Howard Speaks: Your 'Special Sauce' Is You by Dr. Howard Farran

Howard Speaks: Your 'Special Sauce' Is You 

by Howard Farran, DDS, MBA, publisher, Dentaltown magazine


If you decided to open a restaurant today, you’d never think that your best plan was to go up against McDonald’s and offer low-price burgers and turn-and- burn counter service. McDonald’s franchises have the advantage in the volume market because of the bulk discounts and efficiencies negotiated at the corporate level—legal, marketing, HR, finance and more. Individual owners, who can’t harness that same power, are destined to lose if they think they can compete against that model and win.

Dental service organizations are like McDonald’s. Let’s say an insurance company declares that it’s going to pay only $1 for a particular dental procedure but the costs to the dentist, which used to eat up 80% of reimbursement, are now 120% … or 200%. The DSO has an entire agency that assembles the paperwork and negotiates higher fees. The little guy isn’t doing that—and even if he does, he likely still won’t earn the same fees that the DSO will.

Known for quantity, not quality

DSOs might be able to develop a big brand, but they haven’t been able to build trust at the individual doctor level. That’s a big change from where group practice first started in health care, where initially it was all about quality. The Mayo brothers up in Minnesota realized that families were prepared to sell the farm if it could keep their 85-year-old grandma alive. Places like the Mayo Clinic, Scripps Health and Cleveland Clinic opted to become Ruth’s Chris Steak House instead of McDonald’s—the best of the best. We didn’t get the same start in the dental delivery system, though; corporate dentistry is all McDonald’s right now.

While DSOs run a very high-volume operation for a very low margin, they’re also extremely highly leveraged. If there’s ever a downturn in the magnitude of the 2008 financial crisis, half of them wouldn’t survive without getting a recapitalized funding event from some donor, which does not happen. If you want proof of that, look at some of the big DSOs that got flipped since the pandemic in all-cash deals.

But although the big names tend to get all the attention, 85% of DSOs are smaller, multilocation group practices. Most have maybe three locations and they don’t get any press, but we’re talking about the same context: a scaled operation in the suburbs, very insurance-driven, very low margin and usually very leveraged. These guys all have tons of debt.

It’s time to put yourself first

I think that single practice owners are going to be fine, but it’s all going to be based on the dentist as the product.

When my wife and I had our first child, I placed a full-page ad in the local newspaper that said, “Dr. Howard Farran and his wife introduce their latest patient,” with a photo of our son. I got so many calls and gifts from that ad—and new patients, too! It “humanized” me—made me more than a dude in a white coat but a neighbor, a parent and a trusted member of the community. Patients need to be able to trust their dentist or they’ll fi nd a new one. You can be more trustworthy for your patients—but you’ll need to slow down and be special. Flip your high-volume, low-margin practice into a low-volume, high-margin one that’s not reliant upon in-network reimbursements for revenue.

That’s not to say DSOs are going away anytime soon. That’s OK because people are finicky, just like cats. Sure, one market will always be price-driven—but that’s not the market you’re aiming for anyway. There’s also a market for when you’re selling “the unknown” in which you go slow with someone you know. That ain’t a McDonald’s hamburger, that’s a Ruth’s Chris steak. Are you going to slow down and get into relationship dentistry and raise those prices? As far as I can tell, that whole market niche is just naked.

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