Boca Raton, Fla.-based Sage Dental is poised for continued growth after adding its 100th practice to its network.
The DSO hit the milestone after acquiring Kendall Dental Care in Miami earlier this month, making it the largest DSO in South Florida.
Jim Mizouni, chief development officer and senior vice president at Sage Dental, recently spoke with Becker's about the company's growth, competition in the Southeast and the trends he is following in the DSO industry.
Editor's note: Responses were lightly edited for clarity and length.
Question: How would you describe Sage Dental's growth so far this year, and what does this milestone mean for the company?
Jim Mizouni: We surpassed 100 practices about two weeks ago [and] today it's about 103. We about doubled the size of the company in about two and a half years. We actually think we have room to grow at an even faster rate if we continue to be successful.
You have to have a good value differentiation to even get to 100, both for the patients and for the team members. One of the biggest issues in the industry right now is recruiting and retention. You can't deliver excellent patient care if you don't have excellent clinical team members and it's never been more competitive to recruit and retain doctors, hygienists, [dental assistants, and] specialists up and down the line. Secondly, you can't bootstrap or outsource your way to 100 either. At 100 locations, you have to have a robust corporate support system that actually creates value for those practices, whatever that means in terms of IT, finance and accounting, revenue cycle, marketing, development and facilities, and the whole thing. While it's just a number, I think it is a validation that the concept is good, the concept's been tested, it's passed that test and that you've gotten through the initial stages where you've actually built a robust corporate support system that creates value for the practices. Those are the two most important things, probably, around that particular milestone.
Q: What challenges has the company had to overcome during its growth journey?
JM: The company didn't grow any practices at all for a three-year period. We did fairly aggressive growth to get up to the 50s in 2015, 2016 and 2017, and then had to take a pause. One of the challenges in any kind of growth industry is that you're so focused on growth it can be very difficult to actually call that hiatus, take some time and evaluate the quality of the business. Here at Sage, it was a three-year process in which they didn't have a development function. Those three years were dedicated to making sure that operations were all as good as they can be. If you look at the history of a lot of highly successful multi-unit businesses across multiple industries, you'll frequently see in their history that they grow, they start to run into issues and sometimes the really successful ones pause, build their foundational base and then go out and grow again. That's what happened here at Sage.
When I got here in 2020, we were certainly a little bit advantageous in that we're in the Southeast. It's much more difficult if you're a West Coast [or] Northeast group. But we were able to reopen very quickly once we established the appropriate clinical protocols and sourced our [personal protective equipment]. During 2020, we actually saw significant patient growth at the same time. I think a lot of our peers were really struggling or possibly not even open. So that's what really fueled us to make a decision in 2021 that it was time to grow again.
One of the things about Sage is that we're 50 percent acquisition, 50 percent de novo. We don't have a bias either way. It's about good practices, and we're branded. A lot of our competition is non-branded. So it's a much different concept. We believe that there's real value to the brand and there's space in the industry for a quality brand. That's the most important element of what we're trying to do here. Sometimes people, either in the industry or out, think if you're branded that somehow is a negative factor, but Sage rests its mission on being better than even a non-branded concept.
Q: What can you say about the state of competition in the Southeast region?
JM: The interesting thing about the Southeast, really about the whole industry, is that competition is not growing at a kind of peanut butter rate. So there aren't 20 DSOs all battling over Oklahoma, Ohio or North Dakota. It's not an offense against any of those locations. What's happening is that tons of competition is pouring into states like Florida, Texas, Arizona — and probably too much competition, frankly, because you can't have more dental practices in a particular area than the need on the patient side for dentists. We've already built Florida, that's our base. We're the largest DSO in South Florida. So while everybody else is trying to come in and figure out how to compete there, we can actually now move into different markets that we think are going to be more advantageous to us. We've had a lot of population growth in the Southeast, which is attracting a lot of competition, but it's also been very good for growth, for sure.
We're currently working on our development plans for the next group of states. That would be Tennessee, Alabama, maybe South Carolina. A lot of our competitors may start in Texas and then go from Texas to Chicago or Denver or whatever. They're doing that because they're identifying markets they think are very attractive markets. But by doing that, they're also picking the most competitive markets in the United States. Not only is it competitive from a patient standpoint, it isn't like the patients are driving around Atlanta going, "Oh my gosh, if only a dental practice would open up near me." They've got hundreds of dental practices around where they already work and live. So if you're going to go into Atlanta, you have to have something that is going to appeal to people so they come to you and not somebody else.
