The Impact of Corporate Dentistry
Competing in a market with more and more DSOs and large laboratory groups
Whether it is Amazon or Walmart, Apple or ExxonMobil, large corporations occupy an increasingly large portion of the American economy. According to a New York Times article in June, companies with at least 10,000 workers employ more people in the US than companies with fewer than 50 workers-a dramatic change from 30 years ago, when those small companies employed 32.4% of workers in the US, compared with 28% for the large companies.1
The trend toward big business has extended to dentistry. According to the ADA Health Policy Institute in 2017, 7.4% of all practicing US dentists and 16.3% of new dentists ages 21 to 34 were affiliated with dental service organizations (DSOs).2 Meanwhile, the movement toward larger laboratories is evident from the fact that the number of US dental laboratories with a payroll has declined from 7,715 in 2001 to 6,261 in 2017,3 despite a projected 11% job growth from 2014 to 2024 by the Bureau of Labor Statistics.4 In 2012, only 4.2% of laboratories reported being part of a conglomerate, whereas in 2018 that percentage grew to 7.5%, which runs parallel to the percentage of total dentists reporting association with a DSO. The impact of DSOs and large laboratory groups has been felt to varying degrees by most laboratories by now, and the trend shows no signs of slowing down.
"The consolidation of dental providers has been going on for at least a decade, if not longer, but the pace of activity has increased and become much more organized in the past couple of years," says Bill Neumann, CEO of Group Dentistry Now/Join DSO, which provides DSO and dental group practice news and education. "There are various reasons for this increase in provider consolidation and the growth of DSOs, including the innovation of new DSO business models, higher dental student debt, the changing demographics of new dentists, an increase in older dentists looking for different transition models, and generational thought changes on work/life balance. That being said, the industry is still highly fragmented so there is a lot of room for consolidation."
As this trend continues, understanding the corporate landscape as well as both the advantages and disadvantages that big business brings with it will be crucial for any laboratory in the future, regardless of whether they choose to become part of it themselves.
"The dental laboratory industry as a whole is in a complete paradigm shift," says Rob Woosley, CDT, Senior Vice President of Operations for National Dentex. "DSOs are growing, and they are not going away."
Dealing with DSOs
The ADA defines a DSO as "a group practice that contracts with a dental management organization to conduct all of the business activities of the practice." Within that broad categorization, however, a wide range of business models exist.
"Just like with private practices, DSOs can focus on cosmetics, removables, implants, or basic dental services, and have a varying degree of specialty care either connected or associated with the group," says Nick Azzara, President of Dental Network Consulting Group, Inc, who currently works with a national private group practice. "They all have different clinical models and requirements. Some subscribe to the dental spa approach; others are more affordability based. Some have great mentoring and training systems, whereas others need to leverage the laboratories' resources. Depending on the DSO business model, laboratories will need to align their abilities and capabilities with the needs of the group."
The price pressures applied by more economically based operations are well known.
"The DSOs we have dealt with seemed far less interested in the quality and service that a laboratory like ours offers," says Steve Killian, CDT, President of Killian Dental Ceramics in Irvine, California. "We struggled to even reach their dentists or their assistants on the phone. Their priority seemed to be how fast and how inexpensively we could produce a product. Quality was expected, but it was not at the forefront—not by a longshot."
Dealing with more than just the dentist can be challenging for a laboratory as well.
"With a DSO, you are not just dealing with a clinician," Neumann says. "In many cases, you are working with a clinical director, a clinical board, and a purchasing or procurement director."
Some laboratories, however, have found ways to make their own business models align with DSOs and forge productive relationships. Keith Miolen, CDT, Chief Operating Officer of Aurora Dental Lab in Auburn, New York, says that while the DSOs he works with are certainly cost-conscious, they prioritize quality.
