Rising Costs, Flat Fees, and Shaky DSOs

 

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 tongue 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, how are you doing today? Lovely, nice. So we know we all just celebrated a little bit of Halloween this past weekend. How was it for you and your family?

Jarrod Bridgeman
Well, I'll tell you what. The Midwest here in Central Indiana—well, for everybody, it was on a Saturday—the weather was unbelievable. Like, once in a...

Casey Hiers
This was one of the nicest weather-based Halloweens we've had. 70s, partly cloudy, nice breeze. In the Midwest on a Saturday, you never know.

Jarrod Bridgeman
Because my daughter's very first Halloween ever, it was almost a blizzard.

Casey Hiers
Yeah, I remember those. I'm sure we're dating ourselves, but yeah, I think the next time it's on a Saturday is in like 11 years. So it was good. My "dad tax" with candy is still happening. Seemed like a great idea until I was chomping on Milk Duds like a boss. My wife and I were playing cards with friends, and she's like, "Hey, might want to be careful. Didn't you damage one of your teeth a couple years ago?" As I realized, literally my crown pops off! I'm chewing my crown, pulled it out, and everybody's like, "You've got to be kidding me!"

Jarrod Bridgeman
So did she jinx you? Would that have happened if she had not said anything?

Casey Hiers
She didn't say, "I told you so." No. And so, yeah, my dentist—who's also a client, great person—really enjoyed the Sunday night voicemail that they received Monday morning. But they got me in, got it fixed before a vacation. So it pays to know people, I guess. We've helped them with their finances, and I also had an emergency situation. Happy to get me in, so that worked out.

Jarrod Bridgeman
Yeah, you did it as well. Both of us eating stupid crap.

Casey Hiers
Yeah, yeah. Common denominator. What shall we discuss today, Jarrod?

Jarrod Bridgeman
Oh boy. Well, I feel like it should have something to do with dentists and dental practices and the owners.

Casey Hiers
Great idea! This is new territory—we're onto something here!

Jarrod Bridgeman
Right? You know, oftentimes we dive a little deeper into specific ideas, categories, or pains that owners out there are feeling, and we thought maybe this time we do more of a blanket "State of the Union" PSA kind of thing, right?

Casey Hiers
Yeah, let's talk industry. We hear about the pharmaceutical industry, the AI industry, all these different industries. Well, let's talk dental. What do you want to talk about?

Jarrod Bridgeman
Well, let's just start right at the top here and work our way down. What would you say is the state of the industry right now?

Casey Hiers
The State of the Dental Industry! I need a podium. You know, it's interesting when I've talked to older practice owners; a lot of times they had a parent that was a dentist, and they talk about the good old days and how it's changed. Every industry changes, but the dental industry is not failing. It's not shrinking overall. It's about as close to a recession-proof industry as can be. If your tooth hurts, you're going to get it fixed. I didn't care how much it cost; I was getting my crown reattached after they cleaned the Milk Dud debris off of it.

But it's facing a major fiscal squeeze and operational pressures. There has never been a time where it's harder to be a practice-owning dentist and specialist and make lots and lots of money. They're making money, but there's a lot of pressure, and it's hard.

Jarrod Bridgeman
Whether that's staff—staff wanting more money—and rising costs in terms of supplies in the office, plus living expenses for employees.

Casey Hiers
Key pressures facing the industry: rising costs and flat reimbursements. Those are two headwinds that no business owner likes. My costs are going up, and my reimbursements are flat.

Jarrod Bridgeman
And they're not adjusting with the costs.

Casey Hiers
The cost of dental supplies, equipment, and rent has surged. Third-party insurances and PPO reimbursement rates have remained largely stagnant or failed to keep up with inflation. That's tough. What are you going to do as a practice owner? Because the days of just shrugging your shoulders don't work. You can't just put your head down, produce dentistry, and everything works out.

Jarrod Bridgeman
No, because people walk over you, and they do.

Casey Hiers
You've got to go on offense. The biggest challenge I hear is dental staff shortages. We know cash flow, income, and retirement are the real challenges, but at the top layer, staff is hard.

Jarrod Bridgeman
It's hard to make any money if you don't have staff.

Casey Hiers
Very difficult to hire and retain good, skilled people that add to your culture. Because of that, wages have been driven up.

