualitative KPIs that are I think almost more important in a lot of ways than the ultimate financial performance of the practice in a period of time.
Bill Neumann:
You mentioned a lot of strategy already as far as how you got from summer 2017 to where you are now. For the audience, because our audience is pretty vast, because we’ve got the DSO. I’m curious, I’m a doc, I have one location and I might want to scale to two or three. Then we’ve got some folks that are probably seven to maybe 10 or 15. Talk a little bit about the strategy. How did you get from those four initial practices to where you are now? Any tips beyond what you’ve already given us would be great.
Elliot Zibel:
Honestly, I think that if I were to do this all over again it’d be a lot easier than what I did. I think honestly, it’s critically important to get that vision, and mission and culture right early on. That is what differentiates successful growth in groups that are not successful. I think starting out, whether it’s EOS or any of these others, there’s a million other platforms, but having a leadership team, you can’t do it all by yourself. I can’t at least. If you can do it by yourself, you cap out at a certain level and you need to empower and have other people on your team. I think once you have some other people on your team that want to be successful, you’ve got to create that right vision and value framework.
Elliot Zibel:
You really have to live it. You can’t just talk about it once and expect people to remember that. It takes people seven to nine times to remember something you’re saying to them, and in 90 days they forget it. Steve Bill is a mentor of mine. I know he’s been on this show a million times. He said to me once that resonated with me, he’s like “When you make a decision you’re like the Supreme Court Justice ruling on a case.” If you say your values are A, B, and C, and some doctor that’s a huge producer is not living those and is an issue, and it comes to your attention and you’re like, “Oh, well yeah, he’s really important. She’s really important.”
Elliot Zibel:
Well guess what, you’ve just shown everyone that you’re just talking about your values, not living them. They’re going to, in the next thousand times if those situations present themselves, they’re going to do the same thing. I think just getting those values really right and that mission right is critical. You’ve got to have the right people in the right seats. I’ll tell you, the disparity between an A+ player and a B+ player is massive. If you have a bunch of B/B+ players, guess who they’re going to hire? A bunch of B/B+ players. And guess what your company’s going to be? A B company, which might be fine, but I think if you really want to be exceptional you need exceptional people, and you’ve got to empower them.
Elliot Zibel:
If I were to do this all over again, I would have started EOS much earlier. I would have had some ability to invest a little bit more in paying up for some of this A+ talent, because by the way it’s not cheap. They want to be paid, and they want equity as well. What I’ve found is they’re worth every penny of it if you can get the right people. Those would be two things I started with. The last thing is, what is your differentiated value proposition? How are you going to go if you’re an acquisition-driven model? How are you convincing someone to partner with you versus my business or any of the other businesses out there. Think about it from their perspective. One doctor asked me, he was very well represented by a large broker. I think he had 12 offers.
Elliot Zibel:
He was like, “What is different about you guys? What is different? I listened to 11 guys. How do I know?” It was a great question, and I broke it down as best as I could for him, and we ended up partnering with them and not even paying I think as much as others had offered or were willing to pay. Again, it’s about finding that fit and making sure they understand that there’s something more that you’re about than just offering them a big bag of money. I think the right partners, those aren’t the things that are going to drive decisions for the right partners, at least in our model.
Elliot Zibel:
The other thing is analytics. I’m an ex-Wall Street guy. I love numbers. The numbers you’re getting from your dental practice management system are not adequate to run your business. They’re not. They’re not real time enough. They’re not nuanced enough. So, I think the more you can have a scoreboard with accurate numbers and be able to… That information is so powerful to be able to make decisions and to better run your practice. We’re in the middle of transitioning to a whole data warehouse where all the data is coming into one place. The amount of automation and things we could do with that data is unbelievable.
Elliot Zibel:
When we talk about where is the industry going, I think the people that make those investments in data analytics are going to have a huge competitive advantage, because I can enter literally everything in my business, not only the financials and the PMS system, but employee engagement, patient satisfaction, net promoter scores. I can look at all of those things in whatever way I want, and guess what, I’m going to have better insights and visibility on what’s working for my practices and what’s not. While numbers aren’t the only thing, they do help you ask the right questions and focus in the right area. That would be the last thing I’d say, if you’re not accrual-based accounting, you got to get on accrual-based accounting. Cash basis accounting is irrelevant. It’s not real. It’s not capturing what’s actually happening during that time period.
Elliot Zibel:
You got to understand, what are benchmarks, what does success look like, and how my practice is doing in different areas to be able to really impact positive change.
Bill Neumann:
Excellent. Yep, you jumped to one of the questions I was going to ask you, which is what does the future of the dental industry look like? You think really that the winners are going to be the DSOs that aren’t just providing that patient-centric, but the doctor-centric model. But then also, the ones that are leveraging technology, being able to measure and act on the data and the analytics that they have.
