The COVID-19 pandemic has forced DSOs to become more flexible and strategic in order to stand out in a competitive market, according to Sage Dental Chief Development Officer Jim Mizouni.
Sage Dental supports 86 practices in Florida and Georgia, including 14 added this year. The company also inked technology deals with Pearl, a dental artificial intelligence provider, and SheepMedical, a clear aligner technology company, to enhance patient care.
Mr. Mizouni recently spoke with Becker's about the DSO's growth and plans along with challenges in the industry.
Editor's note: Responses were lightly edited for clarity and length.
Question: How would you describe Sage Dental's growth so far in 2022?
Jim Mizouni: So we've expanded by 27 practices in a little bit over a year. We're currently on pace to probably do 25-30 a year. We'd like to get that up to 45-50 a year. Sage did not add any practices in 2017, 2018 or 2019, and actually that's a good thing because what it meant was that we were focusing on improving our core business, clinical, operational, IT, technology, marketing and really worked on the existing portfolio during that period of time. So when we came out of COVID and we started the new development process, we had to kind of begin everything from scratch both on the de novo side and the acquisition side. Right now we're at 86 practices; it still makes us a little bit of a smaller player, but I think at this pace we'll probably come close to 150 by the end of next year.
Q: How was it jumping back into the expansion process during the COVID-19 pandemic?
JM: We were probably helped a little bit by the fact that we're a regional player right now in Florida and Georgia. I think COVID impacted dental organizations differently, depending on what part of the country you were in, but I think the other thing that COVID did is that it probably reordered the competitive landscape a little bit. I think some of the practices that maybe had struggled going into COVID found it very difficult to continue operations post-COVID. Some groups that were very strong already actually saw a fairly significant revenue in patient growth coming out of COVID. That was definitely the experience at Sage. We were pretty well-positioned to kind of take advantage of that so as opposed to it being scary, it was actually really interesting to see the revenue and patient growth be so high out of COVID, and that's what helped field our confidence in terms of growing faster.
Q: What challenges have Sage Dental had to overcome in its growth and how have you had to adapt to those challenges?
JM: Well, I think everybody's experiencing the post-COVID development. Supply chain has significantly been impacted. It's still not back to where it was pre-COVID in terms of everything, from equipment to doors to electrical panels. It's not just dental stuff. It's really anything that is construction-related. The permitting process is much, much slower and much more difficult than it was pre-COVID. It takes longer if you're building practices or remodeling practices to do that than it did before COVID. And as of right now, there doesn't appear to be any fundamental change coming up that I'm going to be able to say, OK, in three months, or six months or nine months or 12 months, it's going to go back to the way it used to be.
A big part of it is just completely revisiting your process. So for anybody who used to do de novos, you would kind of have a series of events that would happen. You go out, look for a location, you do an LOI, you go through the leasing process, the architectural process, etcetera. Now if you just do the traditional way, it may take 12 to 18 months to open up a practice just based on how tight everything is. So what we have to do now is plan ahead of time. We have to do a lot of activities simultaneously that we used to do kind of one at a time. We have to buy supplies and especially equipment that are in high demand, delivery units, autoclaves and panels, whatever it might be, a lot earlier than we used to do. We have a warehouse in which we now stock a certain amount of both supplies and equipment that we didn't have pre-COVID. It forces you to be much farther looking. Maybe in the past I would be 12 months out in terms of development planning. Now I'm really 24 months out in terms of trying to think what's the human capital needed, what's the equipment needed, what's the construction needed.
It's just a matter of being flexible to the change in business dynamic. The other thing is that it's also more challenging in some cases from a recruiting standpoint. That's something that everybody's experienced. Even on the dentist side, it's getting more competitive as you have a lot of DSOs growing simultaneously and they all tend to be focused on the same markets. I think it's a great time potentially to be a dentist or hygienist because you have more people competing for your services, but it forces the DSO to really be much more thoughtful about why us, what are we going to provide them so that we become an employer of choice. So electrical panels or doors or countertops or autoclaves or whatever, you can solve for that. I think it's simultaneously the human capital part of it that really has been challenging for everybody.
Q: What are Sage Dental's goals for expansion?
JM: Sometimes you'll see DSOs and they'll grow and they'll be in Dallas or Chicago and Atlanta. What we really want to do is we really want to try to grow geographically somewhat consistently. So we're in Florida and Georgia right now. Ideally, our next steps would be in the next group of states around that. So it could be South Carolina, it could be Tennessee, could be Alabama. And the reason why we believe that that's a healthy way to grow is that it helps leverage operations in terms of your capacity to support the practices. It helps leverage clinical [operations] in terms of being able to recruit and retain doctors over a particular geographic area. It helps from a marketing standpoint because we're branded.
Q: What advice do you give to potential affiliate practices?
JM: I think the temptation is to say, "I want to grow. I want, I want to buy this number of practices this year," and so I don't want to encourage a doctor to look around or maybe not come to us. But the reality is that if it's a doctor that wants to stay long term, it's almost like it's a long-term relationship and you want to make sure that both parties are equally happy. I tell doctors all the time, "I'm not here to sell you. I'm going to tell you who Sage is. I'm going to learn a lot about who you are and what you want, and it's perfectly OK if that's not a good fit." I absolutely believe that doctors should look around. It's a major decision for most of them. A lot of them have been practicing for years. It's been their own business. This is a very personal decision and DSOs are very different. Some DSOs have different payer models ... [and] some are more mostly focused on general, some general plus specialty. Is that doctor ready to potentially bring in another doctor or more staff as they've been kind of running that practice by themselves. What's their clinical approach? What's their demographic? All those things kind of go into play and I really want to make sure that the doctor is taking their time and is really asking all those questions.