Drilling down: Montco DSO ahead of schedule with eight dental practice deals in first year

Senior Reporter
Philadelphia Business Journal

A dental support organization (DSO) launched one year ago by former Duane Morris attorney Mitchell Goldman is well ahead of schedule in its goal of affiliating with and providing business support services to dental practices.

Mid-Atlantic Dental Partners of Plymouth Meeting, Pa., earlier their month closed its eighth deal.

“We think we’ll be at 20 practices at year’s end,” Goldman said.

The company’s early hope was to have eight practices from the Mid-Atlantic region on board by the end of 2017. The eight that it has deals with are all in either Pennsylvania or Maryland.

Goldman said the interest his DSO is getting from dental practices validates the market data he collected prior to launching the company, along with an affiliated organization that is acquiring a majority stake in the practices Mid-Atlantic Dental Partners is supporting. The company has spent between $8 million and $10 million on acquisitions, Goldman said.

“The numbers showed this is a buyers’ market that has a lot of older dentists wanting to sell and very few millennials wanting to buy,” he said.

The 2017 Dental Practice Survey conducted by TD Bank in Cherry Hill found 29 percent of the respondents said that they are considering selling or merging their practice in the next few years. Dan Croft, head of health care practice solutions at TD Bank, said he viewed the “modest uptick” in the expected supply of practices for sale “consistent with the nearly full recovery of financial losses incurred from plummeting retirement, investment and real estate values during the economic crisis.”

Goldman said his research found the U.S. dental services market is a $112 billion industry with 3.5 percent annual growth rate driven largely by the aging Baby Boomer population, while 45 percent of dentists nationally are over the age of 54 and looking to reduce their practices’ administrative burdens as they continue to care for patients.

Mid-Atlantic Dental Partners received capital commitments of up to $15 million in its initial round of financing. The financing was led by S.C. Goldman and Co., a private family investment partnership based in Philadelphia.

Under the company’s partnership model, Mid-Atlantic Dental Partners allows selling dentists to retain a portion of the ownership in their practice and gives them the opportunity to continue to participate in the monthly earnings of the company — and in the future value of the company when the dentist retires.

Mid-Atlantic Dental Partners supports dental professionals by providing marketing, financial, practice information, and other business services so dentists can focus on delivering care and not worry about the business operations.

“Were not the same old DSO model where somebody buys the practice, employs the dentist, cuts costs and lays off staff,” he said. “I never liked that model. We believe instead of laying off staff, you reposition them. Instead of focusing on cutting costs, you try to grow the business.”

Goldman said a big challenge his company faces is recruiting new dentists. They have created a “path to ownership” program to help associate dentists expand their professional skills. “Our model works because younger dentists graduate with very high debt — $300,000 to $400,000 and for them to go buy into a practice is very difficult — it could mean carrying a total of a million dollars in debt.”

Mid-Atlantic Dental Partners’ path to ownership program finances a young dentists buy-in and allows pay back of the debt over time. The program provides the dentist with an immediate minority ownership stake in the practice. Goldman said he was explaining the model to a potential new hire who said he’d rather have the company pay his student loan.

“I told him with 20 percent of the practice he’d get 20 percent of the monthly [profit] distributions, and he could use that to pay off the loan,” Goldman said. “He didn’t know what a distribution was. His training was all about improving his dental skills, and not on the minutia of the business side.”