5 Key Insights into the Current State of the DSO Market and Beyond

December 2, 2021

Did you know that the DSO market is larger than dermatology, urgent care, physical therapy, and the veterinary industry combined? In fact, the market is currently estimated at a whopping $130 billion, and it’s only expected to continue growing. The market is likely to continue benefiting from the private equity capital filtering into the industry in coming years: At present, there is around $1 trillion available for investment in private equity, and DSOs are particularly attractive investments due to their constant growth.

On top of the private equity funding that is expected to continue pouring into the dental industry, there are several important trends occurring in the DSO market that will lead to change in coming years. Let’s dive into what five of the most relevant trends this year mean for the future of the dental industry as a whole.

1. Acquisition Activity Is Increasing

The past two years have seen a lot of activity in DSO acquisitions and mergers. In January and February of 2021 alone, there were 12 major acquisitions. There is clearly a deep interest in the DSO industry, and this is not expected to die down anytime soon, especially as the demand for great dentistry surges postpandemic. Even small acquisitions can be a meaningful way to extend an existing footprint, and DSOs will be able to add small practice locations in adjacent locations and serve patient populations in every area.

This is great news for dentists who own a practice. Increased growth and demand for large dental practices will lead to better deals for medical professionals as they continue to grow and expand. Similarly, as groups compete for private equity, dental practices will have options to choose from in terms of partnerships, enabling them to make the best decision for themselves.

2. Understaffing Has Challenged Leaders to Look for New Solutions

The COVID pandemic has left many industries understaffed and competing for new employees from a limited pool of applicants. The dental industry is no exception. Practices cannot afford to lose their current employees; however, operating with a smaller staff leaves each team member with an unsustainably heavy workload. These independent practices need help, and DSOs have been challenged to support independent practices in their search for employees—especially hygienists—as the pandemic continues to discourage individuals from working in high-risk roles.

While DSOs are available to offer support, many dentists are also discouraged by the idea of joining one of them; losing control is unattractive to many of those who have always run their own practice. This means that DSOs will need to offer more flexibility in order to stand out in the competitive landscape. Allowing dentists to maintain ownership and autonomy over their practice—particularly the clinical side—can encourage them to search for help when they need it without sacrificing control. You can learn more about how to hire the best talent for your practice by reading our blog, “Recruiting in the Dental Industry: 4 Tips for Hiring the Best Talent for Your Practice.”

3. Pent-Up Patient Demand Has Led to Greater Competition and Opportunities for Improvement

As seen with the growth in DSO acquisition, patient demand has also surged since the COVID vaccine has become available to the public. Individuals who avoided returning for their biannual visit have rushed to dental offices once again, making the need for excellent staffing more important than ever. This trend is expected to continue for years to come as more Americans get vaccinated and return for their hygiene appointments.

As a result, DSOs must look to meet that demand and provide practices with the support needed to deliver excellent care to their patients. In a world driven by convenience, patients expect quick and reliable service. If another business is able to provide better service or faster responses, they will turn to other solutions. Similarly, dental practices will search for more helpful DSO organizations to help them.

At the end of the day, DSOs must identify real and actionable ideas for improving their service and supporting independent practices. This is especially true as additional acquisitions occur and the competition to stand out from the crowd grows.

4. Technology Is at the Forefront of DSO Leaders’ Minds

One example of how DSOs are offering additional support to dental practices is through the implementation of technology and teledentistry platforms. Looking forward, the DSOs that are open to digital transformation and adopting new technologies have a competitive advantage over those who don’t. Not only is digital transformation considered a top priority of organizational strategy, but patients are also looking for more comprehensive solutions online. In fact, in one survey, 78 percent of respondents said they were likely to use teledentistry services within the next five years.

Teledentistry specifically can offer a number of benefits for both DSOs and smaller dental practices, such as lower healthcare costs, higher efficiency and revenue, and even better access to healthcare services. Online scheduling and text messaging are just two examples of technologies that have already become commonplace this year and will continue to make an impact.

5. Integration of Medical and Dental Care is Accelerating

The pandemic has been just one sign of how the boundary between medical and dental work can blur and lead to a more collaborative environment. Considering dentistry being formally recognized as essential healthcare and the quick rebound after the closure of many services due to the pandemic, it’s clear that dentists are not only resilient but also important to the larger healthcare conversation. As the lines between these services obscure and healthcare offers new services to patients, DSOs will need to introduce practices to opportunities for collaboration that could benefit them.

For example, one area of wellness that could see a more united front between medical doctors and dentists is the treatment of obstructive sleep apnea (OSA). According to the ADA, “Dentists working collaboratively with primary care physicians and sleep specialists, as part of a multidisciplinary care team, can assist in providing optimal long-term care for patients with OSA, including periodic dental and periodontal assessment, as well as fabrication and maintenance of properly fitted oral appliances that can be used safely over time.”

Despite the fact that the treatment and screening of OSA have traditionally fallen to the medical side of healthcare, dentists are also in the best position to notice some of the most telling signs of the disorder in the mouth. Characteristics such as a small jaw, mouth breathing, worn teeth from bruxism, and a tongue with scalloped edges could all indicate that a patient is suffering from sleep apnea. With support from DSOs, dentists may be in a much better position to work with medical colleagues to provide excellent care to patients suffering from OSA.

As the DSO market continues to flourish and grow, priorities will inevitably shift in order to empower privately owned dental practices to provide the best patient care possible. Looking ahead based on current trends, it’s likely that acquisition activity will continue to grow, understaffing will create tension and competition within the industry, patient demand will accelerate, technological advancement like teledentistry will become a priority, and medical and dental care will integrate to offer more complete care to their patients.