Elliot Zibel:
I’m biased. As we all know, there’s a million ways to skin a cat in this industry. We started out right with the framework. Okay, so you can either be let’s call it a control-oriented group where you’re trying to standardize every little thing, and you have your round hole and you’re putting everything there. Or you can be a partnership. Within partnership, does it really add any value? Like okay, great. I’m not going to blow up your practice. I’m not going to be one of those stories that I hear all the time where “Yeah, I sold for this group,” and 18 months later everyone was gone. The practice has lost half of their revenue, and now they’re trying to sell it back to me for like $1.00 or whatever it is, which I’ve heard of a million times.
Elliot Zibel:
I’m not going to do that. That’s fine. If we can’t add value, then it’s still not value add. It’s still not good enough in my perspective. Then when you get into the partnership model, then the question is, how do you actually drive organic growth? If you can’t partner with a practice and prove it, to me you’re not adding a ton of value. In my mind I think the way you drive improvement is one, you have to have the information to be able to assess what’s happening in the practice and be able to diagnose what treatment they need, or what focus they need. Then secondly, something we’ve worked a lot on, which is almost more important, is how do you get buy-in for that change or that improvement?
Elliot Zibel:
I can go in there and say, “Oh my God, your perio percentage. I wouldn’t do this with my partner. I’m not a doctor, but hey the perio percentage price is 1%, and our overall practice is 32, and we have practices as high as 45. What’s going on there? We need to do A, B, C, D and E.” That’s one way of doing things. You’re telling people what to do. As we kind of learn as a group more about leadership, leadership isn’t about the authority you have.
Elliot Zibel:
So, I’m the CEO of the company. There’s authority that comes with that, but that doesn’t mean I’m a leader. Leadership is being able to influence people to do what you want them to do, or what the right thing is to do, but making them feel like they’re a part of that decision making. They want to follow you. It doesn’t come with title. It doesn’t come with how long you’ve been in a practice. What we’re really focusing on with our regional leadership team is okay, we need to convince these people why is it good for the patient, why is it good for the doctor, why is it good for the practice, why is it good for them for everything that we’re presenting as something we want to improve.
Elliot Zibel:
I think that once you can diagnose the problem, the harder thing… Because I could diagnose these problems. I knew how to grow a practice really early on because that’s all I knew how to do. I knew how to analyze companies and identify KPIs and things, and I understood how to okay if we can grow patient and business, we can improve retention. Great, we’re going to grow. But how do you do that without alienating your staff and making them feel good about it? That, I think comes down to communication, it comes down to local practice level leadership and getting their buy-in. It comes down to visibility.
Elliot Zibel:
One of my favorite books, Four Disciplines of Execution, you can’t have too many goals. They got to be super important. You’ve got to have accountability around achieving those goals. Somebody’s name has got to be next to that metric. You’ve got to have a scoreboard, and you got to review that scoreboard. If you can put all those four things in place and people think that they’re doing this for the right reasons, almost 100% of the time you’ll be successful. You want to really be successful and share another safety blanket around that, throw a bonus point in there. So then they know why they’re doing it, they know how to do what you’re training them, they have a scorecard, and they actually can have a financial benefit from doing the right thing for the patients.
Elliot Zibel:
It’s the journey of identifying the opportunity, but then how do you drive execution in a way that people feel empowered and not micromanaged, because if you’re micromanaged then your corporate, your this or that… We were trying to stay way away from that. That’s the biggest challenge, is trying to convince people. You’re not always going to convince them 100% of the time, but I think in the 90s we should be able to do it over 90% of the time if what we’re focusing on is patient-centric and good for the patient. Then we should be able to get that buy-in, and we should be able to drive change and everyone will be happy about it. If we force it, then it’s a different outcome.
Bill Neumann:
As we kind of wind this podcast down here, I’ll ask you a real high level question about where you see the dental industry headed. We know it’s consolidating. Any ideas on what will you think the industry is going to look like? Then part two of that is, what’s the future of Select Dental Management look like? So, we could go two years out, five years out, whatever timeframe you’re looking for.
Elliot Zibel:
I actually gave up my forecasting days from Wall Street, but I’ll sort of give you my two cents. Listen, obviously I think the stigma around DSO or DPO, or however you want to call it, has certainly waned. I think people are seeing that there’re different models out there, and they’re seeing the benefits of having a partner, what that can look like for better day to day and transition, and growth, et cetera. So clearly, we could debate what pace, but clearly this industry is going to continue to consolidate over the next five years.
Elliot Zibel:
There’s a ton of capital, as we all know, in the space. You have again this demographic shift of 65+ real dentists that are looking for liquidity and transition plan. That is certainly going to persist. I think depending on where you think penetration rates are, I think that they will accelerate and grow at a faster rate. Groups are going to grow at a much faster rate than non-groups. I think you’re going to see more consolidation, and you’re already starting to see that amongst the bigger groups.
