WEBVTT
00:00:02.407 --> 00:00:11.750
Hello doctors, I'm your host, chip Fitchner, co-founder of Large Practice Sales, and you're listening to Practice Partnership monetizing your dental practice.
00:00:11.750 --> 00:00:16.446
Welcome to today's episode of Practice Partnership.
00:00:16.446 --> 00:00:22.728
Today we're going to talk about the impact of invisible DSOs and the opportunities for specialists.
00:00:22.728 --> 00:00:36.203
If you're a specialist, your opportunities for partnership with an invisible DSO have grown dramatically over the last seven years, and today we're going to talk about what those specific opportunities might be for your specialty.
00:00:36.203 --> 00:00:49.046
Invisible DSO partnership means different things to different doctors and brings different values to different doctors.
00:00:49.046 --> 00:01:05.638
Certainly, getting millions of dollars in cash up front at low long-term capital gains tax rates is valuable, but I think probably the number two benefit that doctors perceive in an IDSO partnership is the fact that they get more time.
00:01:05.638 --> 00:01:23.953
They're going to be offloading a lot of the administrative minutia associated with running a practice, including banking, payroll benefits, benefits, administration, compliance, credentialing, tax, legal IT support and vendor and payer negotiations.
00:01:23.953 --> 00:01:43.971
When doctors can take all of those responsibilities off their back and focus on patient care, leading their teams and practice growth, they find that they have more time for their families and they find that very fulfilling, because many of these doctors did not get into dentistry to deal with administrative minutia.
00:01:43.971 --> 00:02:08.664
Certainly, they continue to lead their practices and make the hiring decisions and the firing decisions and the when will we be open and when will we take vacations, but with an invisible DSO partnership, their new partner is going to help them in many ways and those benefits will extend to recruiting, and I think one of the key things that's changing today is adoption of new technology.
00:02:08.664 --> 00:02:13.401
There are a lot of benefits of an invisible DSO partnership besides the cash up front.
00:02:13.401 --> 00:02:28.633
There is an interesting trend in doctors joining invisible DSO partnerships because they want to be able to access the latest technologies.
00:02:28.633 --> 00:02:38.810
I think ultimately, many doctors will come to realize that using artificial intelligence, for example, in their diagnostic processes, is going to be a game changer.
00:02:38.810 --> 00:03:02.260
It's going to become the standard of care and, with all of the new technologies coming at doctors every year, it really helps to have a partner that can help you adopt those, implement them correctly and ultimately it's going to provide better patient care and differentiate their practice from the other practices in their community which have remained independent and have been unable to make those technology adoptions.
00:03:07.647 --> 00:03:12.875
Growth is one of the key elements that all of the invisible DSOs want to achieve.
00:03:12.875 --> 00:03:23.896
Certainly they would like to achieve it through more efficiently run practices, where the doctors focusing on care and the invisible DSO is focusing on administrative minutia.
00:03:23.896 --> 00:03:30.182
But, more importantly, all of these groups are going to examine growth opportunities within the doctor's community.
00:03:30.182 --> 00:03:41.751
Those growth opportunities may be acquiring competing practices that the doctor might fold into his own or have as standalone practices under his management.
00:03:41.751 --> 00:03:46.733
Other groups pursue the de novo or new start activity.
00:03:46.733 --> 00:04:03.629
But in general, all of the invisible DSOs want to help the doctor achieve growth, not only within their existing practice, but if they are interested in building or acquiring, they're going to want to help with that and they have a lot of different levers that they can pull to achieve growth.
00:04:03.629 --> 00:04:14.987
One of the most significant ones that's happening today is the larger invisible DSOs have been able to leverage the payers to get higher reimbursement rates.
00:04:14.987 --> 00:04:21.113
So, as an example, we have a client in a mid-Atlantic state who's doing about 4 million in collections.
