DSO Restructuring: Why the Hail Mary Sale is Crumbling

Announcer:
Hello, everyone. Welcome to The Millionaire Dentist podcast, brought to you by Four Quadrants Advisory. On this podcast, we break down the world of dentistry finances and business practices to help you become the millionaire dentist you deserve to be. Please be advised, we do speak with an honest tone and may not be safe for work.

Casey Hiers:
Hello, and welcome! This is Casey Hiers, back at The Millionaire Dentist podcast in studio with co-host Jarrod Bridgeman.

Jarrod Bridgeman:
Casey, what's up? How are you today?

Casey Hiers:
I'm great. I could use a cigar. I'm in the mood; I don't know what it is. Yeah, do you have any?

Jarrod Bridgeman:
I don't. I was told not to smoke them in the office.

Casey Hiers:
You too?

Jarrod Bridgeman:
Yeah, it's uh, pungent sometimes and...

Casey Hiers:
Late night, sometimes I'll watch Mad Men, and I've never been a big smoker. But boy, they're just ripping darts, ripping heaters right and left.

Jarrod Bridgeman:
Oh yeah, makes you want to smoke even if you never have in your life. Like, those guys look awesome.

Casey Hiers:
Yeah, apparently the '50s and the early '60s were a different time.

Jarrod Bridgeman:
I mean, you see old photos of people like eating at McDonald's, just smoking it up. You know what I mean? It's crazy.

Casey Hiers:
Remember they used to have non-smoking sections in the same building? Like, it's pretty funny.

Jarrod Bridgeman: I do. I remember that distinctly. And now if I go to any place that, which is very rare, but they allow smoking, I can't even be in there anymore.

Casey Hiers:
Yeah.

Jarrod Bridgeman:
Yeah, it's crazy. Casey, speaking of smoke and fire, there's a topic that you always talk about when you're presenting, and your team's out presenting, and it's a hot-button topic, and it's been a hot-button topic for years now. And that is corporate dentistry, or DSOs.

Casey Hiers:
Yeah, dental support organization, dental service organization, that is the acronym. Yeah, it is a lightning rod topic when we travel the country, and then, just, I guess in the news as well.

Jarrod Bridgeman:
And when we talk about it, we kind of talk a little bit generically and in some information that people need to know, because I feel like a lot of practice owners out there, at least over the last couple years or decade or so, have kind of banked on, "Well, when I retire, I'll just sell my practice to a DSO," whether that's a big name or one that operates regionally. And we've found out, you know, that's not the case, and hasn't been for years now. So that's already kind of a negative on them. What do you hear when you're in these rooms, and you're speaking about this?

Casey Hiers:
Yeah, we added DSOs to our content. And ultimately, you know, for the last 10, 15 years, they've been on the scene. And people have taken notice, kind of like, let’s make an analogy: PGA is the professional golf league, and then LIV tried to come in and throw some money at it and take it over. And they're, looks like they're going to crumble because of financial mismanagement and debt, and some of the similar things...

Jarrod Bridgeman:
Or NFL and XFL.

Casey Hiers:
Yeah.

Jarrod Bridgeman:
Ah, sports reference!

Casey Hiers:
Yeah, there you go! That's big for you. Um, but ultimately, these have been around, and a lot of practice owners have heard stories, or a friend of a friend, and this, that, and the other. But we find that as each practice owner investigates it and entertains it as an option, that can be, there’s a big gap between what it really is and what they're told it can be.

And what I mean by that is we've been on both sides of these deals, and we ultimately want to help people be an entrepreneurial dentist and have a practice and be able to thrive on their own without being in corporate. That could be an option for you.

Jarrod Bridgeman:
Yeah, it's not necessarily a bad thing every single time, but having the option to do what you want to do is different, you know.

