Private equity has become a big player in dentistry, but there is no consensus on whether it has been beneficial to the industry.
Six dental leaders connected with Becker's to share the impact of private equity on the industry.
Question: How has private equity impacted the dental industry, and has it been a net positive or negative for dentistry?
Note: Responses were lightly edited for clarity and length.
John Cox. Chief Growth Officer of SprintRay (Los Angeles): I can comment from many viewpoints but will take the one from a PE-funded technology company which I have been involved with over the past five years. PE has had a significant impact in driving innovation and new solutions in the dental industry. SprintRay is a great example of a technology startup company that has gone through a few rounds of PE funding that have provided the company with the necessary resources to scale operations, hire top talent and accelerate the development of new products, including hardware, bio-materials and AI-assisted design software solutions. The result of this support has enabled SprintRay to grow into a dominant player in the category and bring innovative time-saving and cost-saving solutions to the dental community that provide significant benefits to the practice and, more important, the patient.
Joseph Ferraro, DDS. Dentist of Four Lakes Family Dental (Madison, Wis.): As dentistry becomes more complex and costly to maintain a private dental office, private equity has created a means for dentists to practice without the burden of managing and owning a dental practice. When I graduated from dental school in the mid-'80s, there were few options: You either associated with a dentist or bought your own dental practice. Owning a practice was much easier and there was less regulation; also we lived in mostly an analog world in that era. Since then computer and digital technology has vastly changed our world. Each individual dentist must decide how to practice, and for some significant dental school and undergraduate educational debt makes it difficult to obtain financing to buy a practice. In addition, lack of clinical experience may not be the best start in a solo practice for a dentist. Regardless of the practice setting, continuing education is a vital part of success in the dental profession. One must continue to learn new skills and refresh existing skills to stay competitive. There is no perfect system. Private equity has created many opportunities for dentists to practice; it is up to each individual dentist to demand excellence in how they approach patient care.
Dennis Flanagan, DDS. Adjunct Clinical Professor at Jacksonville University (Fla.): A net negative. We are heading for the morass that medicine has allowed itself to become mired in. The dental specialties have contributed to this by undertraining the dentists, so they are forced to refer almost every patient to a specialist. Thus, new graduates, saddled with debt, are forced to work in corporate enterprises where they are encouraged to over-treat to generate income for their employer.
Huzefa Kapadia, DDS. Dentist at Detroit Sterling Dental: Private equity has created more efficient systems in place. The goals are to reduce overhead and streamline the time it takes the patient to come in and out of the facility. Larger organizations can negotiate better rates for supplies and equipment, potentially reducing costs. PE firms have injected significant capital into dental practices, allowing for technology upgrades, expansion and modernization of facilities. PE involvement has created new career opportunities for dentists, including management roles within DSOs. However, there are some potential negatives of DSOs: Fears of over-treatment or unnecessary procedures to meet financial targets; concerns about prioritizing profits over patient care; and possible loss of autonomy for dentists in corporate structures.
I've talked to several dentists who are looking forward to getting out of their contract after five years and working on their own. Some have said they hated it, and others said they didn't mind it, but their partners didn't like it at all. If you are content making a deal with the so-called "devil" with a large upfront sum of money, it may benefit you, but long term, can you handle the relationship or will you want out? I personally still value my autonomy and tax advantages of owning a small business. Instead of being tempted by the lump sum of money, I've just continued to invest most of my income and have zero debt. That has brought me contentment. Everyone's path will differ.
Matthew Stratman, DDS. Dentist at Stratman Family Dentistry (Tucson, Ariz.): Private equity has created a lot of opportunities for dentists. However, it is not always positive. I wonder what will happen to the stock in the future for those transactions that have already taken place. Is the stock going to be worth astronomical amounts which private equity states when dentist's sell their office to them? Or is the stock going to be relatively worthless, which is what has transpired in medicine? I think in the beginning private equity was a positive to create growth for lots of offices who initially sold. But I think it's going to be negative in the future for the industry where substandard care and treatment is pushed for the sake of growth.
Brooke Young. COO of Espire Dental (Greenwood Village, Colo.): Private equity has been a driving force behind the evolution of dentistry and is a positive. Many dentists graduate dental school with massive amounts of debt and little to no education in running a business. In the traditional model the next logical step is to buy a private practice and assume all the responsibilities that come with running a business. I have worked with many dentists that haven't taken a vacation, or a substantial paycheck, in years because payroll, bills, rent, etc., all have to be paid first, and I have worked with many dentists that have been forced to file bankruptcy because they can't get out from under their debt. Private equity has allowed dentists to do what they do best by focusing on providing world class clinical care while there are business professionals doing what they do best, and thus allowing practices to thrive. Additionally, with increased access to capital dentists are allowed opportunities to work with cutting edge technology. A great example of this is the adoption to AI that we have seen over the past few years.