00:04:21.113 --> 00:04:34.379
This is a GP practice which is about 100% insurance based, and in this particular group their new partner is getting reimbursed by the same payers at a 20% higher rate.
00:04:34.379 --> 00:04:55.399
So you take a $4 million practice and increase the reimbursement rates by 20%, you have an $800,000 increase in collections with zero growth and that $800,000 falls to the bottom line, so it can be significant utilizing your IDSO partners resources for growth internally and externally.
00:05:01.064 --> 00:05:06.817
We've had massive growth in the specialists becoming partners with invisible DSOs.
00:05:06.817 --> 00:05:14.379
Just in the last seven years there have been set 50 specialty focused invisible DSOs created.
00:05:14.379 --> 00:05:17.451
There are 14 now for ortho only.
00:05:17.451 --> 00:05:20.057
There are 17 for oral surgery only.
00:05:20.057 --> 00:05:27.519
There are multiple dental trifecta groups which are eager for pedo, ortho and oral surgery in the same communities.
00:05:27.519 --> 00:05:54.358
The good news is, when you have multiple groups with new, fresh capital eagerly bidding on quality practices, the values go up, and so our entire strategy to achieve the highest value with the best deal structure for our clients is to have multiple bidders, and they need to be multiple qualified bidders because not all of the invisible DSOs are qualified to be partners with our clients.
00:05:54.358 --> 00:06:01.567
There are many of them which may or may not make it, and so it's important that doctors choose wisely.
00:06:01.567 --> 00:06:12.978
But the great news is any specialist doctor today has far more options today than they had even three years ago, and that's driven up values and options for doctors.
00:06:18.225 --> 00:06:24.177
Technology is changing rapidly, and not just the physical technology, but certainly the software.
00:06:24.177 --> 00:06:35.605
Doctors can utilize their invisible DSO partnership to explore the new technologies that are available in their specialty and actually talk to partner doctors that have tried them.
00:06:35.605 --> 00:07:03.348
So a doctor who partners with an invisible DSO is going to be able to access the experiences of dozens or hundreds of other doctors in their specialty that have probably tried just about everything you're considering, and so you access this wealth of knowledge that helps you choose the technologies or softwares which may be most effective for your practice, because other doctors within the invisible DSO have already tried it.
00:07:03.348 --> 00:07:15.901
You know, one of the great things about an invisible DSO is they look at any partnership as being a lifetime partnership.
00:07:15.901 --> 00:07:21.432
They are eager that any specialist that they partner with will remain potentially forever.
00:07:21.432 --> 00:07:33.538
Now, certainly we're not going to allow our clients to sign employment agreements that are longer than five years, because we think there's the opportunity for doctors to renegotiate their compensation structures.
00:07:33.538 --> 00:07:49.555
But ultimately, an invisible DSO partnership will be something that the doctor will choose for the balance of their career, and it's important to understand that the invisible DSO is what you to stay for the balance of your career, even if it's in a part-time capacity.
00:07:49.555 --> 00:07:51.622
You're the leader of that practice.
00:07:51.622 --> 00:07:53.447
You're the owner who has built it.
00:07:53.447 --> 00:07:55.211
They want you to stick around forever.
00:08:00.862 --> 00:08:11.329
There are over a thousand invisible DSOs in the US today and we consider less than a hundred of that one thousand to be qualified bidders for our practices.
00:08:11.329 --> 00:08:23.485
We keep something that we call the blacklist, and the blacklist is a list that changes every week, and it is the invisible DSOs that we will not allow to bid on our clients.
00:08:23.485 --> 00:08:35.172
Now the way an invisible DSO gets on the blacklist is a very complex, non-formulated process which may include management changes.
00:08:35.172 --> 00:08:37.360
It may include changes in their balance sheet.
00:08:37.360 --> 00:08:50.903
It may include the fact that an invisible DSO has started acquiring lesser quality practices, which is an indication that they may not achieve the great equity returns that are possible with the great invisible DSOs.
