Bart Walker, JD serves as a Partner at McGuireWoods LLP.
On February 19, 2020, Bart will serve as a panelist at Becker's 1st Annual Dental + DSO Moderated Discussion. As part of an ongoing series, Becker's is talking to industry leaders who plan to speak at the roundtable, which will take place February 19 in Chicago.
To learn more about this exclusive event, click here.
What are three major challenges DSOs must overcome?
The biggest challenge is scale and integration. It is one thing to operate a single office or even a handful of local offices. It is an entirely different ballgame to operate a true multi-state DSO with different markets, cultures, patient expectations, and regulatory regimes. From an acquisition perspective, acquirers are discovering that even the smaller acquisitions and add-ons require a significant investment of blood, sweat, tears, and money. De novo growth is no easier; in most cases the DSO is displacing an incumbent local provider with longstanding patient relationships. Over all of these concerns there is still the matter of building a winning culture and establishing a credible brand.
The second biggest challenge is attracting and retaining talent. There is an education curve for both new graduates and veterans alike. As DSOs become more common, that learning curve is flattening, but it still poses an obstacle to acceptance in some places. In addition there are simply not enough providers in some places to serve the population. In this business the recruiting cycle never ends.
Finally, and most uncertain, is sustainability. It is unclear whether the investment thesis of each of the well-financed DSOs will pay off. As in all businesses, there will be winners and losers.
If you could solve one challenge in the dental industry overnight, what would it be and why?
Harmonization of licensure and ownership requirements. It is the single biggest obstacle to accelerating consolidation. I believe it is similar to the banking industry before the arrival of interstate banking. If we had a consistent regulatory structure, it would pave the way to a more efficient market.
What has been most successful in terms of expanding?
The DSOs we have seen that have been most successful in expanding have a clear growth strategy (including either de novo or acquisitions) and a clear process-driven approach to replicating successes. The best DSOs know their core competencies and their ideal targets and have the discipline not to stray too far from them.