How Dental Partnership Groups Reshape Dental Practice Ownership

The DPG has the opportunity to buy out the remaining portion of that from the dentist. So it's already kind of baked in, which is a nice exit strategy for somebody. Feel confident that somebody's there to buy this. I don't have to stress that I got to go and find the right private buyer for this. Welcome to the Phil Klein Dental Podcast. There are many dental practice owners that really enjoy dentistry. They enjoy the clinical part of it, but they really don't like many of the other facets of owning a dental practice. If that's the case, you may want to look into a DPG. That's a dental partnership group. DPGs allow you to take some money off the table by selling a minority ownership to that DPG, and you remain the majority owner with full autonomy. So you can continue to practice dentistry just the way you've been doing. And the DPG can help you with all the things you really don't enjoy, like billing, supplies, marketing, and human resources. This is a completely different scenario than selling to a typical DSO where you become a W-2 employee and lose all your autonomy. To tell us more about the DPG world is Dr. Weston Spencer, a GP working in La Jolla, California, and Chief Dental Officer for a DPG called SPP, which stands for Save Private Practice. Dr. Spencer, thanks for joining us on our show. Thank you for having me, Phil. So to begin, tell us what a DPG is and how it differs from the typical DSO. So a DPG is a little bit of a hybrid model where we're used to DSOs being kind of a full acquisition, sell your whole business to a DSO. They're going to acquire your business. You become a W-2 employee, that whole thing. Most of us know what a DSO looks like, right? Comes with all the bells and whistles and everything ready to kind of like service your practice. A DPG is going to be a little bit more of a hybrid model where you're going to have the DPG or the group partners with you for a minority stake in your business. So you as the dentist still own the majority. of your business, that leads to obviously clinical autonomy, business autonomy, all those other wonderful things when you own the majority of your business. But the other advantage in joining the DPG, right, for that minority stake, your equity can roll over in the DPG, the group, and you can go on the growth cycle ride with them as their group grows and you get to participate in that. So let me ask you this. DSOs... we're kind of the first animal to evolve into this corporate acquisition strategy, picking up dental offices all over the place. And some guy had a great idea. They went to a hedge fund or something and said, hey, let's just buy all these offices and put them together. And once we get them all together, we could sell them for a profit. whatever multiple they decide is equitable for everybody. But DPGs came on later. So how long have they been around and what benefits? What's the major benefit? I understand you don't, you're not giving up the majority of the business and DSOs, you become a W-2 employee, which is not the case with the DPG. But besides that, what are some of the benefits to the dentist to joining a DPG? And again, how new is this form of corporate structure? I would say timing-wise, DPGs have probably been around for three or four years. So very new relative to DSOs dominating this space. The idea of a DPG, though, is not new in the sense of let's take essentially groups recognize that dental offices can be very profitable, have high margins, somewhat recession-proof. Yeah, recession will affect it. We see how going through COVID, there was a lot of benefits to being a dentist. We bounced back super quick. There's a lot of really big things. We're not super regulated like a lot of other industries aren't there, right? So that's the why these groups exist is it's, hey, this is a type of business that is worth investing money in or money can come out of, right? But having just one model, the DSO model, which is full acquisition, takes a lot of the clinical autonomy away from the dentist. You ask any person that goes into dentistry, probably the number one reason they do it is because they want to practice the way they want to practice, right? We'll be right back with our speaker in a moment. But first... With countless dental composites on the market today, choosing the right one can be overwhelming, yet a few products rise above the rest, and Voco composites lead the way. For over a decade, Grandioso's tooth-like physical properties have remained unmatched by any other restorative material. With its stunning aesthetics, exceptional durability, and superior handling, Grandioso stands out. as the clear choice for all of your composite needs. And if you're looking to simplify posterior restorations with a single-shade solution, check out Admira Fusion Extra. This omni-chromatic nano-hybrid covers all 16 Vita Classical shades with a single shade. It achieves this without compromising strength, handling, or radiopacity, providing fast, strong, and aesthetic posterior fillings. Join thousands of dentists who trust VOCO for proven performance, superior aesthetics, aesthetics and lasting results. Explore VOCO's full range of composite materials and request a sample at voco.dental. I could go be a surgeon, but I'm probably going to go work for a group or a hospital. But I can treat people the way I want to treat people in my business and be able to have that autonomy. So that's probably number one why a DPG exists is because it still allows for that clinical autonomy to be able to be there. I think patients love the private practice model, right? You feel like you're getting this personalized approach or attention from somebody that's been your dentist for a long time, right? So as long as that feeling still exists, people are going to seek that out. This DPG allows that to still exist, right? The other benefit would be, we talked about like a W-2 employee. If you still own your entire corporation. use that as a pass-through entity, how you do your taxes and all those things, getting all those benefits would still exist in a DPG. But I think the number one reason that somebody joins a DPG is because they see where the trends in the industry are going. They want to participate in that massive growth that is happening on the group side, but they don't want to give up the way they're doing business in their small business. So it sounds to me that a dentist who would be likely to be interested in a DPG is a dentist who's not looking to retire clinically very