00:08:50.903 --> 00:09:00.354
Some of the lower quality groups today are proposing deal structures which have elements which do not provide the doctor with any equity upside.
00:09:00.354 --> 00:09:04.446
They may use words like preferred equity etc.
00:09:04.446 --> 00:09:11.486
But that preferred equity, unless it's structured correctly, may not provide any equity upside for the doctors.
00:09:11.486 --> 00:09:13.511
So these are complex transactions.
00:09:14.092 --> 00:09:15.254
This is your life's work.
00:09:15.254 --> 00:09:21.477
It pays to fully understand exactly what you're getting into and with who you are getting into it.
00:09:21.477 --> 00:09:32.003
Consumers today are looking for faster, immediate solutions.
00:09:32.003 --> 00:09:38.062
The specialists who are scheduling their new patients out three weeks, four weeks, six weeks.
00:09:38.062 --> 00:09:42.374
Eight weeks is not going to be the fastest growing specialist in town.
00:09:42.374 --> 00:09:47.024
The growth of the iPhone has certainly changed dental practice.
00:09:47.024 --> 00:09:52.601
If you don't have the ability to book an appointment on your phone, you may have a problem.
00:09:52.601 --> 00:10:06.663
So keeping up with today's technologies to help the consumers choose you versus the other specialists in your community is an important element of growth and maintenance of your margins.
00:10:12.590 --> 00:10:14.173
We've done multiple transactions.
00:10:14.173 --> 00:10:26.375
Out of our $1 billion of transactions in the last 24 months, about half of those were for specialists, and part of what has been driving the oral surgeons in particular is their inability to recruit.
00:10:26.375 --> 00:10:40.142
And when you choose the right invisible DSO partner who has picked up over a hundred of the graduates last year, they have the ability to provide you with new doctors, which is important for any oral surgery practice which is trying to grow.
00:10:40.142 --> 00:10:47.517
And that's not necessarily to replace existing doctors, although that happens but it's also to support the growth of the practice.
00:10:47.517 --> 00:10:57.934
So the recruiting resources, not just in oral surgery but across all specialties, are of critical value to any specialist considering an invisible DSO partnership.
00:11:03.482 --> 00:11:16.399
One of the fastest growing categories of invisible DSOs today are the invisible DSOs, which are focusing on practices that have a heavy concentration on implant in all on X cases.
00:11:16.399 --> 00:11:23.142
Two years ago there were really no implant only focused or all on X focused invisible DSOs.
00:11:23.142 --> 00:11:26.192
Today there are at least 10 across the country.
00:11:26.192 --> 00:11:42.942
Some of these are interested in oral surgery based practices, which are doing implants and all on X, and others are interested in non-oral surgery based practices that are doing all on X or implants, and that's a rapidly growing category.
00:11:42.942 --> 00:11:48.096
The values are very high and the bitters are very high quality and have fresh capital.
00:11:48.096 --> 00:11:54.095
So if you're a specialist who is focusing on implants or all on X, unique timing for you.
00:11:54.796 --> 00:11:58.955
One of the other interesting things is the rate of consolidation in orthodontics.
00:11:58.955 --> 00:12:09.312
If you listen to your friends at the American Dental Association, their report that came out May indicates that the most consolidated practice type in the US are orthodontists.
00:12:09.312 --> 00:12:24.264
They estimate that 18% of all orthodontists have either partnered with an invisible DSO, sold to a DSO or are now working for one of the two, and that compares to about 13% for GPs.
00:12:24.264 --> 00:12:31.764
So consolidation in ortho has been going on for a long time and it is accelerating.
00:12:31.764 --> 00:12:35.322
Unfortunately, the values in ortho continue to set records.
00:12:35.322 --> 00:12:51.871
One of our highest value transactions as a multiple of EBITDA in 2023 was for a large ortho practice on the east coast, and we have completed well over $300 million of transactions for ortho practices in the last 30 months.
