As I sat down to pen my reflections, my 1-month-old son was snuggled up against me in a Babybjörn, drifting off into sleep now and then, only to stir and remind me to keep bouncing to ensure his contentment. Opening a practice, skirting close to burnout, and eventually selling to private equity was quite the journey, but it brought me unparalleled happiness. This path, though lengthy, unraveled with impeccable timing.
I hail from a quaint town in Maine, and like many who grow up in rural areas, I harbored an intense desire to venture out and "make it." Where exactly I was headed, I wasn’t sure. My mother always conversed with me as if I were an adult, instilling the understanding that achieving success meant generating income. Like many, I saw the medical profession as a promising avenue and entertained various medical fields before settling on dentistry. It spoke to my analytical nature and offered the chance to aid people without the constant life-and-death stress or erratic hours typical in other medical professions. Contrary to popular myths, the dentists I encountered seemed genuinely content, and contentment was my ultimate goal.
My childhood was marred with financial struggles as my parents often quarreled over money. I once believed that the financial rewards of dentistry would bring joy. I thought owning a practice was the key, but I discovered an alternative route.
Buying My Practice (and the Accompanying Stress and Debt)
Ten years post-dental school, my wife (also a dentist) and I owned two practices—and a slew of headaches. I’d witnessed debt’s toll on happiness and managed to keep our finances in check for the most part. However, after the 2008 financial downturn, career paths were limited: a long commute, staying home, working in a dissolving group practice, or owning a practice. I chose the latter, incurring over a million dollars in debt. Along the way, we saw a chance to acquire another practice, transforming my wife’s half-hour commute into a daily walk or bike ride with me—and we leaped at it.
Influenced by insightful financial strategies and a disdain for unnecessary commutes, we took the plunge. But acquiring another practice meant a heftier debt and twice the stress. The looming fear of embezzlement, fuelled by stories from other dentists, was taxing. My risk-averse nature meant I was handling all the financials for both businesses. Meanwhile, my wife continued juggling roles at her practice and as an associate in New Hampshire, while I worked part-time there to chip away at our debt, particularly concerned about her student debt from attending a private school.
As we contemplated starting a family, our massive debt seemed a towering barrier. How would we dot on a child with the workload both at the practices and beyond? By 2016, it was evident we needed a change to improve our work-life harmony. I later learned we were on the brink of burnout, a concept unfamiliar to me then.
Sometimes, though, a lifeline unexpectedly lands in your lap—or in our case, the mailbox.
Private Equity Comes Calling
A surprise mailing arrived from a company named Heartland Dental. My skepticism about affiliating my practice with them was immense; "corporate dentistry" was the evil empire out to squelch small practitioners, sacrificing care quality for profits.
Desperate for change, I decided to look into it. Heartland had distinct criteria for affiliates, and we didn’t meet them. But informed with their expectations, I refocused on strengthening our practices’ business aspects to fit the affiliation mold. By trimming unnecessary expenses and enhancing our financial picture, I was ready for serious talks within a year.
As a thriving dentist with two lucrative practices, I was straying from the norm—buy a practice, work your years, then sell to a young dentist nearing retirement age. But predicting our industry’s financial landscape decades ahead is a challenge.
While exploring my options, healthcare spending was reported as 17.8% of the US GDP in 2015, projected to rise. My 2023 observations noted 17.6%, affirming healthcare’s increasing economic footprint.
Viewing healthcare as a business holds mental barriers, stirred by societal viewpoints and political debate. The appeal for healthcare as a basic right was prevalent, though unclear on its impact on dentistry. I liken healthcare to bodybuilding in how it’s perceived: everyone wants the outcome, not the effort. Similarly, everyone needs healthcare, but few are eager to bear its cost.
There’s magic in envisioning healthcare as universally free, but our debts required compensation not just for debt servicing, but livelihood and reward for our skills. Balancing fairness in healthcare access with the need for incentives in gaining specialized skills is tricky. The fear of leaving unwell individuals uncared for weighs heavily. Yet, public discourse suggested a potential risk to our financial fortitude.
I thought having catastrophic insurance could lessen healthcare costs by driving competition. If people directly paid for routine care, prices would stabilize through market forces. Currently, insurance’s lack of transparency hinders price comparison, with pricing pressure often from the government and insurers. The government’s reimbursement rarely reflects sustainable rates, leading to hiked individual costs to compensate. Insurers pay somewhat in-between, and participation depends on economic viability.
I’m impressed some medical facilities venture outside this model, adopting direct fee-for-service systems. Though reasonable, existing systems’ deep-rooted nature suggests widespread change is far off. This unpredictability presents significant risks.
With our intricate healthcare landscape, the future remains nebulous. Whether political shifts push for singular payer systems, or insurance powers strengthen, or another financial crisis alters available resources—I had only certainties of extended debt and industry volatility. That thought was unsettling.
Considering Selling to a DSO
In the dentistry realm, encompassing 3.4% of total medical expenses in 2014, times were changing. Dentistry enjoyed an advantageous position for practitioners with insurance minimally impacting income and market forces favorably setting fees. Older generations thrived financially in this low-overhead, low-regulation setting.
