Despite high interest rates, global turmoil, labor challenges, and inflation, the consolidation of US dental practices continues at a record pace. Invisible Dental Support Organizations (IDSOs) are accelerating their quiet partnerships with large, growing practices across the country. General practices and specialists continue to achieve record values in Q1 2024 in the Large Practice Sales (LPS) bidding process, which completed more than $1 billion of IDSO partnerships in 2022 and 2023.
In an IDSO partnership, doctors sell 51% to 80% of their practice for cash up front at low capital gains tax rates. Doctors continue to lead their practices as owners with full autonomy for years or decades and benefit from the support of a large partner. Each IDSO offers different resources and cultures.
In a properly executed process, doctors can evaluate the unique features of a variety of qualified IDSOs and choose the right fit for their practice. Some LPS clients in 2023 had more than a dozen qualified bidders from which to choose their ideal silent partner.
Examples of IDSO resources and partnership benefits
Administrative burden reduction: Virtually all IDSOs become responsible for banking, payroll, benefits, compliance, credentialling, tax, legal, IT support, and vendor and payer negotiations. The doctor’s time is freed to focus on patient care, growing their practice, and work/life balance. More time for young families is a key reason hundreds of doctors under the age of 40 have chosen an IDSO partnership.
Lower costs on everything: Due to the size of IDSOs, some of which have more than 10,000 team members, the costs of supplies, technology, and benefits can be dramatically lower than independent practices. Imagine paying 50% less for implants, 40% less for clear aligners, and 25% less for supplies and team benefits.
Higher reimbursement rates: A well-kept secret in the dental world is that some IDSO partner practices are reimbursed at higher rates from insurance companies than independent dentists, in some cases as much as 20% more.
New-patient marketing: Doctors were trained to create beautiful smiles, not how to master digital marketing. IDSOs have full-time internal teams dedicated to driving new patients to their partner practices.
Recruiting: Many IDSOs have dozens of full-time team members dedicated to finding great people for partner practices. IDSOs can recruit more effectively than independent dentists by offering ownership opportunities, superior benefits, choices of geography, and advancement opportunities for key team members.
Capital and support for growth: Doctors eager to expand their practice, build new offices, or acquire complementary or competitive practices can rely on the access to capital, data, and research from their IDSO partner. Doctors can expand their practices without risk, bank loans, and personal guarantees.
Access to leading-edge technology and training: The IDSOs are often the first to test new technologies and systems. AI, for example, will become a standard of care in the coming years, with many IDSOs already using it to improve diagnostic accuracy and increase collections across thousands of practices.
Value creation for doctors and IDSO investors: In the last 90 days, more than $3 billion of new capital has been invested in IDSOs by sophisticated global investors seeking the proven, market-beating returns in US dental consolidation. The doctor’s retained ownership grows faster and greater in value as part of an IDSO than it does by remaining independent. In the first half of 2024, more than 500 doctors will realize growth returns of 200% to 500% in less than five years as their IDSO partners sell to larger investors. The key is to choose the right IDSO partner because some will fail.
Synergy with IDSO partner practices: Dozens of specialty IDSOs have been formed in the last six years. Some focus on single specialties, such as the 17 OMS-only IDSOs. Others are multispecialty, including the dental trifecta IDSOs, which partner with only pediatric, ortho, and OMS to lock in patient referral networks, which drives organic growth.
Peer collaboration: Perhaps one of the most overlooked benefits of IDSO partnership is the sharing of information among doctors with common and not competitive goals. Every doctor can gain from the knowledge and experience of other doctors in an IDSO family. The best IDSOs actively encourage organized collaboration among all their partner doctors nationally.
The acceleration of US dental practice consolidation is logical and inevitable. Dentistry is still well below 20% consolidated according to the ADA.1 Doctors should at least become educated on the IDSO partnership option. You will either ultimately join an IDSO or compete with many.
Reference
- Guay A, Wall T, Considering large group practices as a vehicle for consolidation in dentistry. American Dental Association Health Policy Institute. April 2016. https://www.ada.org/-/media/project/ada-organization/ada/ada-org/files/resources/research/hpi/hpibrief_0416_1.pdf
Editor's note: This article appeared in the May 2024 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.
Chip Fichtner, Cofounder and Principal of Large Practice Sales, completed more than $1 billion of practice transactions in 2022 and 2023 with 38 IDSOs for clients in 31 states. He has built, bought, and sold companies in a variety of industries, and has been featured in numerous media outlets. His tolerant wife of 33 years allows him to live on airplanes visiting clients every week. Learn more at largepracticesales.com.