soon, but they want to take some money off the table. Maybe they want to buy a country house somewhere. And so they could sell 40% of their practice to the DPG, like yours, and your company is called SPP, Save Private Practice. So I'm not looking to retire in the next 10 years, but I want to participate in the massive growth of these. corporate structured acquisitions, even if they're minority positions, which is the case with DPGs, I get to practice the same way I'm practicing now. Does that make sense? Because if I'm looking to retire soon, if I want to retire in a year or two, I want all the money. I'm not looking for... I'm very happy for the people that are investing in your DPG, but my runway is shorter. So I'm looking to get the money now. That's a DSO or a private sale. Is that right? Correct. Yeah, I agree with that. And I think you just described kind of the ideal partner for a DPG is somebody that's got a lot more runway, loves running their business, runs a good business, probably has a good culture in their practice, right? Doesn't want that to change, doesn't want to feel pressure to change that, but sees where it's going and say, hey, I'd like to participate in this and let me partner with somebody who can help me maybe increase that top line, take some of the burden off of me. If there's certain things that could be handled outside the practice, those are probably the aspects of an ideal partner in a DPG. What is your role, Dr. Spencer, as chief dental officer for SPP, the DPG that you're... run executive in? I would say the number one thing that I do every day for SPP is to make sure that my dentist partners feel valued and get the most value out of their partnership with our group. That may be splintered off into other responsibilities, how we negotiate clinical supply deals, how we interact. hiring, firing, all these, wherever we can give help. But ultimately, I want to make sure that they feel like they're getting the most value, that there's camaraderie there. And then, in all honesty, helping them to level up. I've been very fortunate. I've had good people in front of me who've set a good example, have been great mentors for me. Me being able to be mentors for other partners in our group who want to look at things differently, try something differently. Having somebody to talk to and say, hey, this worked for me. I still practice dentistry four days a week. I'm still doing it every day. And things that work and don't work, I still have patients canceling me on me like every other dentist is doing out there. So what did we do today to change that and how are we making that better? Those are the kind of things that I do as a chief dental officer. We'll be right back with Dr. Spencer in a moment. But first, are you looking for an air-driven handpiece that rivals the power and torque of electric? Well, I have good news. It's finally here. It's called the T-Mac Z and it's from NSK, a company we all know and trust as a world leader in dental handpieces. In addition to being lightweight and ergonomic, this revolutionary air-driven handpiece delivers unprecedented 44 watts of power, allowing it to cut through tough zirconia smoothly and quickly. In fact, the T-Mac Z reduces overall cutting time by 30%. That means less chair time, reducing the burden on you and your patient. Take a test drive of the TMAX-Z air-driven handpiece from NSK. For a free 10-day trial, go to nskdental.com and find your local rep to inquire. Experience the power and excitement of the TMAX Z series. If I'm a dentist that's a member of SPP or a DPG and I want to buy a CBCT machine, okay, I don't know what that costs, but I'm sure it's a lot. A lot, yeah. 70s probably, 70K or above. Right, or I want to purchase a $100,000 laser. Now you own 40% of my practice. Do I have to clear this purchase with someone over there or can I just... buy this and because i own 60 you're just assuming that i'm doing the right thing yeah and and and so far that's exactly how that's worked we we don't want to get involved if you feel like this is the best business decision for you to level up your practice because most of those things we buy are necessary and oftentimes can be turned into a profit center for your business so why wouldn't we support wanting to do that. And no, you don't have to get our permission to be able to do that because you own the majority of your business. But I'll say everybody that has partnered with us in our group are, again, good dentists. They're doing it for the right reasons. We're obviously looking for ideal partners who look at it that same way. They want something to grow. They've got a long runway and we want to do this together. Let's grow something big together. And so that's usually the mindset. an abundance mindset, there's a lot out there to take from and we can work together to get the most out of it. So following the deal between a dental practice owner and a DPG and that minority position is determined and sold to the DPG, I assume the dentist will get that money for selling that equity. And then afterwards, there's an exchange based on revenue share. Yeah. So let's do like a 60-40 example. Okay. So And we're going to come together and you're going to become a partner in this dental partnership group. And SPP, for example, the DPG is going to partner for 40% of the revenue in your business. So if your business does $100,000 this month, all the expenses have to be paid. The doctor is going to be paid on an agreed upon, hey, this is what... If I'm the doctor and I'm a partner in this group, this is what I need to make every month. We don't want to burden someone who has a family to take care of and there's going to be a minimum there. Kind of like if you were to take that dentist out in five years and sell the practice, what would an associate maybe look like inside there, right? So it's kind of built in there of what the cost of having a dentist inside this practice. And then once that's paid and the expenses are paid, we're going to share in the revenue after that 60-40. Dentist owns 60. SPP will share in the 40% of that. So you vet the office, obviously, before you purchase the 40%. Absolutely. Yeah, we go through a pretty rigorous analysis to see what's been going on for the last few years, where money's coming in, where it's going, what should be on the doctor's side, what do you need to count as an ad back for the doctor? Because most private practice owners do it that way, right? I've got my basic business expenses. I pay myself and there's probably a few things I... I have that are business