"A misconception is that everything is just numbers-based," says Miolen, who attributes his laboratory's growth from 23 employees to 57 over the past 3 years in large part to working with DSOs. "My experience has been that, because many of the clinicians working for DSOs are young, they are eager to learn. Communication is enhanced, which many people might find surprising, and they value the services I offer as a resource and a consultant. They can get their crowns for a lower price overseas, but if the quality is poor and they develop a bad reputation, then their business will suffer. Accordingly, we have built a business plan around helping these young clinicians as a resource of knowledge."
Neumann says the structure of DSOs is conducive to high-quality dentistry because of the oversight and accountability, as well as the fact that their dentists can focus more on their work and less on administrative tasks.
"Worrying about the business side of running a dental office can be very time-consuming and distracting," Neumann says. "The support organization takes care of the business so the dentist can focus on what they went to school for—dentistry"
Many of those dentists do still prioritize a high-quality laboratory. Scott Ward, CDT, founder of Ward Dental Lab in Brighton, Michigan, says that some of his dentists have tried other laboratories after joining DSOs, but that most return to him eventually.
"They are encouraged to use either an affiliate laboratory or one with pre-negotiated pricing," Ward says, "but usually they come back to us. They realize the value of our relationship. They want lunch-and-learns, CE groups, and our expertise on some of the bigger, more complex cases."
As DSOs increasingly utilize their resources to provide their dentists with extensive education and new technology, such as CBCT and intraoral impression scanners, the quality and consistency of the work being sent to laboratories has increased in many cases.
"We do provide volume discounts, but the advantages provided by their technology and their standard operating procedures help us reduce costs on our end," Miolen says. "We also have established a better manufacturing process within our own business to meet their needs, which has allowed us to provide better service to our private practitioners."
Miolen says that forcing laboratories to run more efficient businesses is a net positive for the profession.
"Decreasing turnaround time and costs while increasing quality is a challenge that other industries are overcoming," Miolen says. "It is changing the mindset of the technician to add business savvy to their technical expertise."
Despite those advantages, the pricing issue always poses a risk. Killian notes that having such large volume associated with one account is risky and requires the ability to scale down very quickly if pricing demands reach a level that are no longer feasible.
"That can be overwhelming for a small laboratory," he says.
Laboratories should be prepared, however, for the possibility of any of their accounts joining DSOs.
"If your top account suddenly requires DSO pricing," Woosley says, "that is a scary situation, especially for independent laboratories."
Many of the realities of the dental industry in 2018 can be challenging for independent laboratories, but one option is to join a large laboratory group. Ward joined a group 17 years ago that eventually became MicroDental, which was recently acquired by the Modern Dental Group. He says the transition was easier than he thought it would be, and that the latest move to Modern Dental has made things even better.
"They are dental people, so they know about our processes and what type of equipment we need, and they have strong relationships with vendors that are very beneficial to us," Ward says.
The corporate structures implemented by large laboratory groups can prove beneficial as well. Many have the ability to separate executive, administrative, marketing, and human resources work from technical work.
"I never realized how much administrative work I was doing until I did not have to do it anymore," says Woosley, who joined National Dentex in 2012.
Ward never had professional marketing campaigns as an independent laboratory owner, but he now takes advantage of Modern Dental's marketing department.
"This year, with fall approaching, we wanted to promote mouthguards for sports," Ward says. "We sent our ideas to a marketing specialist, and they produced color brochures with a whole campaign."
Many of the large laboratory groups also dedicate significant resources to education, even employing people whose primary responsibility is training.
"Finding skilled employees is so difficult because of the decreasing number of accredited laboratory programs, so being able to train people ourselves is a major advantage," Ward says.
Shared resources are another benefit of a corporate organization—whether workload balance or simply offering more options to clients.
"Not every laboratory can be everything to everybody," Woosley says. "Within a network, if one client needs a certain technology or material that their laboratory does not have, another laboratory in the network likely has it."
Competing with Corporate
Of course, corporate acquisition is not for everyone. Killian says he and his brother, Greg, investigated various possibilities over the past 6 years and decided to pursue an alternative path, enlisting the services of a consultant to elevate their own employees to potentially be operations officers in the future.
