While some dentists believe dental consolidation will continue with a significant impact on clinical care, there are a few dentists who think deceleration is on the horizon.
Four dentists recently spoke with Becker's to share their thoughts on where dental consolidation is headed in the next five to 10 years.
Editor's note: Responses were lightly edited for clarity and length.
Question: How do you see consolidation in the dental industry evolving in the next 5-10 years?
Kartik Antani, DMD. Napa Family Dental of Albuquerque (N.M.): In my opinion, consolidation in the dental industry will continue to occur, however, at a slower pace. Largely due to increased expenses of borrowing money and recapitalization, mergers and acquisitions experts have become more careful on who they want to consolidate into larger groups. Some dental groups and private equity firms have had numerous challenges, and some have even completely failed. The costs of running practices has also increased tremendously, [such as] labor and supplies, for example. As a result, in the next few years, activity will slow down.
On the other hand, trends show that fewer dentists want to own practices. New graduates are experiencing a higher cost of entry — tuition is much higher than it used to be, the cost of new builds are higher, running a practice has become more expensive, and even though valuations differ, generally the purchase prices of existing practices have risen too. Younger dentists also want to enjoy the associate lifestyle more, and fewer want to take on the risks and burdens of practice ownership.
These factors, among others, make me think that although consolidation will continue to occur, the activity in this space will be slower.
Keith Arbeitman, DDS. Arbeitman & Shein (New York City): DSOs serve a clear and necessary purpose, but not all operators are created equal. The cash-on-cash return from owning multiple dental practices is quite good relative to other asset classes and private equity knows this. I think we'll continue to see new DSOs enter the market, aggressively overpay and struggle to gain scale. Those that manage to successfully scale will be consolidated at the portfolio level by the biggest private equity funds, and will earn outsized returns. In many cases, the average dentist operating under a DSO will actually have little to no awareness as to who actually owns the practice they're working in. More graduates due to the proliferation of dental schools aided by the rising cost of dental education will put significant financial pressure on new dentists entering the workforce, which ultimately benefits the DSOs by driving down dentist salaries. We'll see a growing disparity between dentists that accumulate tremendous wealth, and an ever increasing class of dentists that file for bankruptcy.
Owen Waldman, DMD. Waldman Dental Group (Scottsdale, Ariz.): I see consolidation in the dental industry growing and continuing to make it more impersonal, more corporate with less individualized personal care and more treatment planning for the sake of the corporate dollar. There will be more of a revolving door of staff and dentists at these corporate offices, like always, because fewer and fewer dentists will be the majority owners and it's not "their business." Thankfully for the public, there still will be those of us who will continue to give that high quality, personalized care, where the staff and patients are treated like family. Since dentistry is personal, people will still spend that discretionary income at an office where they know the same doctor and staff will continue to be there for them for years and years and will have that trust factor that will not be the same in a corporate office.
Jerry Popeck, DMD. Popeck Family Dentistry (Pennsville, N.J.): I really believe the DSO environment is at or near its peak. Many younger doctors are seeing this and switching to private practice, which is a much better way to treat patients.