00:12:51.871 --> 00:12:58.583
It is a rapidly consolidating sector and many orthodontic practices are exceptionally profitable.
00:12:58.583 --> 00:13:23.356
One of the interesting things that we've seen happening over the last 18 months is that the oral surgery practices, of which there are now 17 oral surgery only invisible DSOs eagerly competing against each other to partner with great oral surgery practices nationally, some of those, because of their lack of targets let's call it have decided to add perio.
00:13:23.356 --> 00:13:27.293
In some cases, they've added perio and endo.
00:13:27.293 --> 00:13:32.414
That is growing the consolidation of all three of those specialties.
00:13:33.325 --> 00:13:36.214
Of course, we can't forget the dental trifectas.
00:13:36.214 --> 00:13:45.032
The dental trifectas are the specialty groups that are focused only on pedo, ortho and oral surgery within the same community.
00:13:45.032 --> 00:13:51.456
When they're able to do that, we've been able to get exceptional values for all three practice types.
00:13:51.456 --> 00:13:58.037
Dental trifectas have been proven to be the most valuable invisible DSOs on an exit.
00:13:58.037 --> 00:14:07.311
One of the biggest dental trifecta groups monetized in September of 22 at a valuation of over 20 times Evita.
00:14:07.311 --> 00:14:24.251
In late 2023, another dental trifecta group monetized their investment by partnering with the world's largest investor who, 13 months previously, had acquired one of the largest oral surgery invisible DSOs.
00:14:24.251 --> 00:14:31.006
These all presented opportunities for our doctors to monetize all or part of their retained equity.
00:14:31.006 --> 00:14:36.827
Many of them made two, three and four times their money on that equity in a very short period of time.
00:14:36.827 --> 00:14:47.070
For doctors interested in learning more about the dental trifectas, pedos, ortho or surgeons, take a look at our previous episodes where we go into that in more detail.
00:14:52.845 --> 00:15:05.518
For specialists, as is true for really all dental practice types, one of the number one metrics to create the highest values for a practice is the growth rate.
00:15:05.518 --> 00:15:15.331
Now, growth is registered or measured not only in top line revenue or collections growth, but it's also measured in EBITDA growth.
00:15:15.331 --> 00:15:24.174
Believe it or not, some practices that have grown have been able to increase their EBITDA or profit margin as a percentage of their overall collections.
00:15:24.174 --> 00:15:40.105
So practices today which are growing 23 over 22 and will grow 24 over 23, are the practices which are attracting the highest volume of bidders and will ultimately achieve the highest values.
00:15:40.105 --> 00:16:05.370
When choosing an invisible DSO partner, whether you're a specialist or a GP, it's absolutely imperative that you understand the financial support behind that invisible DSO, as this category has grown and has billions of dollars of profits have been made by both doctors and investors.
00:16:06.445 --> 00:16:11.056
The consolidation of dental practices has attracted a significant amount of capital.
00:16:11.056 --> 00:16:16.576
The key to that capital is understanding what that capital's track record is.
00:16:16.576 --> 00:16:19.953
Have they done invisible DSO creation before?
00:16:19.953 --> 00:16:23.113
Have they done healthcare consolidation before?
00:16:23.113 --> 00:16:33.613
Growing a large group of national gyms is not the same as growing an invisible DSO profitably and with an ultimate high value equity.
00:16:33.613 --> 00:16:37.774
So it's critical that doctors understand who their potential partner is.
00:16:37.774 --> 00:16:50.076
There are many new groups with lots of capital entering this space who will not be successful because they do not understand the nuances of building an invisible DSO with happy doctors.
00:16:50.076 --> 00:16:52.990
Doctors, thank you for joining me today.
00:16:52.990 --> 00:17:03.475
Please be sure and tune in for our next episode, where we talk about why so many doctors in their 30s and 40s are joining invisible DSOs today.