A lot of our competitors are going into these cities in which it is incredibly competitive to recruit doctors, hygienists, dental assistants and staff. You're seeing wage rates are really starting to climb in those areas. You're seeing churn at the staff level really start to climb, because if you're an outstanding hygienist, you get hired by a company and then within probably weeks or months, you've got a whole bunch of other recruiters calling you up asking if you want to possibly move. A lot of my peers probably do that because they see that Austin, Orlando or whatever has fantastic growth rates, so they're like, "Okay, we've gotta be there." But actually, I think competition density is something that's really important in this industry, and it's a big part of where we choose to go.
Q: What are the keys to successfully running a DSO?
JM: This is my third DSO group. I think that helps me out tremendously. I've been on both the marketing development side, so I've spent a lot of time thinking about not only growth but also branding, differentiation, competitive landscape and patient perceptions of who you are and what you do. That's helped me tremendously to merge those two things from my past. We have a lot of people on the team that have seen things that have and haven't worked. So as opposed to maybe some other younger, smaller groups in which the team is trying to build them for the very first time, I think at Sage we've got the advantage that we have a lot of people who have a lot of experience in the industry and in other groups and have learned from that. One of the cool things about Sage is that we built it from a fairly small base the way that we believe a DSO should optimally be built based on experience.
If you can build a quality brand patients trust, there are some significant advantages there from marketing efficiency and patient retention. Investing in technology is a big part of our success, and then the other thing I would say is that, in terms of development, we are super thoughtful and disciplined about what we do and where we go. We do not buy practices just because they're for sale and we're not going to buy a practice that does not meet our size needs or our quality of real estate needs. We don't go out and buy specialist practices because our entire model is about bringing the specialist to the patient, which is a huge advantage for us. We're not going out and buying a whole spectrum of different practices. And we're very consistent in terms of how we add to the portfolio. Our de novos help because we can build them exactly the way we want them and we can supplement the acquisitions by filling them in with de novos so we feel like that's developed a really successful growth strategy.
Q: What other initiatives is Sage Dental focused on this year?
JM: One thing we're spending a lot of time on right now is AI. The development of the software that does not replace the doctor, but helps the doctor to more quickly diagnose long-term history issues for the patient and helps them present patient treatment plans is a big thing. Most groups are not yet doing it, but I think it's going to become more standard as we go forward.
You're seeing a massive change in patient treatment from removables. It used to be not too long ago that you got older and teeth started to decay that you just defaulted to dentures. Implants have completely changed the industry in a lot of ways, and I think it's a positive thing. Patients want their teeth for life. They're now willing to make the investment where they can go the implant route instead of the removable route. That requires technology and expertise, and any organization that's going to take advantage of the growth of implants is going to have to provide that. They're going to have to provide both the hardware and they're going to have to provide the training and the support to be able to provide that. It's really incredible some of the work that's being done in dentistry right now, even for patients that have really significant issues that allow them to fundamentally live life the way they used to in terms of eating, talking and smiling and all the things that are critical. It's certainly one of the biggest trends in dentistry right now.
Q: What are some other trends you're following?
JM: There's a significant trend towards doctor equity. A lot of groups have come to the realization of "How do we keep our doctors long-term?" Well, we do that through various equity programs. It could be equity in the practice or within the company. It used to be that there were a lot of groups that did that through acquisitions. They would acquire a practice and as part of that selling price, the doctor would keep equity in the new venture or get equity within the company. What you're now seeing across a lot of major groups is that they're now going back for doctors who were employed dentists and providing equity programs for them as part of their long-term retention strategies. So they didn't come to those practices as acquired doctors. They may have come to them as employed doctors and now they're going back and transitioning them into equity doctors. So I think from an internal standpoint, there are about 100 different ways to go at it.
It's kind of interesting because there are far more doctors who would like to sell than there are doctors who want to buy right now. There just isn't a population of young doctors that are coming out of school, working for years and making that transition to ownership. So more individual doctors who maybe historically would say, "I don't want to sell a group. I'm a private practice," have come to the realization that they're going to have to sell to a group. So how do you kind of combine the best of both worlds? You create equity strategies in which you can bring in a younger dentist who maybe doesn't want to buy or doesn't have the means to buy, but you provide the mechanism for them to get equity over time.