However, technological advances, growing regulations, and insurance regulations squeezed small practitioners’ profit margins. Younger dentists, facing more career years, sensed future uncertainty. With steep fees to sustain, transitioning to a DSO grew more attractive.
What Is a DSO?
Understanding DSOs, at least in my case, is crucial.
Various structures exist; my familiarity largely lies with Heartland’s model. Here, DSOs contract with local corporations employing state-licensed doctors, ensuring clinical autonomy. Heartland manages the critical business operations—supply procurement, regulatory compliance, payroll, professional development, marketing, HR.
I’ve heard other DSOs impose rigid guidelines, even affecting clinical judgment, creating discomfort for doctors. DSOs might range from single doctor ownership to majority private equity interests, aligning with state regulations.
Our DSO features numerous doctor and employee stakeholders. KKR, having recently purchased a significant stake, has maintained doctor’s ownership opportunities thanks to Heartland’s founder, Dr. Rick Workman’s vision.
In essence, DSOs resemble mutual funds of dental practices—diversifying risk among multiple offices rather than one solo practice.
The Benefits of a DSO
DSOs offer several advantages for a dental practice owner:
- Reduced financial burden and operational worry: A larger entity shields against risks like payroll issues, unexpected expenses, or fraud. If my practice closes temporarily due to a blizzard, the organization still compensates the staff. When Florida offices struggled post-hurricane, our steady productivity supported them during recovery. The early COVID shutdowns proved our collective resilience, offering peace of mind.
- Debt elimination and immediate equity access: My wife and I had steadily tackled our debt, but future economic stability was uncertain. Owning a practice doesn’t guarantee resale value decades later. With increasing DSOs and new offices, practice worth might dwindle as starting new becomes cost-effective than purchasing. Factor in graduates’ escalating debts, and potential buyers dwindle. DSOs offering steady income and mentorship appeal increasingly to fresh graduates.
- Relief from administrative hassles: Drawing on years of knowledge, DSOs streamline operations with established “best practices.”
- Affordable healthcare for my family and team: Though I favor market-based systems, as part of a larger group, negotiating better rates becomes possible. Solo, I couldn’t provide healthcare; post-affiliation, our employees enjoyed excellent plans.
- Sustained profitability: Group leverage ensures favorable costs on supplies and operations previously unattainable solo.
Making the Jump to a DSO
I delved deeper into working with Heartland, speaking with more than a dozen affiliated doctors. While responses varied, the consensus was positive. One even joked they couldn’t get enough of "the Kool-Aid."
We ultimately struck a deal that eradicated our business debt, aligned our practices, cleared my wife’s educational dues, leaving primarily our home mortgage. Financially, we traded a potential future gain for certainty. The transition enabled us to merge practices, granting my wife part-time freedom.
With Heartland, compensation is straightforward: base salary plus profitability bonus. Specialty and productivity drive potential earnings within this framework.
Our merger saw growth, not job cuts; our history of paying down debt positioned us to liquefy significant practice equity. This proved crucial when COVID hit, shuttering practices, validating my early move.
Listening to colleagues now weighed by pandemic-induced woes underscores our good fortune. Maybe we could’ve held on longer for a bigger sum. But given the unpredictability, I’d rather be premature than tardy, and I regret nothing about our timing.
With everything in place, we embarked on starting a family. Nine months later, a beautiful boy joined us, allowing my wife to enjoy motherhood without debt clouds. As our practice flourished, supported by enhanced training, I traded bookwork-induced late nights for cherishing nighttime feeds and diaper duties. I couldn’t have made a more fulfilling decision.
Why I Still Sleep Well
One lingering concern was being pressed to compromise ethics. Eight years in, working for the same company, that worry was unfounded. I’ve grown into a better doctor, engaged with patients without financial distractions. I relocated to escape Maine’s harsh winters and now mentor aspiring doctors, imparting insights akin to those I’ve learned from notable financial educators.
The DSO landscape continues to evolve, and while practice sales still fetch good prices, concerns about future depreciation seem legitimate. Dentistry technology surges forward, discussions of lasers, AI, 3D printing abound, and they’re costly. Regulation grows, reimbursements shrink, sustaining my choice’s wisdom.
Anticipating sentiments against corporate affiliation, I’d urge a pause. Consider your preferences—some may relish independent ownership, others not. Personally, the lessened stress allowed me to stay in a field I love. Through my work with Heartland, I shed less satisfying roles, embraced patient care, mentorship, and became a better husband and father, crafting a life richer for not retiring.
Our practice’s sale gifted my family’s wellbeing, and I trust these reflections guide fellow professionals in pivotal career decisions.
If contemplating such a shift, research thoroughly. Not everyone suits the DSO avenue. If autonomy is your utmost priority, the shift may not be in your favor. Seek camaraderie, however, and you might thrive. Remember, it’s your practice, shape it your way. For me, the DSO decision lifted burdens, refining life’s work balance.
Reflect on your aspirations—is relinquishing ownership your path, and to whom? Please, share your thoughts below.