Casey Hiers:
Well, in those rooms we present in, we just go through like three parts of a deal that are always in there. You might have many sections, some sections, but there's always three parts of a deal. And we just get into, generally speaking, what you can expect if you engage with a DSO. And people are enlightened because they didn't know some of those things. Again, they've heard either really good stories or really bad stories. And when that's the case, sometimes you're like, "It's probably somewhere in the middle."

Jarrod Bridgeman:
How many people are surprised about the strings attached?

Casey Hiers:
Less and less, I will say. You know, when I talked about these maybe three years ago in a much lighter setting, you'd have some people take a stance and get pretty defensive. I can tell you from the ground, from being at these events, after that portion of the presentation is over, a lot of, there’s some dialogue that occurs, and most people in that room either have done something with a DSO and regretted it, or entertained it and realized, "I don't want to sell my soul. I don't want to go this way."

But money talks, so anytime you hear stories of, "Oh, well, I know somebody who got 10x EBITDA..."

Jarrod Bridgeman:
Yep.

Casey Hiers:
"...blah, blah, blah." Yes, it has happened; yes, it can happen. But we just try to give people a peek behind the curtain to know what to expect so they don't have rose-colored glasses on.

Jarrod Bridgeman:
Well, and as all that comes out and people are surprised by it, and maybe learning that it's not this comforting blanket at the end at the end of your retirement life there... work life, I should say. And obviously, there’s ups and downs, but there's been some more, I would say, you know, on this podcast, you've heard it here first, not really, but breaking news as to what's been happening in the world of DSOs, and that is becoming an even bigger issue for people who've maybe have already sold, right?

Casey Hiers:
Yeah, we'll dive into that. I just thought of another sports analogy.

Jarrod Bridgeman:
Okay.

Casey Hiers:
That Hail Mary, that, you know, hoping that you can sell and get some money, right? If you think football, can you imagine, like, would you rather be up 28 to 3 and win the game, and then really enjoy the entire game and everything about it, or do you want to have to throw a 90-yard Hail Mary, hoping and praying somebody accidentally catches it to win the game, right?

When you think about retirement and your money, spoiler alert: you don't want the Hail Mary. You want to enjoy a profitable career throughout, so that you don't have to rely on the Hail Mary. And even once you win with a Hail Mary, like, yeah, it's exciting, but holy cow, what a terrible game. Why'd we put ourself in that position? Too many dentists put themselves in that position.

Jarrod Bridgeman:
Now, imagine trying to throw that Hail Mary at 75 years old, and not even having any football skills.

Casey Hiers:
You're doing a dentistry and football crossover analogy there!

Jarrod Bridgeman:
The whole point of what you're saying is, yes, it's always better to prep and get your stuff in order and kill the game.

Casey Hiers:
Yep, plan and prepare; it's a much better route. But, you know, again, DSOs, they're here, and, you know, we're the vehement defender of the entrepreneurial dentist, that being said. Again, we have been on both sides of these deals. But there's been something in the last three weeks that has come out that's incredible, and really that's kind of what we want to share today.

Jarrod Bridgeman:
Right, and that’s, I would say maybe the falling world of DSOs?

Casey Hiers:
Let me read the title: "DSO World Hit by a Tsunami of Restructurings."

Jarrod Bridgeman:
That's quite the title!

Casey Hiers:
Tsunami. Yeah, I mean, we'll just cover some, you know, CliffNotes version, but three of the nation's top 10 largest DSOs were forced into restructuring agreements with creditors in 2026. And, you know, it's, "Well, why would they do that?" Well, they, by doing this, they avoided costs, public exposure of record, and negative publicity of a public Chapter 11 bankruptcy filing.

So then what happens? The people they owe money to, the creditors, assumed majority equity positions in these, you know, three of the nation's top 10...

Jarrod Bridgeman:
Meaning that the creditors now basically own the DSO itself.

Casey Hiers:
Yeah, and again, the domino ripple effect we won't get into, but part of the allure of the money is that you get company stock, and there's recapitalization events and all these things. This just destroys so much of the potential money that some people are going to get. But kind of like, where there's smoke, there's fire, there's your sign; that's a big one, right? That's happened, and then, oh, one of the largest, the country's second largest DSO, and the largest branded DSO...

