Dentaltown March 2022 - 12

howard speaks
column
Your 'Special Sauce' Is You
If you decided to open a restaurant today, you'd
never think that your best plan was to go up against
McDonald's and offer low-price burgers and turnand-burn
counter service. McDonald's franchises
have the advantage in the volume market because
of the bulk discounts and effi ciencies negotiated at
the corporate level-legal, marketing, HR, fi nance
and more. Individual owners, who can't harness that
same power, are destined to lose if they think they can
compete against that model and win.
Dental service organizations are like McDonald's.
Let's say an insurance company declares that it's going
to pay only $1 for a particular dental procedure but
the costs to the dentist, which used to eat up 80% of
reimbursement, are now 120% ... or 200%. The DSO
has an entire agency that assembles the paperwork
and negotiates higher fees. The little guy isn't doing
that - and even if he does, he likely still won't earn
the same fees that the DSO will.
Known for quantity, not quality
DSOs might be able to develop a big brand, but
they haven't been able to build trust at the individual
doctor level. That's a big change from where group
practice fi rst started in health care, where initially it was
all about quality. The Mayo brothers up in Minnesota
realized that families were prepared to sell the farm if it
could keep their 85-year-old grandma alive. Places like
the Mayo Clinic, Scripps Health and Cleveland Clinic
opted to become Ruth's Chris Steak House instead of
McDonald's-the best of the best. We didn't get the same
start in the dental delivery system, though; corporate
dentistry is all McDonald's right now.
While DSOs run a very highvolume
operation for a very low
margin, they're also extremely
highly leveraged. If there's ever a
downturn in the magnitude of the
2008 fi nancial crisis, half of them
wouldn't survive without getting a
recapitalized funding event from
some donor, which does not happen. If you want proof
of that, look at some of the big DSOs that got fl ipped
since the pandemic in all-cash deals.
But although the big names tend to get all the
attention, 85% of DSOs are smaller, multilocation
group practices. Most have maybe three locations and
they don't get any press, but we're talking about the
same context: a scaled operation in the suburbs, very
insurance-driven, very low margin and usually very
leveraged. These guys all have tons of debt.
It's time to put yourself fi rst
I think that single practice owners are going to be
fi ne, but it's all going to be based on the dentist as the
product.
When my wife and I had our fi rst child, I placed a
full-page ad in the local newspaper that said, " Dr. Howard
Farran and his wife introduce their latest patient, " with a
photo of our son. I got so many calls and gifts from that
ad-and new patients, too! It " humanized " me-made
me more than a dude in a white coat but a neighbor, a
parent and a trusted member of the community.
Patients need to be able to trust their dentist or
they'll fi nd a new one. You can be more trustworthy
for your patients-but you'll need to slow down and
be special. Flip your high-volume, low-margin practice
into a low-volume, high-margin one that's not reliant
upon in-network reimbursements for revenue.
That's not to say DSOs are going away anytime
soon. That's OK because people are fi nicky, just like
cats. Sure, one market will always be price-driven-but
that's not the market you're aiming for anyway. There's
also a market for when you're selling " the unknown " in
which you go slow with someone you know. That ain't
a McDonald's hamburger, that's a Ruth's Chris steak.
Are you going to slow down and get into relationship
dentistry and raise those prices? As far as I can tell, that
whole market niche is just naked.
Please share your thoughts and suggestions for readers
in the comments section under this article online at
dentaltown.com/magazine. ■
by Howard Farran, DDS, MBA, founder and CEO
12 MARCH 2022 // dentaltown.com
http://www.dentaltown.com/magazine http://www.dentaltown.com
Dentaltown March 2022

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