Jarrod Bridgeman
When there's a drought in the labor pool, people are able to command more money. If you want me, I want this much.

Casey Hiers
You've got to state the problem before you fix it. With rising costs and flat reimbursements, you must look at your business model. If insurance is killing you, do you want to continue to complain, or do you want to look at strategies and business models?

Jarrod Bridgeman
Which is easier: sitting around and bitching, or doing all that work?

Casey Hiers
It's easier to sit around and complain. The results are more difficult if you don't address them, but if you do, you'll look up and go, "My gosh, I'm so glad I did that because it set me up for my last 7 to 17 years of practicing."

Jarrod Bridgeman
As we bring in new practice owner clients each year, how often do we see fees being wildly off?

Casey Hiers
When we look at getting fees into the 80th percentile for their area, it's rare when somebody is only single digits off. Most of the time, they are 12% to 40% low, and they're surprised and frustrated. Fee renegotiation is a good start—it's a band-aid, but it goes back to the business model.

And with dental staff shortages, this is going to be hard for some people to hear: a lot of times, it comes down to you. It comes down to leadership. Are you a good leader in your practice?

Jarrod Bridgeman
You set the tone. You set the culture. A lot of dentists want to delegate it to the office manager, but at the end of the day, you're the one signing the checks and hiring people.

Casey Hiers
When I hear people complaining about their hygienists, associates, and staff, I've heard everything except them taking accountability. Accept it, and be a champion who finds good people. We help people with leadership and hiring all the time—those are $5,000 decisions that have a huge impact.

Jarrod Bridgeman
If your employees love working for you, word-of-mouth spreads. They'll tell their hygienist friends, "Hey, you should come work for this doctor, it's great."

Casey Hiers
Word-of-mouth works for hiring just like new patients. If you have poor leadership and a toxic culture, throwing money at the problem with a new bonus structure won't fix it.

Jarrod Bridgeman
What's another pressure? One we talk about at our events across the country is DSOs and corporate dental offices.

Casey Hiers
You nailed it. Over the last 15 years, people said, "I'm out, let me get that 10x EBITDA corporate check." That Hail Mary is less of an opportunity these days. Why? Private equity-backed DSOs have faced heavy debt restructuring and financial challenges, with creditors running the show. That dream of selling to corporate for a big payout is on shaky ground.

Jarrod Bridgeman
And if corporate options aren't as strong, how is a younger dentist going to buy a massive monstrosity of a practice without a strategic transition plan?

Casey Hiers
Another factor is market saturation. Our COO says some of the most profitable practices are in rural areas where people might not think to live. If you set up shop on Main Street in the coolest city, there are 19 other practices right next to you.

Let's look at the bright side: dentistry is an amazing profession with strong long-term demand. Jarrod and I both had tooth emergencies this year, and nothing stood in the way of getting them fixed. What dentists provide is essential.

Jarrod Bridgeman
Sometimes that gets lost in feelings or getting overwhelmed by the imagined work.

Casey Hiers
80% of a dentist's patient pool loves them, but the 20% negative minority stands out. Then there are technology shifts—digital workflows, AI diagnostics—which are cool, but expensive. Buying shiny new tech without a strategy can wreck your cash flow. Does it make you money, save you money, or save you time? Spending hundreds of thousands on tech while your practice foundation is on fire is a bad strategy.

When I broke my crown, I wasn't thinking about their diagnostic tech—I just wanted it fixed by a dentist I trust.

Dentists must acknowledge macro-level challenges. You can be massively profitable, but you can't play defense or put your head in the sand.

Jarrod Bridgeman
The best defense is offense. Complaining fixes nothing and leaves you unhappy.

Casey, for those who want to learn more, where is the team traveling next?

Casey Hiers
Tonight we're in Athens and Savannah, Georgia! On November 12th, we're in Charlotte, North Carolina—which has been completely sold out for weeks!

Jarrod Bridgeman
If you missed Charlotte, join us that same night in Winston-Salem, North Carolina. Then on December 10th, we're in Austin and Houston, Texas. In January, we're heading to Tampa and Naples, Florida, as well as Alabama!

Head to fourquadrantsadvisory.com, check out upcoming events, and register today!

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, go 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.