Jarrod Bridgeman:
Was it Aspen?

Casey Hiers:
Yeah!

Jarrod Bridgeman:
Yeah.

Casey Hiers:
Yeah, great place to ski. Approximately $3 billion in debt will mature in December of 2027. And discussions have been made about selling off assets to raise cash to service the debt. Like, again, it seems like a theme, like, our country's budget: debt. LIV Golf: debt. DSOs: debt. They try to build it, build it, build it, build it, and I mean, it's a house of cards.

I mean, really, you know, what does all this mean? Is that what you were about to ask me?

Jarrod Bridgeman:
I was going to ask you that, yes. Casey, what does all this mean?

Casey Hiers:
There's going to be less lucrative opportunities. There's going to be less big checks stroked, and you better make sure that guaranteed money is a significant chunk of it.

Jarrod Bridgeman:
It sounds like a lot of these expanded too much too quickly, which even our entrepreneurial dentists may know a dentist or two have done the same thing, where they opened up five, six, seven, eight practices. And that debt never went away, and the work stayed the same.

Casey Hiers:
Yeah, I mean, with interest rates spiking, numerous DSOs' true equity valuations are zero or less than zero. Like, there's no, like, when there's no money, there's no money. And, so that company stock and some of the hopes of adding to that guaranteed signing bonus... yeah, that's really in jeopardy...

Jarrod Bridgeman:
So some of that stock can be considered like Confederate money? Just useless?

Casey Hiers:
Yeah, yeah, Monopoly money, right? I mean, that's kind of...

Jarrod Bridgeman:
What does this mean for the people who may have more recently sold? Is there a possibility of the practice that they just sold just closing down and they're just kind of, I don't know, fired? Because you're now working for...

Casey Hiers:
Yeah, I mean, I don't want to speculate there. Like, this is, like, literally happening, you know, in this summer, right, the last three weeks? Like, these things are happening; they're on, you know, upcoming. There's going to be a lot of speculation on all sides: people that love DSOs, people that don't love 'em. A lot of speculation; we'll see where the cards fall, but ultimately...

Jarrod Bridgeman:
But ultimately we're learning that it's not a Scrooge McDuck tub full of money that's never-ending.

Casey Hiers:
Yeah, I mean, that was the thought, right? "Oh, 10x EBITDA multiple, somebody's going to give me, you know, millions and millions and millions of dollars for my average-sized practice." Right? That would be great, right? You know, it would... it would be great if a long-lost uncle gifted you $10 million today. Probably not going to happen right now. It's really hard to get a really good, you know, DSO deal.

Now, again, some of these larger multi-specialty practices, there's a place for it. But be cautious, be hesitant. Like, this is breaking news; this is information that's happening right now where there's some chinks in the armor with DSOs and how fiscally responsible they've been. And when your creditors take control, that can be a little scary.

Jarrod Bridgeman:
Right, I mean, some of those creditors are well known for just tearing places down and selling the pieces off, like they've had at Red Lobster.

Casey Hiers:
Yeah, when there's blood in the water, the sharks will come. And, ultimately, right now there's a lot of things up in the air. All that does is reinforces the need for what we do. And again, there's 200,000 dentists in the country; we can't help everybody, we're not a volume shop, we don't want to help everybody. But all it does is reinforces the need to making sure that your financial house is in order, your practice is efficient, your overhead's trending downwards, your insurance adjustments are trending downwards, you know, your money's right... like, make sure you're insulated. Your tax, your retirement, your investing, all those things need to be tight because what this DSO thing did was give a lot of people false hope.

"And I'm going to get hit the Hail Mary, I'm good," and for some people that worked, you know, whew, they did it, but for others, it was not what they thought it was going to be. Ideally, this makes people be more accountable and have, you know, take off the rose-colored glasses and go, "I have got to get better."

