If you’ve caught yourself worrying about negative headlines as they relate to your career prospects in dentistry, let me explain what’s happening. Not a day goes by that I don’t read about the upcoming disaster in private practice dentistry. It’s hard to get away from headlines that scream “Student loan balances are at historic highs,” “DSOs are taking over,” “Dental schools aren’t providing enough clinical practice for new grads,” and “Insurance companies are taking over dentistry just like they did medicine.”
The implication is usually that private practice ownership is disappearing. It’s a wonder any young dentists are still thinking about practice ownership considering all of the negative news out there.
Pessimism is a human default, and it sells better
Not only is pessimism more common than optimism, but it sounds smarter, too. If you’re a magazine editor, which article will you put on the cover—the true but somewhat boring positive story, or the scary, not-true-yet-but-could-be negative story?
Who’s going to read an article about the fact that composite materials got 1% better this year, or that crowns are lasting on average 5% longer for most patients? Whoop-de-doo.
Here’s an example outside of dentistry. On December 29, 2008, at the close of the worst year for the modern economy ever, The Wall Street Journal published an article saying the worst was yet to come. It ran a front-page article on the economic outlook from a Russian professor named Igor Panarin, who saw the bad year only getting worse. WSJ shared: “Around the end of June 2010, or early July [Panarin] says the U.S. will break into six pieces, with Alaska reverting to Russian control . . . California will form the nucleus of what he calls ‘The Californian Republic,’ and will be part of China or under Chinese influence. Texas will be the heart of ‘The Texas Republic,’ a cluster of states that will go to Mexico or fall under Mexican influence.”
Pessimism sells. Optimism does not. Pessimism often sounds smarter and more plausible than optimism. Point out to a friend that you’re actually having a decent year in your practice and that you’re planning to fully fund your profit sharing plan this year, and he or she will likely shrug you off or give you a skeptical look. But tell someone they’re in trouble and you’ll have their undivided attention.
Pessimists extrapolate present trends, forgetting how markets adapt
Let’s apply this thinking to the common trope that dental service organizations are going to take over private dentistry. As we do, let me ask you: what percentage of dental practices in the US are owned by corporate groups? I’m talking about both the mega 900-plus location DSOs and the small five to 10 location groups owned by one or two doctors.
Would you guess 25% or 35%? An orthodontist I asked the other week guessed, “About 50%.”
The answer surprised him, and it may surprise you. Corporate-owned practices make up between 10% and 15% of the total marketplace. But here’s the thing. DSOs were only 5% or less of the market 10 to 15 years ago. They were 5% of the market 10 years ago, and they’re 10% now. Oh my!
This trend is what has people worried. Double the market share in 10 years and it’ll be 20%. Give it another 10 years and DSOs will own 40% of the market, and so on.
I believe this is flawed thinking, similar to what environmentalists wrote about the rainforest in the 1970s.(we now have more and diverse rainforests), or what people assumed about “peak oil” fewer than 15 years ago. (No one knew fracking would make more oil available.) They were looking at a trend line on a graph and assuming that the rest of the market would not respond.
Dentists are too smart not to respond. If DSOs, or insurance, or whoever, start cutting into their patient base, dentists will adapt. Maybe they’ll improve their websites. Maybe they’ll learn how to talk with patients more effectively. Maybe they’ll train their staff for better customer service. More than likely, they’ll invent new solutions to problems that they can’t even imagine at the moment.
And they’ll have a blast doing it. Dentists will be happier in their practices, patients will like coming to them, and many dentists will make more money and retire sooner, all while preserving the autonomy and independence they sought when they went into private practice.
If you want to buy a practice, do it
The lesson from all of this is: do not stick your head in the sand, but instead be more realistic than pessimistic about your career options and trajectory. If you want to buy a practice, do it. I helped hundreds of dentists in 2020 accomplish that, all in the middle of a pandemic!
These dentists are happy, they’re making more money, they’re loving their clinical independence, and, yes, they’re working hard to make it all happen. This can be you, as long as you’re not too pessimistic.
BRIAN HANKS, MBA, CFP, is the author of How to Buy a Dental Practice. He hosts the Practice Purchased podcast and represents buyers in dental transitions nationwide. Hanks can be contacted at brianhanks.com.