DSOPro

Director of Operations Excellence Discusses Procurement Role at a New Type of DSO

Written by Sam Jenio | Nov 18, 2022 1:14:39 PM

DSOPro: How did you get involved in dental procurement and DSOs?

I’ve had a circular career as it relates to dental. I went to Michigan State University, and for most of that time worked part-time at a dental supply distribution company. Dental supplies are sort of a cottage industry in that there are some big players, then there is everybody else. The one I worked for was at that time the seventh largest in the country, but which may have been 1/100ths the size of the Henry Scheins of the world.

I learned this big catalog of products and took supplies orders from dentists, hygienists, dental assistants, and office managers for a few years. After graduating with a degree in supply chain management, I spent the next 20 years in various roles, mostly in procurement and strategic sourcing.

In November 2020, I was recruited by North American Dental Group (NADG) for two reasons. First, the company was scaling and, coming out of COVID, felt they were poised to double in size in 3 to 5 years. They were growing their internal corporate group to make sure they were properly set up for the future. I’d been managing procurement teams in healthcare services with Stericycle (a professional services firm), Sidley Austin (one of the largest law firms in the world), and Heidrick & Struggles (one of the largest executive recruiting firms).

I’d also spent time in for-profit education, which is kind of an odd place to be. Before that I was in consulting and also worked in the manufacturing industry with a company called Eaton Corporation, which is like a small General Electric.

Going back into dental at NADG was exciting because it was my roots, where I came to understand why I wanted to be involved in supply chain. I was confident that I’d be able to figure it out and make an impact fairly quickly. Unfortunately, NADG hit some challenges in mid-2021, and their private equity owners forced a reduction of about 25% of the corporate team, which included me.

I was recruited next by United Dental Corporation (UDC). UDC is a startup—or “emerging” as we like to call it—DSO. Our founder, Dr. Ray Khouri, experienced three successful DSO exits in Australia, New Zealand, and Canada, and wanted to try it again in the United States because the DSO market is growing so rapidly here.

I’ve been lucky to be part of a very small team that is—excuse the cliché—building the plane as we fly it, as well as working on selling a model for affiliating with UDC to a pretty significant pipeline of private practice owners.

 

DSOPro: What is the difference between a DSO and your dental partnership organization?

The model we employ is quite different from typical DSOs. Dr. Khouri was very successful as a dentist. He was able to relate to dentists who wanted to sell their business and affiliate with a DSO but didn’t want them to change everything. That’s why he created the DPO model. He told his affiliates, “Look, the DSOs are coming. Align with us because we’re going to be different. We’re not going to change your practice management system, or your providers, or the way you practice dentistry. We’re just going to help you grow if you need it.”

Dr. Khouri’s success was effectively driven by the fact that his businesses, and those of his partners, were affiliated with practices that were already running well. UDC only partners with practices that are a successful business, and where the provider will remain in place and still see patients. We don’t require them to do anything differently. We give them more information than they’ve had before about their practice, and more resources than they ever had before, but it’s totally up to them to decide to use those resources.

That way, we can stay incredibly lean in terms of our own centralized organization. A DSO that seeks to have 100 or 200 locations might have 50 or 60 people as the center-led organization. We’ll never be that big, because our focus is buying good practices that know what they’re doing and helping them improve without having to worry about “turning them around.”

That’s a totally different model than I came from, where you focused on how your center-led activities were going to really help that practice. And in some cases, you were betting on it.

With a partnership model, there’s an opportunity for affiliates to become shareholders in the larger business as part of the initial acquisition. However, the UDC model is a little different in terms of the economics of most DSOs in that additional growth within the practice is a shared-rewards type of situation. If the practice continues to grow, even post-sale, there are opportunities for the practice founder or the affiliate to continue to enjoy sharing those rewards in growth.

DSOPro: Describe what operations means in your group, and what your role is.

Operational excellence at UDC is comprised of four key areas.

Number one is procurement. Whatever the practice needs, you need to help them get it better. As a large organization, which we seek to be, all our affiliates should be able to take advantage of scale. This pertains to all areas where practices spend money, including supplies and labs. They should have world-class deals for any of the things they buy for their practice. My job is to set up world-class DSO deals, as well as leverage the technology used to buy their goods and services, and to make sure that they’re getting a great price.


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Number two is real estate and facilities. My background with Stericycle led to understanding how real estate works, how managing a facility works, and managing landlord relationships. We’re able to take that over for the practice owner so they don’t have to worry about it anymore. This includes lease renewals, if they want to move their location, or if they need construction work done like building an additional operatory, things like that. I help them to do that when they need it.

Number three is clinical compliance. One of the biggest issues when you affiliate with a DSO is that the compliance rules don’t change, and there may be a little more scrutiny versus somebody running a private practice. I’m rolling out a compliance program across all affiliates to ensure that they’re managing those programs appropriately under the UDC model.

OSHA, infection control, and HIPAA protocols will be managed from one centralized place, as well as, unfortunately, the rash of cyber issues becoming more prevalent in the industry. Private practices may not be paying for cyber insurance and may not have a backup plan or support for cyber security. We will do that for them to protect them as well as UDC at large.

The fourth pillar is learning management. One of the challenges we hear about from potential affiliates is that they often lose employees because they either don’t feel onboarded correctly, feel like they’re not getting enough training, or they’re not informed on what’s going on across the company.

So as part of learning management, we’re building an intranet that will allow our affiliates and their teams to take advantage of information they may not have known where to look for before joining UDC. We will also use it to obtain feedback from teams on what they want to do, and how they want to go onto the next level.

