Brian Colao, Legal Expert, Weighs in on DSO Trends in M&A, Technologies, and Emerging Issues

DSOPro: Tell us about your background and your company.

I am an attorney and the Director of Dykema DSO Industry Group. I’ve been practicing in the dental space for approximately 27 years, since before the inception of DSOs around 25 years ago. I’ve been focusing on DSOs since the very beginning of the industry.

We have approximately 50 attorneys that work with our clients in the DSO space, representing hundreds of DSOs in all 50 states and all 6 Canadian provinces. 

DSOPro: What do you and Dykema DSO Industry Group do for DSOs?

We offer a full range of legal services, from litigation to real estate, taxes, brand protection, corporate finance, employment issues, etc. We help with strategic planning, DSO transactions, credentialing, permits, and certifications. We also create regulatory compliant business models nationwide to help DSOs remain compliant with state and federal regulations. We help DSOs deal with a broad range of compliance issues, from dental board complaints, to HIPAA, OSHA, labor employment issues, and consumer finance issues. We handle any compliance issue that can possibly come up. And we do a lot of M&A work: buying, selling, investing, and lending in the space.

DSOPro: What’s new in 2022 in the M&A arena?

We’re continuing to see the great evolution and consolidation of the dental industry. Solo and group practices are converting to a DSO model or affiliating with DSOs at an unprecedented, record pace. That started happening in 2010 and has continued through today. We are expecting to see the very robust M&A markets continue through the end of 2022.

DSOPro: Why do you think this is trending?

Dentistry has proven to be recession- and pandemic-proof. That has resulted in an enormous investor demand to be involved in dentistry. Billions of dollars of private equity funds are flowing into the dental space, mainly because it’s been recession- and pandemic-proof.

DSOPro: Are you seeing any interesting new DSO models?

We continue to see innovative teledentistry platforms that are direct-to-consumer platforms. We were starting to see them emerge in 2019, then the pandemic hit and teledentistry became a premium because people didn’t want to be near other people. They wanted to do things remotely, which was really important at that time. A lot of very innovative teledentistry platforms continue to enter the marketplace.

DSOPro: Is that approach emanating from DSOs? 

It’s absolutely a DSO model to deliver care to the consumer through teledentistry instead of traditional brick and mortar practices. The teledentistry model is similar to the other DSO models except they’re delivering straight to the consumer.

The DSO can be based anywhere in the country and set up a model to deliver care remotely following the teledentistry regulations. The dentists do have to be licensed in the state where the patients are located, but they don’t have to live there. We’ve seen it a lot in orthodontics with clear aligners and other types of oral health areas, such as teeth whitening.

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DSOPro: Are specialty DSO practices continuing to grow? 

Many specialty DSOs in oral surgery, endodontics, orthodontics, periodontics are starting to emerge and they’re doing very, very well.

DSOPro: What kind of DSO activity are you seeing in Canada and Europe that parallels or is different from what’s happening in the United States?

The DSO model is gaining traction in Canada, Europe, and Mexico. The rules and regulations are different in those countries. It’s often easier to do a DSO model in Europe and Canada than it is in the United States. Their growth is a little bit behind where we are in the U.S., but there is a lot of exciting activity. I think those markets are beginning to see more consolidation as well.

DSOPro: Why is it harder here, generally speaking?

The regulations are tougher here. Only licensed dentists can own dental practices in the United States. In Europe and other places, businesspeople can own dental practices. They can’t practice dentistry, but they can own the practice. Here, in almost all 50 states, you must be a licensed dentist to own and operate a dental practice. That makes it more difficult to structure DSOs in the United States.

That’s largely the U.S. model and it holds true for other professions. Usually, you must be a physician to own a medical practice. There are some exceptions and, generally, the healthcare space has more exceptions than dentistry does. You also have to be a veterinarian to own a vet practice. Service organizations in those areas predominantly function like they do in dentistry by providing non-clinical administrative support services.

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DSOPro: Are there any interesting new legal challenges or issues in the DSO space?

As we get more involved with teledentistry and telehealth, it does present some challenges as to the limits of what can be done in the telehealth context and what must be done in an in-person visit. The marketplace is sorting that out right now, and at times struggling to figure out what is appropriate to do remotely and what must be subject to an in-person visit.

The technology is getting more sophisticated, especially regarding things you can do with iPhones. iPhones can be used to take pictures inside the mouth. We have to figure out at what point we are comfortable making diagnoses through iPhones that traditionally had to be done in the office. The technology is there, but we’re still struggling with what the standard of care should be and what’s going to be allowed.

There are always the usual challenges, too. DSOs must maintain regulatory compliance. It’s one of the more heavily regulated areas in this country. Although these are regulations that we’ve been required to comply with for the last 20 years, now there are interesting questions about teledentistry and other emerging technologies coming up.

DSOPro: Tell us about the event you are hosting in July. 

We are holding our 9^th annual Dykema’s Definitive Conference for DSOs July 13-15 in Denver this year. Details and the agenda can be found at dykemadso.com. This is considered one of the best informational and networking events. It brings hundreds of the greatest thought leaders in the industry together. This year, we’re featuring a Women in DSO Velocity Event, offering a special educational networking opportunity. 

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We’re expecting 1,500 people and a complete sellout like we had last year. We have scheduled three days of topics that will appeal to everyone in the DSO industry, including sellers, buyers, investors, dental entrepreneurs, group practices, and DSOs of all sizes. 

There will be lectures and workshops on topics ranging from the new frontiers in operations, private equity investments, and dental specialties; accounting, cyber security, and modernizing your DSO; an M&A mixer; real estate; finances; new technologies; dental school collaboration; patient financing innovations; and regulatory due diligence. We have great celebrity keynote speakers lined up and there will be plenty of networking time and several receptions. We’re really excited about the event this year.

The Dykema DSO Industry Group is offering a discount code: Use code WINNING to save $150 off the price of registration. 

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About Brian Colao

Brian Colao is the Director of Dykema’s Dental Service Organizations Group. He has been serving the dental industry for over 25 years and is widely regarded as one of the foremost authorities in the United States on DSO formation, DSO business structures, DSO-related mergers and acquisitions, and the full array of regulatory compliance requirements for DSOs. Brian was named a “2019 DSO Influencer” by Group Dentistry Now.