00:17:03.475 --> 00:17:11.834
It's an important trend that doctors of all ages need to understand because if you're old like me, it may limit your opportunities.
00:17:11.834 --> 00:17:15.088
So tune in for our next episode and thank you for listening today.
00:00:02.407 --> 00:00:11.750
Hello doctors, I'm your host, chip Fitchner, co-founder of Large Practice Sales, and you're listening to Practice Partnership monetizing your dental practice.
00:00:11.750 --> 00:00:16.446
Welcome to today's episode of Practice Partnership.
00:00:16.446 --> 00:00:22.728
Today we're going to talk about the impact of invisible DSOs and the opportunities for specialists.
00:00:22.728 --> 00:00:36.203
If you're a specialist, your opportunities for partnership with an invisible DSO have grown dramatically over the last seven years, and today we're going to talk about what those specific opportunities might be for your specialty.
00:00:36.203 --> 00:00:49.046
Invisible DSO partnership means different things to different doctors and brings different values to different doctors.
00:00:49.046 --> 00:01:05.638
Certainly, getting millions of dollars in cash up front at low long-term capital gains tax rates is valuable, but I think probably the number two benefit that doctors perceive in an IDSO partnership is the fact that they get more time.
00:01:05.638 --> 00:01:23.953
They're going to be offloading a lot of the administrative minutia associated with running a practice, including banking, payroll benefits, benefits, administration, compliance, credentialing, tax, legal IT support and vendor and payer negotiations.
00:01:23.953 --> 00:01:43.971
When doctors can take all of those responsibilities off their back and focus on patient care, leading their teams and practice growth, they find that they have more time for their families and they find that very fulfilling, because many of these doctors did not get into dentistry to deal with administrative minutia.
00:01:43.971 --> 00:02:08.664
Certainly, they continue to lead their practices and make the hiring decisions and the firing decisions and the when will we be open and when will we take vacations, but with an invisible DSO partnership, their new partner is going to help them in many ways and those benefits will extend to recruiting, and I think one of the key things that's changing today is adoption of new technology.
00:02:08.664 --> 00:02:13.401
There are a lot of benefits of an invisible DSO partnership besides the cash up front.
00:02:13.401 --> 00:02:28.633
There is an interesting trend in doctors joining invisible DSO partnerships because they want to be able to access the latest technologies.
00:02:28.633 --> 00:02:38.810
I think ultimately, many doctors will come to realize that using artificial intelligence, for example, in their diagnostic processes, is going to be a game changer.
00:02:38.810 --> 00:03:02.260
It's going to become the standard of care and, with all of the new technologies coming at doctors every year, it really helps to have a partner that can help you adopt those, implement them correctly and ultimately it's going to provide better patient care and differentiate their practice from the other practices in their community which have remained independent and have been unable to make those technology adoptions.
00:03:07.647 --> 00:03:12.875
Growth is one of the key elements that all of the invisible DSOs want to achieve.
00:03:12.875 --> 00:03:23.896
Certainly they would like to achieve it through more efficiently run practices, where the doctors focusing on care and the invisible DSO is focusing on administrative minutia.
00:03:23.896 --> 00:03:30.182
But, more importantly, all of these groups are going to examine growth opportunities within the doctor's community.
00:03:30.182 --> 00:03:41.751
Those growth opportunities may be acquiring competing practices that the doctor might fold into his own or have as standalone practices under his management.
00:03:41.751 --> 00:03:46.733
Other groups pursue the de novo or new start activity.
00:03:46.733 --> 00:04:03.629
But in general, all of the invisible DSOs want to help the doctor achieve growth, not only within their existing practice, but if they are interested in building or acquiring, they're going to want to help with that and they have a lot of different levers that they can pull to achieve growth.
00:04:03.629 --> 00:04:14.987
One of the most significant ones that's happening today is the larger invisible DSOs have been able to leverage the payers to get higher reimbursement rates.
00:04:14.987 --> 00:04:21.113
So, as an example, we have a client in a mid-Atlantic state who's doing about 4 million in collections.
