Heartland Dental is the largest DSO in the U.S. It was founded in 1997 by Rick Workman, DMD, who opened his first two dental offices in Effingham,...
A 30-Year Perspective on DSO Growth and Developing Procurement Strategies
As the founding COO of ClearChoice and with her 30-year perspective on growing companies, MBA, COO, CMO, EVP, EV, and i3 Ignite co-founder Margaret McGuckin discusses her take on Procurement Strategies.
DSOPro: Tell us about your career in dentistry and other markets.
I was the founding chief operating officer for ClearChoice Dental Implant Centers. I was part of the team that launched ClearChoice, which was kind of a dental unicorn. We were the first into the market and benefited from a lot of those “first mover” advantages.
I was responsible for all our locations. We went from one “proof of concept” location, which was in an open-bay orthodontics office, if you can imagine doing implants that way, to 31 locations in 14 states, and from $1 million in revenue to $135 million in 4 years. Then we sold to private equity.
A lot of my history evolved because my bosses would go on to accept wonderful new positions and then ask me to join them. One of those situations involved ClearChoice. I worked for one of the co-founders for 4+ years in a very large, publicly held telecom and media company and was responsible for all growth initiatives, including having an M&A division reporting to me. I was on the senior team and that division was about $1.6 billion in revenue. We had about 14,000 employees. Scaling in that type of a company is very difficult.
My boss and I kept in touch after I left the company. He contacted me about ClearChoice and said, “We have validated demand. People want dental implants. We know we can do the work clinically, but we don’t know how to scale this. You know how to scale better than anybody I know. Would you come work with us?”
He was a former McKinsey consultant and one of the smartest, nicest, most accomplished people I’ve worked with. I was based in Texas at the time and was the chief marketing officer for a direct-to-consumer healthcare business. When I helped start ClearChoice I found that I loved the dental industry and helping practices scale. So that’s my story of how I got into dental. I have been very active in the consulting space, working with really visionary doctors and helping them make their visions come alive. It’s so tough for these visionary docs because very few actually succeed.
Typically, they get stuck on issues they can’t solve and can’t get themselves unstuck. They really grapple with these very complex issues that they have not faced before. It was not part of their education. They keep starting new projects, but don’t make measurable progress. They generally know what needs to be done but can’t make it happen. A lot of them have tried coaches, but they just don’t work.
My approach at i3 Ignite is different in that we help them where they are, wherever they are stuck. We just tackle those issues one by one with a solution mindset like, “Let’s solve these problems so that we can start creating this platform of success for you that is long-term and scalable.” That’s what I do.
DSOPro: Are you working with private practices, group practices, and DSOs?
Yes. It’s odd, but my point of view and the approach that I bring works in all three of those areas. I’ve helped very large DSOs, like Community Dental Partners, on some very specific issues, and I coached one of their executive teams. I’ve worked with a large specialty practice. It was about $4 million in revenue when I started with them 3 years ago. I’m thrilled to say—and this is not because of me, but I feel like I was a big part of their growth—we doubled their size. They’ll be $9 million in revenue this year.
As another example, there are three doctors within that practice and the younger partner really needed to accelerate his revenue development and production. We were able to double his revenue in a year.
DSOPro: What is the track or recipe for that?
I work in a very holistic way. At ClearChoice, I literally had to roll my sleeves up and create basically every process from the first inquiry, whether that’s by phone or a digital touch, from a prospective patient all the way to discharge. We had to decide which positions were necessary in every location, the compensation for those positions, and create all the processes needed to operate a scalable, new, and innovative concept. I have done that in four other industries, and it is what I love to do.
I can very quickly, with a few questions, identify the most important things that we need to do to move forward and move forward quickly. For example, I have been working with a new client for a month. He’s a specialist and has a very successful practice. At the beginning of our engagement, he said he wanted to open a second location but felt the risk was really high. I asked why he thought that. He walked me through his thinking, and I said, “Yes, those are all really important things to do, and we can tackle them together.” He believed it would be 3 years before he could open the second location. I suggested we put some key foundational things in place that would enable him to open the second office within 6 to 9 months max.
After working together for 3 weeks he said, “Oh my gosh, I think we could be opening in less than 6 months because you have given me the tools. You have customized everything, all your approaches and templates, and have brought them to bear in a very succinct, clear way that relates to my practice and me—not my friends’ practices, not every other group practice in the world—but to just me, my situation, and my people.”
DSOPro: How did you develop that approach?
One of the areas I’ve really studied is the intersection of people and process. I am very much a process thinker. I have been an “operator” from the time I was 11, literally. I understand that way of thinking, I think that way, and I can make it happen. I develop, create, and then execute. More importantly, I help teams execute it. I am also very creative and visionary. My MBA emphasis was in services marketing, so I always bring this marketing perspective into what we’re doing operationally to grow and scale a business.
To make those two things match up, you have to be really good with people. You must understand how they work and think, how to motivate and retain them, how to recruit and hire them, how to give them tools to manage themselves instead of having managers standing over them saying, “Why aren’t you doing more or doing it faster?” It’s important to give people the tools to manage themselves and have that intersect with the processes. If you go too far one way or the other, you may end up having a super happy, great culture and team, but you may not be getting the financial results that you need. I love to work at this intersection of people and process. There are not a lot of people who do that or do it well. I have a fair amount of healthcare experience and I’ve been doing this for 30 years.
