How to Scale Up a Profitable Dental Service Organization (DSO)
Like any business rollup looking to benefit from cost-savings advantages of shared services, dental service organizations (DSO) are no exception and are becoming increasingly popular. The goal is to free up practitioners’ time for more patient care versus administrative paperwork.
What is a DSO?
A DSO is a legal entity separate and distinct from a group of dental practices providing administrative and management services for its members. Because of the corporate practice of dentistry doctrine, most states require that dental practices are owned and controlled by one or more licensed dentists.
Setting up a DSO involves several key steps to improve regulatory compliance, provide efficient operations, and deliver quality dental services. What are the key steps?
Business plan
This roadmap organizes your DSO’s mission, goals, target market, services, and growth approach. It should include:
- Financial projections
- Competitive analysis
- A detailed roadmap to develop a scalable organization
- Key value drivers and execution strategies
- How the DSO will service the practices
- Investments to create the DSO and the infrastructure required to deliver those services
Common centralized services include:
- Executive leadership
- Accounting
- Treasury
- Information technology (IT)
- Human resources
- Marketing
- Procurement
- Revenue cycle management
In most instances, these functions existed in the practice but could benefit from professionalization due to new stakeholders and reporting requirements, made consistent across practices and then centralized to create efficiency and scale. The overall stakeholders and growth plans— as well as the projected scale of the DSO — are important in defining this business plan. Business plan alignment between the DSO and the practices as well as the timing of set-up and integration are essential to long term scalable success.
Legal structure and licensing
Next, decide the most appropriate legal structure for your DSO. LLC or corporation are the typical selections. Check your state, regional, and any local requirements for business licenses and permits to legally operate in your area.
Compliance with dental board regulations
Study up on dental board regulations in the states where you plan your DSO’s headquarters. Check into licensing requirements, scope of practice guidelines, and other regulations for dental care delivery.
Professional leadership
Because people are your most strategic asset, you’ll need a team of experienced professionals to lead your DSO. Normally, a DSO is acquiring existing practices of qualified dentists, hygienists, and customer-friendly administrative staff. The DSO itself will need people to provide executive leadership to all the practices as well as key individuals to provide the services the DSO defined in its business plan.
Clinical protocols and standards
Your brand and reputation depend on harmonized clinical protocols and quality standards for service delivery across all locations within your DSO. Consistency in clinical practices promotes a high level of patient care and helps build a reputable brand upon which high star ratings are earned.
IT Infrastructure and EHR systems
Next, you’ll need a roadmap for driving efficiencies with a cyber-secure and robust IT backbone for electronic health record (EHR) systems. Professionals with experience in DSOs can help you streamline patient data management, appointment scheduling, and billing. Be mindful of health care data protection regulations.
Facility setup and equipment
Havea clear capital improvement plan and approach for the DSO. State-of-the-art dental equipment contributes to a quality experience and can provide efficiencies. For expansions, choose secure locations for dental clinics, considering competitive density, accessibility and local demographics.
Insurance and billing processes
Certain administrative functions can be centralized to enhance efficiency. Use your top employees (and pay them well) to manage the profitability engine of your business: insurance, billing processes, and for timely reimbursements. Stay informed about dental coding standards and billing regulations to address compliance issues.
Marketing and branding
Reviews are your lifeline to drive patient traffic. Develop a strong brand identity for your DSO. Implement marketing strategies to attract patients, including online presence, community outreach, and partnerships with local businesses. Highlight your exceptional staff, care, and convenience.
Patient-centric approach
The DSO is created to support the practices and its patients. Map out the patient experience across all practices from the second they arrive near your building all the way through departure with a swag bag. What can be improved? A patient-centric approach is key to earning a great reputation and referrals. Ask:
- Is the environment welcoming?
- Are we proving patient education at every step?
- Do we have a culture of continuous improvement focused on customer experience and making changes on a regular basis?
How we can help
Remember — little details matter, especially when it comes to customer service.
Building a vision for your DSO? We’d love to help with that. Contact us.
Written by Mary-Jane Man-Jones, Jennifer Clement, and Amy Moore
Craig Arends is a principal at CLA and is the managing principal of CLA's private equity practice. Craig brings a concentration of experience in providing accounting and transaction structuring advice for leveraged recapitalizations, purchase accounting and SEC reporting, assessing quality of earnings, and GAAP accounting. He has far-reaching experience with critiquing financial models and reviewing target companies' financial performance to identify cost reductions and/or operating efficiencies Craig has more than 30 years of experience in public accounting serving public companies, private equity groups, and companies, including a term as principal in charge of a Big Four Capital Markets Group in Moscow, Russia. He has led financial accounting due diligence projects for private equity investor groups and venture capital funds, primarily in the technology, communications, and manufacturing industries, as well as assisting with Foreign Corrupt Practice Act matters ranging from investigation of payments made, validation of compliance with corporate policies, and review of proposed transactions to ensure compliance. When not working, Craig enjoys watching any sports, but his most favorite are baseball, football and soccer.
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