00:04:21.113 --> 00:04:34.379
This is a GP practice which is about 100% insurance based, and in this particular group their new partner is getting reimbursed by the same payers at a 20% higher rate.
00:04:34.379 --> 00:04:55.399
So you take a $4 million practice and increase the reimbursement rates by 20%, you have an $800,000 increase in collections with zero growth and that $800,000 falls to the bottom line, so it can be significant utilizing your IDSO partners resources for growth internally and externally.
00:05:01.064 --> 00:05:06.817
We've had massive growth in the specialists becoming partners with invisible DSOs.
00:05:06.817 --> 00:05:14.379
Just in the last seven years there have been set 50 specialty focused invisible DSOs created.
00:05:14.379 --> 00:05:17.451
There are 14 now for ortho only.
00:05:17.451 --> 00:05:20.057
There are 17 for oral surgery only.
00:05:20.057 --> 00:05:27.519
There are multiple dental trifecta groups which are eager for pedo, ortho and oral surgery in the same communities.
00:05:27.519 --> 00:05:54.358
The good news is, when you have multiple groups with new, fresh capital eagerly bidding on quality practices, the values go up, and so our entire strategy to achieve the highest value with the best deal structure for our clients is to have multiple bidders, and they need to be multiple qualified bidders because not all of the invisible DSOs are qualified to be partners with our clients.
00:05:54.358 --> 00:06:01.567
There are many of them which may or may not make it, and so it's important that doctors choose wisely.
00:06:01.567 --> 00:06:12.978
But the great news is any specialist doctor today has far more options today than they had even three years ago, and that's driven up values and options for doctors.
00:06:18.225 --> 00:06:24.177
Technology is changing rapidly, and not just the physical technology, but certainly the software.
00:06:24.177 --> 00:06:35.605
Doctors can utilize their invisible DSO partnership to explore the new technologies that are available in their specialty and actually talk to partner doctors that have tried them.
00:06:35.605 --> 00:07:03.348
So a doctor who partners with an invisible DSO is going to be able to access the experiences of dozens or hundreds of other doctors in their specialty that have probably tried just about everything you're considering, and so you access this wealth of knowledge that helps you choose the technologies or softwares which may be most effective for your practice, because other doctors within the invisible DSO have already tried it.
00:07:03.348 --> 00:07:15.901
You know, one of the great things about an invisible DSO is they look at any partnership as being a lifetime partnership.
00:07:15.901 --> 00:07:21.432
They are eager that any specialist that they partner with will remain potentially forever.
00:07:21.432 --> 00:07:33.538
Now, certainly we're not going to allow our clients to sign employment agreements that are longer than five years, because we think there's the opportunity for doctors to renegotiate their compensation structures.
00:07:33.538 --> 00:07:49.555
But ultimately, an invisible DSO partnership will be something that the doctor will choose for the balance of their career, and it's important to understand that the invisible DSO is what you to stay for the balance of your career, even if it's in a part-time capacity.
00:07:49.555 --> 00:07:51.622
You're the leader of that practice.
00:07:51.622 --> 00:07:53.447
You're the owner who has built it.
00:07:53.447 --> 00:07:55.211
They want you to stick around forever.
00:08:00.862 --> 00:08:11.329
There are over a thousand invisible DSOs in the US today and we consider less than a hundred of that one thousand to be qualified bidders for our practices.
00:08:11.329 --> 00:08:23.485
We keep something that we call the blacklist, and the blacklist is a list that changes every week, and it is the invisible DSOs that we will not allow to bid on our clients.
00:08:23.485 --> 00:08:35.172
Now the way an invisible DSO gets on the blacklist is a very complex, non-formulated process which may include management changes.
00:08:35.172 --> 00:08:37.360
It may include changes in their balance sheet.