"We looked very closely," Killian says. "At that point, none of the big players in mergers and acquisitions fit our style of business, and we were concerned about how our employees would be affected."
Killian is not isolated as an independent owner, however. His laboratory is a member of the Dental Laboratory Owners Business Association, a group of 10 to 15 laboratories that share best practices among themselves. They meet face-to-face periodically and email each other with problems and questions.
"If you are not part of some kind of group or you do not have friends in the industry to share information with, then you are missing out on tremendous opportunities," Killian says. "We help each other succeed."
Similar organizations exist across the country. The CNC Group has united independently owned laboratories since 2002 for "the transaction of lawful business and to share knowledge, techniques, and business operating procedures" among its more than 60 members, according to its website. The approximately 50-year-old TEREC NA (Technical Research Consortium North America) consists of 15 laboratories that share knowledge on marketing, sales, and management, and also research new products.
"When TEREC members want to purchase equipment, we bring in manufacturer representatives for a meeting," says Joe Apap, General Manager of Town & Country Dental Studio in Freeport, New York. "We research the products to determine what will provide the best ROI, and then we negotiate with the distributor."
Town & Country has had several overtures from large laboratory groups. In the 1980s, owner Barry Lampert was close to joining a conglomerate called Americus that eventually became part of Dental Services Group (DSG). He ultimately decided to remain independent, but Town & Country has adopted many corporate principles and philosophies in order to compete with the larger companies, Apap says.
"We have a corporate structure," Apap says, adding that CEO David Lampert, Barry's son, has an MBA. "We have mission statements. It is not an easy task to get a 55-year-old dental laboratory to embrace lean manufacturing principles, but we are making strong progress and reaping the benefits."
As DSOs continue to occupy an increasingly significant share of the market, Apap says most laboratories will be forced to adapt and operate similarly.
"That is business," Apap says. "We are not there just yet, but the more the dental community embraces corporate elements, dental laboratories will have no choice but to follow suit."
Questions remain regarding the viability of independently owned laboratories working with corporate entities on the clinical side, or whether they will fare better by working exclusively with private practices. No matter how corporate a practice is, however, individual dentists will need good laboratory service in order to provide quality care to their patients.
"Whether in a group or private environment, there is still a human—a highly skilled professional—working on the patient's behalf," Azzara says. "At the end of the day, the real goal is to bring the best quality dentistry to the patient at affordable fees. Groups are driving that iniative and seem to be accelerating the curve toward more affordable care. It will be the patient who dictates what they need and are willing to pay for, and in an ideal world the laboratory and dentists should be working together to meet the needs of the patient at a price the patient can afford."
As the profession becomes more corporate, the large companies must also evolve for both types of practices and laboratories to work together.
"Always, quality will have a place," Killian says. "Having more experienced, better-rounded technicians who are able to help problem solve, case plan, engineer, envision, and be ahead in the problem-solving process with any case and in the workflow as a laboratory will always be important. The top managers and executives in any organization—corporate or independent—need to have well-rounded skill sets to be able to cope with changes, see what is coming, continue to acquire knowledge, network, and just have a vast knowledge of where we have been, where we are, and where we are going."
1. Leonhardt D. The charts that show how big business is winning. The New York Times. June 17, 2018. https://www.nytimes.com/2018/06/17/opinion/big-business-mergers.html
2. Garvin J. HPI: 7.4 percent of U.S. dentists are affiliated with dental service organizations. ADA News. March 07, 2017. https://www.ada.org/en/publications/ada-news/2017-archive/march/hpi-7-4-percent-of-us-dentists-are-affiliated-with-dental-service-organizations
3. Martin EJ. The changing landscape of dental labs. AGD Impact. May 2018. http://nadl.org/sl_files/B69CAC86-5056-A04E-376F18291EB46FEB.pdf
4. Dental tech job duties, responsibilities and salary info. Study.com. https://study.com/dental_tech.html