Elliot Zibel:
I think you’re starting to see the Heartlands of the world that really now have so much scale that they could buy a business like ours and save a substantial amount of money just on supplies and labs. I don’t know if that was the case two or three years ago, but I think it’s now interesting that some of the strategic buyers, given the synergies that they’re able to extract, are actually going to be able to pay higher multiples in private equity groups, is something that we’re seeing a little bit more these days.
Elliot Zibel:
Whereas, it used to be private equity was willing to pay [crosstalk 00:50:01]. I think you’re seeing an inflection there as some of these guys could scale and really focus on payer fees and all these other things that you can get when you have 2,000-3,000 practices. I do think that the smaller groups are going to win and be very successful in this model. I’m a member of the DEO, and there’s some really smart people there. I 100% believe that they will be successful. Part of our model is trying to partner with those folks and support them with capital or back office systems, and just let them go because they’re really great leaders.
Elliot Zibel:
So, I think you will start to see people starting to partner with these kind of more regionalized local groups because a lot of the bigger groups realize that they’re being much more successful in driving business development and acquisition-driven growth in addition to organic growth. Lastly, I think the analytics stuff, I think it’s unbelievable. Artificial intelligence, I’m not a much tech savvy person, but to be able to have a system where somebody leaves your office without an appointment, you can create a work stream behind that that could send them an email, a text message, a handwritten letter.
Elliot Zibel:
The possibilities are endless to create accountability around the actions of your team, so then all of a sudden your practice leader gets an email that says “Hey, Elliot left without an appointment. Click on this button to text message Elliot,” or call or whatever, and you can start to see all of the different things that are actually happening in a practice and automate that. That’s tremendously valuable because everyone in the practice is constrained on time. It’s busy, it’s hard. So, I think that artificial intelligence, and you see some really cool things also going on, let’s not forget about Pearl and OverJet and all those guys.
Elliot Zibel:
There’re just some great things going on that I think can lead to better care and experience for our patients. I think we’re probably in the first or second inning of that obviously.
Bill Neumann:
Yeah, it seems like it. All right, finally where is Select Dental Management? What does your future look like?
Elliot Zibel:
Our future looks like… Again, we have our really core set of values and we are I think much better honed in on the types of people we want to partner with, and that are good fits for our system. I think it looks like us continuing to partner with those folks and be able to really collaboratively elevate practice performance and quality of care. I think as we’re getting bigger it’s getting even easier to be able to help provide better mentorship and support in CE.
Elliot Zibel:
A big focus for us in 2022 is really can we develop more regimented training programs around different skillsets that we want our doctors to be able to have access to, and can we do that not just for doctors, but hygienists, assistants. We do a lot for practice leaders, but we don’t do as much for maybe that insurance coordinator. My goal is to have the ability to help everyone in the whole system grow and improve, be part of a bigger network that they know is doing things for the right reason.
Elliot Zibel:
We used to have a slogan that we kind of [inaudible 00:53:18]. It was “Smile Proudly”, and the idea is being like we want people to smile proudly and be part our organization, part of our mission. Obviously, we want our patients to smile proudly because their mouths are healthy and they like coming to our practices. I think that’s my goal, is to have best in class partners, best in doctor and team member retention, and the ability to really help grow people. We always say growth is one of our core values always in all ways, personally, professionally and as a practice.
Elliot Zibel:
That’s really I think what I continue to see. My biggest role right now given our scale, is to just find A+ people to lead different divisions of our company that I can empower and can just support. That’s really where my job has shifted over the past six months.
Bill Neumann:
Great. Great way to finish things up. I really appreciate it, Elliot. Elliot, just lastly, can you shout out your email address in case anybody wants to reach out to you? I’ll drop it in the show notes, but just shout it out real quickly.
Elliot Zibel:
Yeah, it’s really long so I hope everyone’s got extra pens available. It’s ezibel@selectdentalmanagement.com. Yeah, I wasn’t thinking that one through when we bought the domain name originally.
Bill Neumann:
I did the same thing. Group Dentistry Now. William.Neumann@… So yeah.
Elliot Zibel:
Yeah, exactly.
Bill Neumann:
We’ll put it in the show notes so you’re able to contact Elliot. You don’t have to memorize it, but just for the folks listening that don’t get a chance, it’s Elliot Zibel, and he is the CEO of Select Dental Management. We really appreciate you being on the Group Dentistry Now Show today. I appreciate you sharing your words of wisdom, the journey that you’ve had, what’s to come for the industry. Thanks everybody for watching today and listening in. Until next time, I’m Bill Neumann, and this is the Group Dentistry Now Show.