00:08:37.360 --> 00:08:50.903
It may include the fact that an invisible DSO has started acquiring lesser quality practices, which is an indication that they may not achieve the great equity returns that are possible with the great invisible DSOs.
00:08:50.903 --> 00:09:00.354
Some of the lower quality groups today are proposing deal structures which have elements which do not provide the doctor with any equity upside.
00:09:00.354 --> 00:09:04.446
They may use words like preferred equity etc.
00:09:04.446 --> 00:09:11.486
But that preferred equity, unless it's structured correctly, may not provide any equity upside for the doctors.
00:09:11.486 --> 00:09:13.511
So these are complex transactions.
00:09:14.092 --> 00:09:15.254
This is your life's work.
00:09:15.254 --> 00:09:21.477
It pays to fully understand exactly what you're getting into and with who you are getting into it.
00:09:21.477 --> 00:09:32.003
Consumers today are looking for faster, immediate solutions.
00:09:32.003 --> 00:09:38.062
The specialists who are scheduling their new patients out three weeks, four weeks, six weeks.
00:09:38.062 --> 00:09:42.374
Eight weeks is not going to be the fastest growing specialist in town.
00:09:42.374 --> 00:09:47.024
The growth of the iPhone has certainly changed dental practice.
00:09:47.024 --> 00:09:52.601
If you don't have the ability to book an appointment on your phone, you may have a problem.
00:09:52.601 --> 00:10:06.663
So keeping up with today's technologies to help the consumers choose you versus the other specialists in your community is an important element of growth and maintenance of your margins.
00:10:12.590 --> 00:10:14.173
We've done multiple transactions.
00:10:14.173 --> 00:10:26.375
Out of our $1 billion of transactions in the last 24 months, about half of those were for specialists, and part of what has been driving the oral surgeons in particular is their inability to recruit.
00:10:26.375 --> 00:10:40.142
And when you choose the right invisible DSO partner who has picked up over a hundred of the graduates last year, they have the ability to provide you with new doctors, which is important for any oral surgery practice which is trying to grow.
00:10:40.142 --> 00:10:47.517
And that's not necessarily to replace existing doctors, although that happens but it's also to support the growth of the practice.
00:10:47.517 --> 00:10:57.934
So the recruiting resources, not just in oral surgery but across all specialties, are of critical value to any specialist considering an invisible DSO partnership.
00:11:03.482 --> 00:11:16.399
One of the fastest growing categories of invisible DSOs today are the invisible DSOs, which are focusing on practices that have a heavy concentration on implant in all on X cases.
00:11:16.399 --> 00:11:23.142
Two years ago there were really no implant only focused or all on X focused invisible DSOs.
00:11:23.142 --> 00:11:26.192
Today there are at least 10 across the country.
00:11:26.192 --> 00:11:42.942
Some of these are interested in oral surgery based practices, which are doing implants and all on X, and others are interested in non-oral surgery based practices that are doing all on X or implants, and that's a rapidly growing category.
00:11:42.942 --> 00:11:48.096
The values are very high and the bitters are very high quality and have fresh capital.
00:11:48.096 --> 00:11:54.095
So if you're a specialist who is focusing on implants or all on X, unique timing for you.
00:11:54.796 --> 00:11:58.955
One of the other interesting things is the rate of consolidation in orthodontics.
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If you listen to your friends at the American Dental Association, their report that came out May indicates that the most consolidated practice type in the US are orthodontists.
00:12:09.312 --> 00:12:24.264
They estimate that 18% of all orthodontists have either partnered with an invisible DSO, sold to a DSO or are now working for one of the two, and that compares to about 13% for GPs.
00:12:24.264 --> 00:12:31.764
So consolidation in ortho has been going on for a long time and it is accelerating.
00:12:31.764 --> 00:12:35.322
Unfortunately, the values in ortho continue to set records.
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One of our highest value transactions as a multiple of EBITDA in 2023 was for a large ortho practice on the east coast, and we have completed well over $300 million of transactions for ortho practices in the last 30 months.