And what's hard is, you know this, so many practice owners- they've achieved enough success that the realization of, "I need help with this," or, "This isn't good enough," it's really hard for them to cross that Rubicon sometimes.

Jarrod Bridgeman:
It really is, and then when they do eventually get around to getting help, or joining with us, boy, are they ever saying things like, "I wish I would have started 10 years ago. I wish I would have started sooner. I wish younger me would have realized this."

Casey Hiers:
Well, I mean, think about it.

Jarrod Bridgeman:
Think of that Rod Stewart song.

Casey Hiers:
If you start work... Rod Stewart, great guy. Yeah, if you start working out and you drop, you know, 20 pounds, you look in the mirror and go, "I wish I'd have done this sooner."

Jarrod Bridgeman:
Is that a hint?

Casey Hiers:
But it was also—no, no, no, no, no, that's your own head trash! I think you look great!

Jarrod Bridgeman:
Thank you!

Casey Hiers:
Getting your financial house in order is not as hard as you think; you just have to...

Jarrod Bridgeman:
...do the work and peel off that band-aid, or get the balls, get the courage.

Casey Hiers:
But your give-a-shit factor just has to be higher. But it's a dangerous place, 'cause there's a lot of dentists and specialists out there that make between, call it, you know, 375 and 700. And so it’s, they're in that weird spot where they're, again, doing better than most...

Jarrod Bridgeman:
Yep.

Casey Hiers:
...so they can rationalize anything they want away, but they should be making double, you know? And so it's again, yeah, "I should have done this sooner."

Jarrod Bridgeman:
Or could be doubling savings way more, and you know, having more free time, and work-life balance, and...

Casey Hiers:
But yeah, the Hail Mary is options lessening as we speak, and so if you're out there ho-hoping and praying is your business strategy, and you think the DSO is going to bail you out, maybe? But boy...

Jarrod Bridgeman:
You know, go ahead, do it, try it!

Casey Hiers:
You know, I don't mind playing roulette with some fun money, but don't play roulette with your practice and your retirement...

Jarrod Bridgeman:
That's right!

Casey Hiers:
...and your livelihood...

Jarrod Bridgeman:
And your children's livelihood, and yeah.

Casey Hiers:
Yeah, absolutely.

Jarrod Bridgeman:
Casey, for those folks out there who want to learn more, obviously they can register and attend one of our events. We've got all kinds of events going on throughout the country. So tonight we're going to be in both Memphis and Nashville, Tennessee, so that'll be fun. You get to party it up in Nashville, go down to the uh, the big street? What's that called again?

Casey Hiers:
The big street? Broadway?

Jarrod Bridgeman:
Broadway, thank you!

Casey Hiers:
No, no, I mean, if you go to Nashville, there's always Broadway, but the real gentlemen, the real aficionados of fun know to go to the West End of Nashville, you know? It's amateur hour down on, it’s fun, but...

Jarrod Bridgeman:
You should at least go once.

Casey Hiers:
Yeah.

Jarrod Bridgeman:
At least experience that. So yeah, that, Memphis, we're also going to be in, and this is going to be in September 17th, we're going to be in Grand Rapids, Michigan, and East Lansing, Michigan. And then in October, we're going to be in Kansas City, Missouri, and Springfield, Missouri, and we've got more events coming throughout the rest of the year, and then you and I are working on where we want to go next year already.

Casey Hiers:
Yeah, another Four Quadrants tour to help practice owners make more, save more, retire on their own terms.

Jarrod Bridgeman:
Casey, thanks so much.

Announcer:
That's all the time we have today. Thank you to our guests for their insight and for sharing some really great information. And thank you to you, the listener, for tuning in. The Millionaire Dentist podcast is brought to you by Four Quadrants Advisory. To see if they might be a good fit for you and your practice, head on over to fourquadrantsadvisory.com and see why, year after year, they retain over 95% of their clients. Thank you again for joining us, and we'll see you next time.