DSOPro: Tell us about i3 Ignite.
We are located in Denver, Colorado. Kathy Lynn-Cullotta and I started it together and we’ve been consulting together for almost 10 years. We both have MBAs. Initially, we were both very active in, and had clients in other industries.
Kathy was hired by my boss at the media/telecom company to help me figure out how, with a unionized sales force, we could get new products embraced by the union, which is not easy. You negotiate contracts only every 4 years. If you’re off cycle with a new product introduction, you literally have to put it on hold for 4 years and by then the market has moved beyond that product. So, this was a very strategic challenge for us. She’s super smart and she helped me solve that problem.
DSOPro: Tell us about your perspective on procurement.
Interestingly, a lot of people are coming into DSOs now from other industries and they’re bringing all the phenomenal knowledge they have into these emerging DSOs. It’s very exciting.
When you’re doing growth and innovation work, you’re asking the procurement team to do things differently and to accommodate new growth. Historically, procurement teams are not great at that because they’ve got 42,000 rules about everything. It’s one thing if it’s a publicly held $1.6 billion business. But with 400 employees, does that make sense? No. So, I love seeing innovative procurement companies emerging in the dental space that have figured out how to expedite procurement processes.
One of the foundational things procurement people do is get requests for proposals (RFPs) from potential suppliers. They’re not only negotiating prices but building the strength of the relationship with vendors and partners. Both of those are critically important.
RFPs typically have been used as a tool for reducing expenses. Frankly, with regard to expense reduction, it is best to focus on the most expensive product categories in your P&L and try to make progress there. And to think about those expense categories as a percent of your revenue.
Let’s say you’re $1 million in revenue, and implant costs are 3% of the revenue. At $10 million or $100 million in revenue, your implant as a percent of revenue should be decreasing because of your buying power. Your economic buying power in the market is lowering the price overall. What I see too often is that as a DSO or group grows, their implants as a percent of revenue keep getting higher. They are not taking advantage of the best practices in procurement. At ClearChoice, we lowered our expenses as a percent of revenue by three full points just by concentrating on doing RFPs related to implants and bone. When revenue is $135 million and you can take three points off an expense category, it’s a huge drop to the bottom line.
Another important factor in terms of RFPs is it’s about more than pricing. This is so true today. You really want things from your vendors and/or vendor partners: a partnership, support for marketing, and for them to do training and provide continuing education. Probably most importantly, you want them to be thinking about supply chain issues and to have total transparency around those.
Another tip: the faster you can get a procurement platform in place and use technology to reduce costs and help manage inventory better, the bigger the advantage for the company. There are new tools for this process now. For example, Supply Clinic is one of my favorites because they offer products for both single locations and DSOs where you can look at reporting by item, by item and location, and by regions.
You can roll up the total organization to analyze how much you are spending on dental implants as a percent of revenue overall. You can drill down into that to identify which locations are under 3% and why, which are over 3% and why? Then you can create strategies to help the locations that aren’t doing as well on the expense management side of implants. Take the best practices from the locations that are doing well and share them with the whole organization. Technology is a way to keep a virtual cycle of expense reduction that is always getting better and improving. And it’s almost effortless.
Another challenge DSOs have as they grow is with the considerable investments made in the technology and equipment needed in a modern practice today. Someone needs to service all of it and that involves a lot of different companies. A new platform designed to help with this arm of procurement is UptimeHealth.
Here’s my theory about that platform (and—full disclosure—I am going to be an advisor for them). Traditionally, this has been looked at as just a buying process. I believe it’s much broader than that. It’s a management function, where (1) you’re trying to ensure the ability to continuously improve all your supplier relationships, and (2) you’re able to reduce costs. I think the third leg of that stool is having processes in place to ensure that your CBCT is never down for a day.
For example, at ClearChoice, we had a CBCT in one of our best and highest producing locations. The practice managers have a checklist and identify every month what needs to be scheduled for maintenance. Well, they’re so busy they never do it. So, one time that CBCT was down for four days. That location was making $12 million a year in production. It was open only four days a week, so for it to be down for a full week was a killer for us financially.
I think procurement needs to finish this “cycle” because it’s not just buying and driving down costs. It’s extending that cycle into managing this very expensive equipment that is not in service because we have not followed the protocols for making sure that it is always ready to go. I think that’s now a third function of procurement.
And finally, no matter how big or small you are in terms of procurement, get a procurement platform in place today so that your practice, or DSO, is giving the team all the technology-based tools possible right up front and they’re training on it. It’s not a big deal and it’s so beneficial to start using one of these platforms when you open your first location. Even if you’re going to have only one location, it makes a huge impact.
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About Margaret McGuckin
Margaret McGuckin was the founding Chief Operating Officer for ClearChoice Dental Implant Centers, responsible for scaling the pioneering DSO from 1 to 31 locations, resulting in $135M in revenue in the first 4 years of operations. As a senior executive, she grew and scaled organizations in large public companies as well as startups prior to CCDIC. She’s a charter faculty member of the DEO, active in Women in DSOs, and a speaker at major DSO conferences such as Dykema and the DEO Summit. She’s helped many people throughout her career to develop as leaders and achieve their visions.
About i3 Ignite
Many companies face barriers to growth due to ineffective prioritization, no team alignment, or an inability to move execution of strategy through the organization. As partners, the team at i3 Ignite take their 20+ years of C-level experience to ignite and scale growth.