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Alternative Models for DSOs with Brian Colao of Dykema

In just a few short years, the dental industry has been turned on its head with the introduction and evolution of the Dental Support Organization.

It started as a way for multiple practices to consolidate non-clinical operations such as human resources, property management, billing, et cetera. There are several DSO models including ones that offer equity options for affiliated dentists.

While they may seem ubiquitous today, some new trends offer exciting alternatives to DSOs that dentists should be thinking about.

Amol Nirgudkar, CEO of Patient Prism, sat down to discuss alternative models for DSOs with Brian Colao, Director of Dykema’s DSO Industry Group and an expert on the corporate practice of dentistry.

“People have heard me speak on the evolution of dentistry from single, dentist-owned practices to group practices to startup DSOs to DSOs,” said Colao. “But now there's been an evolutionary split where not everybody has to go to the conventional DSO model. There are a lot of alternative models available.

“Some of them are designed for folks that aren't sure if they want to jump totally off the cliff and make the jump to a DSO.”

Here are some approaches to group dental practice that may be of interest to you.

Strategic Partnership Opportunities

Consider these the toe-in-the-water of the DSO pool. They give participating dentists the chance to try out some of the consolidated services.

“So, there's a lot of what I call strategic partnership opportunities out there where you can sign on to allow a limited offering of non-clinical support services, pay a fee for that, and keep what's left over for your office,” Colao said. “You maintain the equipment and the intellectual property and the lease in your practice, but you pay a small fee. Sometimes it's three to six percent of your revenue.”

What you get in return could be help with human resources, marketing, billing or collections. These arrangements are set up to allow dental practice owners to maintain the status quo or increase their involvement in the DSO at some point in the future.

“And if things go right, either or both parties have the option to convert that to a full-blown DSO relationship,” he said.

Franchise Return and Practice Collaboration

Two more trends that might surprise solo practitioners include franchising and collaboration.

“You know, something else that I'm seeing out in the marketplace is a little bit of a comeback from franchises, from dental franchise opportunities,” Colao said. “Also, I'm seeing practices band together to get a higher multiple, either on an integrated basis or not-integrated basis. Folks in a certain geographic area are saying ‘let's band together and instead of offering our practices for sale individually, we'll do them as groupings of 15 to 20.’”

By combining several practices together, business owners can get a better price for the offices and their revenue generation.

Direct-to-Consumer Models

Colao said he’s also seeing a lot of direct-to-consumer models.

“You know, one-day implants, one-day dentures, a lot of the clear aligner programs out there that are offered directly to consumers, some of them with brick and mortar, some of them without brick and mortar,” he said.

Colao said he’s seeing these alternatives all over the country, not just in less regulated states.

“Some of them have more (regulation) like the franchise model, for example,” he said. “In addition to all the DSO rules, now you have franchise regulations. So, some of them have more, but they found an audience.”

Colao was pleased to see the diversity of alternatives to DSOs at Dykema’s dental industry meeting in July 2018.

“A representative for just about every alternative DSO model out there was at our conference, and it was so fun to talk to them,” he said. “Many of them spoke on panels and other things, and the audience got to really learn more about the alternative models.

“The bottom line is that while the conventional DSO model has gained acceptance, is very profitable, and will continue to enjoy acceptance, there are alternative models available to folks,” said Colao.

About this Industry Leader:

Brian Colao - Profile Pic

Brian Colao

Director of Dykema's DSO Group

Brian is widely regarded as one of the foremost authorities in the United States on the corporate practice of dentistry. He specializes in the representation of DSOs nationwide in the following areas:

  • Creating regulatory compliant business models and conducting ongoing compliance on a broad range of issues applicable to the industry
  • Defending DSOs in all manner of litigation and regulatory actions including State Dental Board Investigations and Complaints, State Attorney General Investigations and Complaints, Federal Investigations and Complaints, and private legal proceedings involving affiliated doctors
  • Assisting Private Equity Investors in buying, selling or investing in Dental Service Organizations

In recent years Brian has successfully resolved on behalf of his clients several significant civil and criminal Medicaid fraud investigations and state dental board actions alleging the corporate practice of dentistry, fee splitting and related violations, and he is the "go-to" person in the industry for all manner of regulatory issues. Brian has also handled, as lead regulatory counsel, some of the most significant transactions in the industry on behalf of buyers, sellers, lenders or potential investors. In recent years Brian has handled over 100 significant dental transactions representing in excess of $6 billion of total value. Brian also assists lenders in conducting due diligence prior to extending credit to Dental Service Organizations.

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