00:12:51.871 --> 00:12:58.583
It is a rapidly consolidating sector and many orthodontic practices are exceptionally profitable.
00:12:58.583 --> 00:13:23.356
One of the interesting things that we've seen happening over the last 18 months is that the oral surgery practices, of which there are now 17 oral surgery only invisible DSOs eagerly competing against each other to partner with great oral surgery practices nationally, some of those, because of their lack of targets let's call it have decided to add perio.
00:13:23.356 --> 00:13:27.293
In some cases, they've added perio and endo.
00:13:27.293 --> 00:13:32.414
That is growing the consolidation of all three of those specialties.
00:13:33.325 --> 00:13:36.214
Of course, we can't forget the dental trifectas.
00:13:36.214 --> 00:13:45.032
The dental trifectas are the specialty groups that are focused only on pedo, ortho and oral surgery within the same community.
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When they're able to do that, we've been able to get exceptional values for all three practice types.
00:13:51.456 --> 00:13:58.037
Dental trifectas have been proven to be the most valuable invisible DSOs on an exit.
00:13:58.037 --> 00:14:07.311
One of the biggest dental trifecta groups monetized in September of 22 at a valuation of over 20 times Evita.
00:14:07.311 --> 00:14:24.251
In late 2023, another dental trifecta group monetized their investment by partnering with the world's largest investor who, 13 months previously, had acquired one of the largest oral surgery invisible DSOs.
00:14:24.251 --> 00:14:31.006
These all presented opportunities for our doctors to monetize all or part of their retained equity.
00:14:31.006 --> 00:14:36.827
Many of them made two, three and four times their money on that equity in a very short period of time.
00:14:36.827 --> 00:14:47.070
For doctors interested in learning more about the dental trifectas, pedos, ortho or surgeons, take a look at our previous episodes where we go into that in more detail.
00:14:52.845 --> 00:15:05.518
For specialists, as is true for really all dental practice types, one of the number one metrics to create the highest values for a practice is the growth rate.
00:15:05.518 --> 00:15:15.331
Now, growth is registered or measured not only in top line revenue or collections growth, but it's also measured in EBITDA growth.
00:15:15.331 --> 00:15:24.174
Believe it or not, some practices that have grown have been able to increase their EBITDA or profit margin as a percentage of their overall collections.
00:15:24.174 --> 00:15:40.105
So practices today which are growing 23 over 22 and will grow 24 over 23, are the practices which are attracting the highest volume of bidders and will ultimately achieve the highest values.
00:15:40.105 --> 00:16:05.370
When choosing an invisible DSO partner, whether you're a specialist or a GP, it's absolutely imperative that you understand the financial support behind that invisible DSO, as this category has grown and has billions of dollars of profits have been made by both doctors and investors.
00:16:06.445 --> 00:16:11.056
The consolidation of dental practices has attracted a significant amount of capital.
00:16:11.056 --> 00:16:16.576
The key to that capital is understanding what that capital's track record is.
00:16:16.576 --> 00:16:19.953
Have they done invisible DSO creation before?
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Have they done healthcare consolidation before?
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Growing a large group of national gyms is not the same as growing an invisible DSO profitably and with an ultimate high value equity.
00:16:33.613 --> 00:16:37.774
So it's critical that doctors understand who their potential partner is.
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There are many new groups with lots of capital entering this space who will not be successful because they do not understand the nuances of building an invisible DSO with happy doctors.
00:16:50.076 --> 00:16:52.990
Doctors, thank you for joining me today.
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Please be sure and tune in for our next episode, where we talk about why so many doctors in their 30s and 40s are joining invisible DSOs today.
00:17:03.475 --> 00:17:11.834
It's an important trend that doctors of all ages need to understand because if you're old like me, it may limit your opportunities.
00:17:11.834 --> 00:17:15.088
So tune in for our next episode and thank you for listening today.
