DENTAL SUPPORT ORGANISATIONS

ABOUT DSOs

Dental Service Organizations (DSOs) contract with dental practices to provide critical business management and support including non-clinical operations. The creation of DSOs has allowed dentists to maximize their practice with the support of professional office management. The DSO model enables dentists to focus on the patient while delivering excellent dental care.

AT USA Dental Solutions, we provide high quality management services to dentists seeking support in their non-clinical operations.

DENTIST OWNED DSO MODELS

The dentist-owned DSO is designed to allow private practitioners to maintain 100 percent control of their practice while optimizing operating efficiencies, enhancing the care they provide and building long-term financial assets.

THE ORGANISATIONAL STRUCTURE

The DSO can be used to achieve these goals for individual practitioners and groups by placing their business management and financial functions within a single corporation, the DSO. The participating practices are relieved of direct involvement in these functions and of personnel who may have been carrying out these functions.

The end result is that the owners continue ownership of their clinical practice and also own a portion of the DSO that provides services to the practices.

If, for example, three dental groups got together to form an DSO, and the practices had 10, 20 and 30 owners, the DSO would be owned equally by the 60 participating owners. Each owner would purchase an equal number of shares to capitalize the DSO. The DSO, in this model, would be owned by individuals, not by the three practices. The DSO would be governed by a representative board of directors (or managing members if a LLC-limited liability corporation).

Each practice would have proportionate representation on the board of directors. The operating agreement of the DSO would have provisions to delineate the powers of the board and to assert minority rights that would prevent the smaller practices from being outvoted on important matters.

It is important to note that after the formation of the company by the three dental groups in the example we are using, there are now four companies and the DSO is subservient to the owners of the three independent practices. Nothing changes about the clinical practices. They go on as usual with each practice maintains its existing contracts with its payers, patients and employees.

The DSO will be capitalized with a small investment by its owners, typically $1,000-$4,000 per practitioner. Each group will be charged a service fee by the DSO that includes all management, accounting and billing fees with the total less than 6 percent depending on the size of the DSO and its ability to negotiate favorable vendor contracts. The DSO service fee replaces the total practice overhead costs each group incurred prior to being serviced by the DSO.

STRATEGIC BENEFITS

One way to view the core strategy of the MSO is to develop multiple on-ramps into the MSO that enable independent physician groups to remain independent while offering benefits such as leveraging costs across multiple groups to drive savings in operating expenses. In addition, an MSO can deliver high-quality, low-cost management services to member physician groups including:

  • Revenue Cycle Management: Billing and collections
  • Finance and Accounting: accounts payable, payroll, banking, and financial reporting
  • Human Resources: Hiring, staffing, recruiting, compliance, and benefit plan design
  • Payer Contracting: traditional, shared savings, bundled payments, and at-risk programs
  • Information Technology: corporate IT support and infrastructure
  • Analytics and Business Intelligence: data models, dashboards, and analytics tools
  • Sales and Marketing: practice growth strategies, marketing

Some services can be consolidated with the advantage of better service that will be provided to a larger entity. These are:

Insurance brokerage services. Using a single large broker for all employee benefit insurance and corporate liability insurance can be an advantage. Brokers are rapidly losing lucrative clients die to group mergers and practice buy-outs. Brokers who affiliate themselves with an DSO that is expanding should be willing to deliver dedicated premium service and provide products to a large group at lower negotiated prices.

Malpractice insurance. It will be difficult to reduce malpractice premiums for doctors who remain in individual, small groups but the DSO management team should be able to exert some leverage on these insurers. There can be pricing benefits when all doctors are on the same renewal date with the same insurer. When the DSO reaches sufficient size, establishment of a captive insurance company may be possible.

Collection Agencies. These companies will be willing to lower their fees and provide individualized service to the DSO participants. It is a large advantage to the collection agency to have accounts from multiple practices sent from a single billing entity in a standard format

DSO MANAGEMENT

The job of the DSO representative (CEO) is to make sure the business of the practices is run efficiently and effectively. However, the  board is not expected to carry on the consolidation and efficiency measures outlined above and maintain them on an ongoing basis.

An extremely important feature of the DSO is that a larger organization can afford to attract experienced, top notch dental business management personnel.

It is the management team that carries out day-by-day administrative tasks designated by the physician board of directors. When the DSO is formed, it will have the opportunity to take on competent dental practice business personnel who have been working in industry and hold credible experience and knowledge of the domain.

DSO EXPANSION

After the DSO is up and running, additional practices can be invited to become owners in the DSO by buying in at a share price established by the original owners. The share price for second tier groups will be higher than original groups because they do not have to contribute startup company “sweat equity” and emotional risk taken on by the original DSO founders.

 

However, the second tier participants will obtain the immediate benefits of lower costs, seasoned management and a proven operation. The expanding DSO increases economies of scale as well as negotiation advantage with vendors.

 

For example, if billing service fees are negotiated with an outsourced vendor on a sliding scale based on total DSO group patient revenue, the billing fee percentage for the original DSO groups will decrease as more practices have their billing outsourced to the selected vendor.

 

After the DSO is established and successfully operating for its given specialty, it can offer services to other specialties, adding each specialty in a unique division. While the expertise for billing might slightly differ, management, accounting, human resources and other DSO services can be scaled to accommodate these specialties, providing increased economies of scale to all DSO owners.