When I had my first job interview after dental school, I visited the MapQuest website and printed a paper copy of directions to the office, then drove there with gas that cost me around $1.50/gallon.

This rapid pace of change seen in our day-to-day lives has also been experienced in our industry. The dental industry has experienced a sea change in clinical and business norms. The influence of rapid clinical evolution and the rise of DSOs have substantially transformed the landscape of dentistry in the past two decades.

Clinical Evolution

In the dental school clinic, alginate and polyvinyl siloxane impressions, along with film x-rays, which required development in a dark room with noxious chemicals, were commonplace. 3D scans and digital radiographs are now the standard of care and offer accurate, rapid diagnostics with lower radiation and chemical exposure to patients and team members. Same-day crowns and restorations were unheard of at the time, with the standard being manual waxing and casting of gold crowns or PFMs (either by the dentist or a dental lab), requiring a 2-week wait with the patient in a temporary crown and returning for a second appointment. Since then, full ceramic-based milled crowns such as zirconia have replaced much of the metal-based full-coverage restorations typical in 2004.

CAD/CAM systems have become popular and allow for a convenient and proper alternative to gold crowns and PFMs. I remember the first time I completed a same-day CEREC crown on my 80-year-old grandmother. Although I was 50 years younger than her, it blew both of our minds!

In truth, as much as I revere the quality of my dental education, posterior amalgam restorations were almost exclusively what we were taught. Posterior composite restorations on patients were frowned upon at the time and it was essential to obtain special permission to attempt one. After dental school, I do not remember performing a single amalgam restoration and I exclusively used composite materials for posterior fillings. Now in 2024, this is the norm.

Cosmetic modalities and treatments have seen a tremendous improvement in options and efficacy since 2004. Teeth whitening and veneers were popular treatments at the time, but the range of systems and materials for these have exploded in the past 20 years. Both Invisalign and the clear aligner industry were in their infancy. Orthodontists at the time almost exclusively panned the product, which was primarily used by GPs. Now, many orthodontists have embraced one form or another of clear aligners for many cases and patients often prefer clear aligners to traditional braces. Sleep dentistry, Botox, and various other treatment modalities are new industries on their own that have found a place in the dental landscape.

The use of dental implants has multiplied exponentially in the past 20 years. Some estimates place the size of the market then to under $200 million, in contrast to the current market of around $5 billion with estimates in excess of $11 billion by 2032. Implants were just starting to be discussed in my dental school in 2004, and clinical placement/restoration was not part of the regular curriculum at that time. My recollection is that they were mostly placed by oral surgeons, some periodontists, and a few general dentists. Now, more GPs are being trained and placing implants, and it is an everyday occurrence in many specialty practices.

Pain management has also changed significantly. With a growing awareness of the opioid crisis, many dentists have reduced the use of opioids for pain management. This shift in prescribing patterns has been coupled with enhanced tracking and reporting at the federal and state levels as well. It was typical to prescribe a healthy amount of Vicodin or Percocet after a tooth extraction. In hindsight, and with more information about the downsides of opioids, many dentists have shifted away from these medications in favor of effective, much safer alternatives and quantities.

The last aspect of dental clinical evolution I would like to highlight is the growing awareness and recognition of the significant links between oral health and systemic health. Links between periodontal disease and conditions like heart disease, diabetes, and stroke are now better studied and understood. Back in 2004, while we certainly believed oral health was important to overall health, we did not have the studies and information to back up this belief like we do now. Routine dental visits in general are more comprehensive in 2024, with a particular additional emphasis on the patient’s overall health.

The Rise and Evolution of DSOs

I often joke that I have been in DSOs so long that the acronym DSO did not even exist! And this happens to be true. The term DSO became popular back in the early 2010s. Before that time, multi-location groups were lumped in with anyone practicing in any non-solo manner. The very first dental conference I attended was the American Academy of Dental Group Practice (AADGP) in January 2005, about 6 months post-dental school graduation. Back then it was the only event focused on group dental practice. I recall being the youngest person there by at least 15-20 years and out of the roughly 75 people in attendance, I believe about half were vendors. Now we see over 1,000 attendees at DSO conferences and the number attending grows every year.

I was not there for the very early days of group dental practice or what we would now call DSOs before 2004; however, I have studied them extensively and I have experienced everything that has happened in the industry since 2004 as an employee dentist, group practice partner, solo owner of a DSO, CEO post-PE transaction, board member and investor in multiple large DSOs, coach/consultant, DSO conference keynote and speaker, author, co-founder of several dental technology businesses and co-founder of multiple medium- and large-sized DSOs. It is safe to say that I have seen our industry evolve and been directly engaged with DSOs from the early business models until the present.

According to Harvard Business Review*, as businesses scale up from a small business to maturity there are successive periods of growth (evolution) and crisis (revolution). The typical pattern looks something like this:

1. Growth through creativity -> Crisis of leadership
2. Growth through direction -> Crisis of autonomy
3. Growth through delegation -> Crisis of control
4. Growth through coordination -> Crisis of red tape
5. Growth through collaboration -> Crisis of?