We’re a small team, so while I am working on laying the groundwork and infrastructure on those four areas of operations excellence, I’ve also been involved in the due diligence process. I’m part of the team that kicks the tires and looks at all the information for red flags, areas of opportunity, growth, and savings, as well as synergies.

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DSOPro: In terms of growth, are you working on regions to begin with or nationwide?

Following the model Dr. Khouri founded, success is not based on region or on specialty. At a certain point we will focus on having regional centers of excellence. For example, the practices we’re looking at are located in major cities in Arizona, California, Georgia, and Washington. We’re probably not going to be affiliating with practices in rural areas.

DSOPro: What types of back-office support is UDC providing?

Typically, a DSO takes over everything, meaning hiring and firing and all of that. We are helping with other pain points. We’re handling all of accounts payable, but not accounts receivable. We provide data and analytics to help practices better manage their accounts receivable, but that’s not centralized. We’re helping with IT support, but not telling them that they must use a certain computer or this or that machine.

We’re helping with capital financing. For example, if a doctor wants to add digital dentistry into the practice, we can help finance that. This is where I come in and get them a better price than they would be able to get on the open market. We won’t tell them which technology they have to buy, but we’ll tell them which ones we have corporate deals with that they can take advantage of and finance through us.

We help them adopt new technologies, such as artificial intelligence. Many dentists are interested in bringing that into their practice, but they don’t know how. We have experts on our team experienced with this technology who we can set up deals and implementation schedules with.

In the future, we’ll be assisting affiliates with marketing. In this obviously fast-changing world, with all the different media elements out there, many practices would like help with marketing.

Regarding HR, we help the practice with onboarding and benefits, and handle payroll. Relative to this labor market we’re in right now, we’re looking at opportunities to help them hire providers at the dental assistant, hygienist, and office manager levels.

Another point about UDC versus other DSOs is that we offer a value-add stack of services. Practice owners can take advantage of having the choice to pick the services we will provide them.

DSOPro: What interesting trends are you seeing?

First, there is a lot of consolidation going on, even from DSO to DSO. Smaller DSOs are being purchased by larger DSOs. I think that will continue and that there’s still plenty of room for founders who want to get out.

I also think there remains a huge market for those practice owners who still want to practice dentistry, still love their team, and think now is the right time to affiliate with a DSO to either help them grow or help sustain where they are now by taking up some of those activities they don’t like doing.

I think you’ll see more of what UDC is doing in the future when practices become ready to join or affiliate with a DSO type of group, but don’t want their life to change too much.

Another thing that I think will set UDC apart is that even though we’re just emerging as a DPO, we’ve all got deep DSO and multi-site healthcare experience. A lot of DSOs are challenged with talent and must look outside of dental. We are an organically grown healthcare/dental talent group, which resonates with a lot of the affiliates we meet with. We’re not just some private equity firm looking to swallow you up. We know what goes on in your practice. You can join us and be part of a broader UDC team that isn’t just a “turnaround” job.

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DSOPro: What changes do you see in the future?

Technology is going to just keep getting better. Practice owners really need to bring in these technology tools to stay on the cutting edge. In many markets, dental offices are almost like a spa. That challenges many current practice owners located in older buildings or, in some cases, an old house. I think they will be challenged to maintain their patient base, because patients are seeing these fancy DSOs and new offices opening and feel like, “Hey, my dental care might be better there, because it’s as clean as a surgery bay.” I think that’s going to be a huge challenge.

Also, going forward, there’s so much opportunity to streamline how payers are managed, what they will and will not pay for. A lot of dentists are moving to fee for service. They will process your claim for you, but you must pay cash up front. I think that will grow in the future, especially in markets where populations and incomes are growing.

DSOPro: What do you think will trend regarding affiliated industries, like medical and dental working more closely together?

It’s already started to happen with first movers like Aspen Dental. They have started buying medical companies and thinking about, “How do we merge oral health with the rest of your body?” I wouldn’t be surprised if they brought in optometrists and ophthalmologists, so you could go to just one place to get your teeth cleaned and be examined by a dentist, then have an eye test followed by a physical. I think that will happen, especially with companies like Aspen with the resources and the knowhow to run the multi-site operations that patients love.

 

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About Sam Jenio

Sam Jenio has over 20 years of multi-industry operations and procurement experience. For the last two years, he has focused on helping DSOs leverage scale and drive enterprise value while supporting the practice providers in what they do best.
Jenio is the Director of Operations Excellence at United Dental Corporation (UDC). Since early 2022, he has been helping start UDC, an emerging/startup DSO founded by a group that has previously launched and exited successful DSOs across the globe. The UDC team is in the process of establishing infrastructure and managing operational, financial, and legal due diligence for target acquisitions. Jenio has created and directs four pillars of operations excellence for the services company (Procurement, Real Estate, Clinical Compliance, and Learning Management).

United Dental Corporation

UDC is a Dental Partnership Organization (DPO) that acquires high-performing dental practices and provides the capital and back-office support to build on the established success of the practices. It is a growth accelerator for doctors looking to maximize the value of the practices that they have built. UDC is disrupting the traditional DSO model with a proven affiliate strategy by acquiring top tier dental practices and providing professional corporate support to empower the dental principal to provide the best in patient care. Our model has already been proven in Australia, New Zealand, and Canada with 98% principal retention rate, and the potential to disrupt the $123B US dental market.