DSO 3.0: What it is and how to prepare.
There’s been a lot of talk on social media and amongst peers about how the nature of dental service organizations (DSOs) are changing. And for good reason — big shifts are happening in the industry. Although things are shifting in a positive direction, there are still many DSO and healthcare service providers who aren’t seeing the bigger picture. Or worse, don’t think these changes will affect them.
If you haven’t taken the time to evaluate where your DSO stands and how the incoming of national retailers — who have big plans to cover dental and beyond — now is certainly the time to start doing so.
Are you Stuck in DSO 1.0?
These days, some are still getting into the DSO industry akin to someone investing in Apple stock because they have an iPhone. They want to invest in healthcare because it’s financially lucrative. This approach is what I like to call DSO 1.0.
You might be stuck in DSO 1.0 if…
Your number one focus is on the financials (P&Ls) of your DSOYour focus isn’t on your practice’s goodwill (which makes up almost 80% of a practice as well as its asset allocation) Your focus is on things like acquiring new patients, increasing revenue, budgets — not patients and care. Your turnover rate for patients and practitioners is rising
You can get away with doing these things for a while, but eventually, it will begin to affect revenue negatively, which will ultimately impact your exit valuation.
Shift into DSO 2.0
There will always be ebbs and flows within a practice, as with any business, but those who’ve realized the downfalls of DSO 1.0 and are operating in the mindset of DSO 2.0 are more prepared for the long run and the inevitable changes within the industry.
DSO 2.0 practices…
Using technology and clinical data to understand their patients focusing on building meaningful interactions with patients and practitioners making data-driven decisions putting the patient experience first keeping goodwill in mind by focusing on growth strategies around patient and practitioner retention
There’s a focus on the attitude and feeling of these practices in a way that humanizes the approach to dental care. For that reason, patients and providers respect and trust are gained. This is not only great for goodwill but also naturally affects revenue positively — a true personification of “good medicine is good business”.
Prepare for DSO 3.0
There are many big changes coming to the retail healthcare industry. Ones that could truly revolutionize the way people receive not only dental care but healthcare on every level.
For example, Wal-Mart has plans to disrupt the healthcare industry just as it did the retail industry. Companies like this are in healthcare for the long-term and have the means to put their money where their mouth is. They are invested in goodwill and patient care quality because they plan to be around indefinitely.
I truly believe ten years from now we’ll see less small and midsize DSOs, and more large ones. Just as we saw happen in the retail industry and the smaller mom and pop shops began to close and consolidate.
Start Preparing For the Future of DSO Now
Cutting corners now to make a budget and have good looking numbers will get you only so far. It will be a real shock when it comes time to sell and your valuation has dropped significantly due to provider and patient turnover.
My advice is to get your moral compass and goals in order starting immediately and to look in the proverbial mirror of your practice for ways to be at the top of your game. Without strong patient goodwill and loyal providers, the competition and pressures of DSO 3.0 may be what sinks your ship.