David Drzewiecki, CEO of Absolute Dental
Below is an excerpt of the full interview conducted with David Drzewiecki. Download the PDF now for the full article.
DSO Market Landscape – A Market Transformed, Misunderstood & Ripe With Opportunity Ahead
There are approximately 200,000 dentists in the United States. When I started in the dental market in 2007, there was about 5% consolidation across the industry. Today, it’s closer to 20%. Watching this rate of consolidation was impressive. When I got involved with Dental Care Partners, we had 67 practices, Aspen Dental had about 100 practices, Heartland Dental had maybe 130 practices. Heartland Dental now for example has over 1,600 practices to give you an idea of just how much things have changed. Technology was few and far between back in 2007 comparable to what’s available today. Medicaid was misunderstood, probably 10, 15 years ago. Today, however, pediatric Medicaid and orthodontics Medicaid are broadly accepted as solid business models.
Greatest Misconceptions About the DSO Investment Thesis
Paramount is the false assumption that the DSO market is already mature, in the ninth inning. The reality is that with 80% of the market of 200,000 dentists still fragmented, with 50% of the adult market untapped and with the role of technology in establishing value-based payments and expanding our reach into homecare and more services the best is yet to come. The second main false assumption is that the market hasn’t scaled well, with a few well publicized largescale DSO challenges. My view is that in a market of +150 DSO platforms, there were only a couple of bad actors in there that unfortunately created some of those misconceptions. Whether it was a failed DSO unable to meet its debt covenants or an incidence of Medicaid fraud, the number of these types of examples is less than a handful. The DSO industry consists predominantly of people who genuinely care about delivering great care and / or supporting others who deliver great care.
Where Does the DSO Market Go From Here?
I see and interact with more DSO strategics now than ever before, as well as more DSO targets. We should anticipate further consolidation. Today’s largest DSO groups will continue to consolidate for all the right reasons, which is expanding and streamlining services for the end-patient. As we look at some evolving dental payer market dynamics and what it will take to achieve target outcomes at a macro level in the dental industry, there will be required investment in technology to develop the types of programs necessary for continuing to modernize the holistic dental care experience.
Technology will continue to both enable and require further consolidation. Technology adds expense and complexity, but also simultaneously provides potential for improved results across a myriad of departments, particularly as it relates to the standardization of dental care.