The oldest and largest DSOs in 2024 were able to successfully navigate the crisis periods. Those that are not around, not growing, or in danger of collapsing are the DSOs that reached a period of crisis that they have not been able to navigate.

Early DSOs were no exception to this trajectory. During the time of DSO 1.0 and early DSO 2.0, solo practitioners were the clear norm, with over 90% of dentists practicing the way dentistry had been practiced for 100 years: alone with a team in one office. Group practice was “weird” and seen as “risky” by most dentists at the time. I once had an older dentist say to me at a local dental society meeting that I was crazy for owning and managing multiple offices, ending the comment with, “You are wasting your time and money you paid for four years of dental school.” I also heard many dentists tell me that a second office is a “waste of time” and “they don’t work.” Well, they were dead wrong. I am sure for some dentists it did not work, but for the successful early pioneers of the DSO space who were at times outcasts in our profession, it worked extremely well and ushered in a new era that has taken dentistry to new heights.

The early DSOs were immature, as is typical for industries evolving from a cottage industry to consolidated, mature companies. These business models of 20 years ago were the reason the pejorative term “corporate dentistry” was coined. They were often more command and control than we see in modern DSOs and plagued with issues like limited or disrupted doctor autonomy, employee-only dentists, clinical mandates/quotas that violated corporate practice of dentistry laws, and poor cultures.

In the early to mid-2010s, there was a significant transformation in the business models of growing DSOs to solve for the primary issues plaguing them in the old models: high dentist turnover and low dentist retention. I have repeated to many in our industry for a decade that MB2 deserves a lot of respect for helping to push the DSO industry into DSO 3.0 with their inventive (at the time) joint venture (JV) structure that allowed dentists to partner with them and continue joint ownership of their practice after joining a DSO. I am sure there were other similar models or structures that allowed this at the time in small or even some of the legacy DSOs, but MB2 was the one that really took it mainstream and grew tremendously, at least partially fueled by this structure. Also, around that time, management and investors began catching on that dentists must have more clinical autonomy, fewer quotas, and better culture. Around this time was also when private equity firms really began investing in many DSO platforms and my first DSO was included in this initial frenzy of investment when I sold it in 2013. Almost all the DSOs who began or emerged in the last decade exhibit the typical characteristics of DSO 3.0.

Currently, it feels to me that we are moving into a new phase of DSO evolution and into DSO 4.0. I would characterize these companies as looking to solve the remaining problems with DSO 3.0, also fueled by the difficult lending and M&A environment we face now. Higher interest rates than we have seen for nearly two decades and macroeconomic headwinds have created a new normal where DSOs who are over-leveraged with their lenders must slow or stop M&A activity. A few DSOs have even defaulted on their financing, which creates a clear opportunity for companies who were more cautious with their leverage ratios and were disciplined on valuations for tuck-in acquisitions. DSO 4.0 companies must use capital more intelligently moving forward and keep their leverage ratios low with senior lenders, buoyed up with higher doctor ownership percentages to ensure there is plenty of dry powder available to grow in the coming years.

I characterize DSO 4.0 as a small group of emerging DSOs led by ICON Dental Partners. These DSOs have sought to find novel solutions to old problems and seek to transform the typical DSO business models with innovations that create better solutions for dentists by aligning the interests of dentists with the DSO. Many existing DSOs are undifferentiated and in the words of one DSO investment banker, “have no reason to exist.” These DSOs have true doctor ownership at the same equity class as DSO leaders and investors, fixing an issue that has felt incorrect to me as a dentist for over a decade. Doctors who have built their practices up to elite levels and plan to practice for the foreseeable future should have a clear path to monetize their current and future growth (granting equity credit for future EBITDA growth), building wealth to a greater degree than previous DSO models have allowed in a true win/win partnership arrangement with the DSO. The issue of DSO founders and investors making exponentially better returns than the partner dentists at liquidity should be corrected in DSO 4.0. These DSOs also ensure 100% clinical and staffing autonomy, and work in a radically supportive manner to enhance and grow partner practices hand in hand and day by day with the doctor partner. This model creates a stronger, more durable, and highly differentiated DSO because it solves the plague of high dentist turnover and low retention rates many companies in our industry with earlier business models struggle with perpetually. I believe DSOs with the characteristics of the DSO 4.0 model I have outlined here will drive much of the growth in the DSO industry for the next decade and beyond.

While our industry works through its own period of crisis and revolution, just as it has several times over the past 20 years, I expect that we will get back on the path to growth and evolution soon. This new phase of growth will be fueled by continued clinical evolution coupled with a mix of strong legacy DSOs and perhaps largely DSO 4.0 companies who are pioneering new models that solve old problems in our industry.

*Churchill NC, Lewis VL. The five stages of small-business growth. Harvard Business Review. 5:1983. https://hbr.org/1983/05/the-five-stages-of-small-business-growth. Accessed October 30, 2024.

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