San Mateo County Dental Society Meeting on Dental Service Organizations (DSOs)

Presentation by Ali Oromchian, Legal Authority in Healthcare

Welcome and Introduction

• Host: Mike Icardi, Membership Specialist at SMCDS
• Structure of the meeting: Muting participants, Q&A Box for questions
• Tonight’s topic: Dental Service Organizations (DSOs)

Presenter Introduction

• Presenter: Ali Oromchian, founder of Dental and Medical Counsel, PC Law Firm
  • Specializes in dental and medical practice transitions, corporate creation and partnerships, etc.
• Relationship with SMCDS spans 17 years

Main Topics

Introduction to DSOs

• Definition: Management companies created by dental or non-dental professionals to provide non-clinical services
• Typical services: Insurance coordination, HR, marketing, billing, etc.
• DSG: Always for non-clinical services; clinical services managed by dental corporations

How DSOs Operate

• Use of technology to streamline operations and reduce costs
• Pre-COVID vs. Post-COVID reputation and operations
• Private equity involvement
  • DSOs are funded by private equity aiming to buy dental practices
  • Metrics: Multiples of profit (6-8x compared to 1.5-2.5x when sold to another dentist)

Types of DSO Structures

1. Joint Venture Model

   • Dentist retains control over day-to-day operations, shares some responsibilities
   • Example responsibilities: HR, marketing, insurance
   • Ideal for dentists who wish to practice for 5+ more years

2. Sub-DSO Model

   • Partial exit model
   • Dentist retains a higher percentage due to risk
   • DSO offers management support, benefits from profits, but involves more risk

3. Equity Role Model

   • Dentist sells 100%
   • Typically for those retiring in less than 5 years
   • Multiples similar to private sale (1.5-2.5x profits)
   • Clear exit strategy, professionally managed

Advantages of Selling to a DSO

• Increased practice efficiency
• Economic scales reduce costs
• Administrative burden is reduced
• Focus on clinical care and patient service
• Access to advanced technologies and training

Disadvantages of Selling to a DSO

• Loss of complete autonomy in the practice
• Potential strategic shift due to economic changes
• Possible change in patient experience and relationship
• Employee morale and communication may change

Due Diligence before Selling

• Comprehensive research on the DSO’s track record and reputation
• Financial analysis by DSO-specialized CPAs
• Assess if the DSO offers the services and support needed
• Legal and regulatory compliance checks
• Review of all contractual documents involving experienced legal counsel
• Clear exit strategy and intellectual property rights

Choosing the Right Partner

• Ensure alignment of goals
• Transparency in financials and operations
• Experienced and reputable management
• Strong line of communication

Key Takeaway

• Major Mistake to Avoid: Never provide financial details to a DSO without proper preparation. Incorrect financials can significantly undervalue your practice.

Additional Resources

• DSO Leadership Summit organized by HR for Health
  • High-value networking and educational events
  • Discount code provided for attendees

Follow-Up

• Contact details and resources offered for further consultation and reading
• Q&A session covered various questions on DSO transactions, financial impacts, and partnership insights.