expenses that are also personal type. And so we need to know what those are and categorize those going forward. So yes, we'll do a pretty in-depth analysis before we do a deal. So we talked about how the practice owner that partners with a DPG maintains his or her autonomy. What are some of the services that are really key in helping that practice grow that the DPG provides? As far as we're concerned, they maintain all of the autonomy and have access to the services that they want to take care of, that they want help with, right? One of the first ones to usually take advantage of would be billing, right? Most small business owners, I know I'm in California, I have a team of nine people. I want all of my people in my office focusing on patient care. I don't want them on the phone calling an insurance company tracking down a $40 check that was owed to me six weeks ago, right? So I take advantage of SPP's billing services where somebody else off-site takes care of it and it's at an incredibly low percentage of what we collect is what SPP is paid for for that service. So we just need to take care of the billing cost of that. And so the dentist gets it at an incredibly low rate, most of the time below e-assist type. fees or anything else like that. So we try to make it incredibly attractive. But that would be one example of a service that you're going to take over. So to answer your question, is SPP or DPG going to come in and take over all of your services? Absolutely not. Don't want to do that. However, we do have very good or best practices, ways of doing things that you can take advantage of. One of the things you do take advantage of immediately is obviously a clinical supply discount, right? That's one thing that DSOs groups do best is they buy in bulk and they have contracts in place that they're going to get a significant discount on their clinical supplies and you will get that immediately on day one. And I assume the DPGs have access to the major dental distributors that stand behind the products that they ship and also help with service tech issues and so forth. We really have access to all, but our best deals are with Henry Schein and Patterson. So exit strategy, how does that work with the DPG? Let's say they're working with SPP. They've been doing this for five or six years. They've taken their 60%. They're growing their office. How do they actually decide, okay, I don't want to work another day in my life. I'm moving to Hawaii and it's time to leave. As we do that ramp up towards that direction, right? I always like to kind of share that once you start to work with a group, a wonderful thing starts to happen. If there's synergy, you kind of grow together. We've seen a pretty... good increase in the bottom line of every practice that's joined the DPG just because you're going to take advantage of a lot of services. You're going to take at lower costs, save some money. You're going to put more money in your pocket. So hopefully you're making more as you join a DPG. But then the exit situation, just like you said, five years down the road, that was my runway. I'm ready to go. Obviously, we've been working on a strategy for that person to exit, right? But ultimately, either the DPG has the opportunity to buy out the remaining portion of that from the dentist. So it's already kind of baked in, which is a nice exit strategy for somebody. Feel confident that somebody's there to buy this. I don't have to stress that I got to go and find the right private buyer for this. But along the way, we are going to... have equity partners that will take on minority shares within the group. And all partners who are in the DPG with us will be able to benefit financially from taking on those partners, those financial partners as well. So hopefully you make some money along the way. And then in the end, have an opportunity to either sell to the group or if the opportunity is there that a capital partner is coming in and wants to take over the remainder of the business, that that opportunity is also there for them to sell to a bigger group. Yeah, it sounds like to me, typically a dentist would look at your offer and say, hey, SPP sounds pretty good or whatever the DPG is, but then compare it to what they can get from a DSO, right? They're going to shop it out, right? I mean, they're selling an equity position in their investment that they've built. And they're the owner of that investment. They certainly want to sell for the highest price. But a lot of these other circumstances. fall into making this decision because if, like you said, the runway is important. How long do I want to do this? Do I love dentistry? Yeah. I still love dentistry. I want to practice. Well, then I don't want to be a W2 employee for a DSO. Yeah. Yep. So I think that's the, that's what I'm seeing is the biggest difference between choosing there, right? Like you're at the time of that deal. What is my attitude over the next three to five to seven years? Right. Do, am I ready to go? Let's go and sell majority now and I'm going to work a little bit and I'm out. Or do I still love what I do? You know, and if you do, but you see where the industry is going, then you can kind of participate in both still. Right. And get the advantages of both private practice and group at the same time. Yeah. And also benefit from all the services that you offer. So what's the best way, Dr. Spencer, for our audience to get more information about DPGs, specifically your group, SPP? Yeah. Thanks for asking. So our website is SPP dental.com. You go to that website, easy to fill out some information and somebody is going to get back to you right away. You can follow us on Instagram at SPP dental partners. You could DM somebody there. We're going to get back to you the same day. And if you want to talk to me directly, my Instagram handle is at. Dr. Weston Spencer. That's D-R Weston Spencer. If you message me, I'm probably going to get back to you same day as well. So it should be easy to get a hold of somebody no matter what. Great information. It's really important that... We have someone like you to clarify this because it's, you know, dentists are inundated with what they do every day, the clinical work and running a practice. And to hear a podcast and learn some of this stuff certainly brings awareness to what a DPG is, the options that a dentist may have. And obviously now they have someone they can contact to ask more questions, which is literally the purpose of this podcast. Thank you so much, Dr. Spencer. Have a great evening. Happy to do it. Thank you, Phil.