DSOs that put too much emphasis on expanding their network without providing enough support to their existing practices could be putting themselves at risk of slowing their growth, according to one executive.
Hackensack, N.J.-based Max Surgical Specialty Management recently hired Brian Lawson to be its senior vice president of business development. Mr. Lawson has an extensive background in multi-site healthcare, including serving as the chief development officer at SALT Dental Collective and serving in leadership roles at Covenant Physician Partners and SAGE Veterinary Centers.
Mr. Lawson recently spoke with Becker's about the trends he is following in dentistry and the challenges facing DSOs.
Editor's note: Responses were lightly edited for length and clarity.
Question: What trends are you currently following in either the dental or DSO space?
Brian Lawson: I'm very interested in monitoring the macro environment to see how it impacts our industry over the next 12 to 24 months. There are several organizations in the industry that grew recklessly over the last few years by adding practices all over the country and did not provide the necessary operational support to help their practices overcome difficult situations. As a result, these organizations have been really struggling to get through this tough period and may not achieve the outcome they had hoped for.
On the other hand, the Max leadership team spent so much time on the front end, thinking about our mission, vision, values and, specifically, how will we build a differentiated platform that adds value to the practices we're fortunate enough to partner with? This mindset has allowed us to thrive during a difficult time in the economy. We're now at nearly 30 locations after officially launching last fall at AAOMS and are planning for a big year in 2025, but we've also invested significantly in our infrastructure to ensure we are growing prudently and are able to continue to provide top-tier support to all the new practices that join our family in the future.
Q: Why might some DSOs have chosen to focus more on M&A growth instead of organic growth and adding enough value to their current network?
BL: I think sometimes DSOs and people involved may be focused on just growing revenue and EBITDA and locations and just looking at the big numbers, and spending less time thinking about, how do we help these practices solve unforeseen problems that come up? When times are good, you don't really have to worry about problems like that because the dental industry is such a good spot to be. It's a very defensive industry. Everyone always needs dental care. So it's easy sometimes to think problems won't come up, but when they do come up and you're spread very thin and you haven't invested enough in your own support system, that's when you run into trouble.
Q: What are some of the consequences facing DSOs that don't show enough support to their doctors?
BL: What ends up happening is the practices they partner with don't end up growing, and sometimes they stay flat or even fall behind in terms of revenue and profitability. When that happens, it's typically a few potential problems they're struggling with. It could be recruiting, maybe doctor recruiting or help with staffing. It could be marketing, it could be any number of operational issues, but the end result is that the practice takes a step back. And if enough practices take a step back, the entire company takes a big step back, and then it becomes very difficult to recover because so many DSOs are using debt and leverage to be able to fund future growth where if your profitability declines, it makes it very difficult to get financing to continue to grow, and then you're kind of just stuck.