DSOs

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DSOs

The top five dental service organizations (DSOs) in the United States by the number of their affiliated dental offices are the following: (1) Heartland Dental - 840; (2) Aspen Dental - 660; (3) Pacific Dental Services - 625; (4) Smile Brands - 360; and (5) Great Expressions Dental Centers - 300.

METHODOLOGY

In order to determine the top five dental service organizations (DSOs) in the United States, we have searched dental registries, industry reports, related publications, and dentistry websites. We have selected the DSOs with the most number of affiliated dental offices. Based on a pre-compiled report from Becker's Dental Healthcare, Heartland Dental, Aspen Dental, Pacific Dental Services, and Smile Brands retained their top four positions in the list with a small increase in their number of affiliated dental offices in 2017 through 2018. For the companies placed 6th and 7th, we have done some additionalresearch in order to confirm the position of the 5th DSO. Based on what we found, the Great Expressions Dental Centers DSO, with 300 affiliated dental offices, replaced American Dental Partners, which has 280 offices, and took the 5th place in the list for the year 2018.

With regard to the overall valuation and growth rates, no such data for the top five DSOs was publicly available, even after a thorough search through sources such as the ADA site, various DSO sites, financial websites, like Hoovers, Crunchbase, Owlers, and various company press releases. The reason why the data is not available is due to the private nature of the company. Instead, we decided to use their estimated revenues, from the Hoovers database, and the increase in the number of affiliated dental offices. Note that we have also used sources that are more than two years old in order to present the available growth information on the increase in the number of each DSO affiliated dental clinics.

TOP FIVE DENTAL SERVICE ORGANIZATIONS (DSOs)

1. Heartland Dental Care

Heartland Dental Care was established in 1997 and is currently operating in 35 states. It has 840 affiliate dental offices. In terms of ownership structure, KKR is the majority owner of Heartland Dental with the Ontario Teachers’ Pension Plan having some sizable stake in the private company as well. In the absence of the overall valuation, we were just able to obtain their revenue which totals to around $34.11 million. The company was awarded a $1.6 million funding grant on June 3, 2011. Since there were no financial growth rates available, Heartland Dental's growth can just be seen from the increase of their supported practices and covered states from 397 dental affiliates in 21 states in 2012 to 725 offices in 2016, and to 840 supported dental practices in 35 states in 2018. We were not able to find Heartland's funding information, growth rate, and market valuation.

2. Aspen Dental Offices

Aspen Dental Offices has 660 affiliated dental offices that were found in 37 states. It was founded in 1998 and privately owned by Ares Management, Leonard Green, and the management team of Aspen Dental. Aspen grew from just 300 affiliated offices in 2013 to 660 offices in 2018. Its revenue is around $142.69 million. No funding information can be found for Aspen. For Aspen, we were not able to find their funding information, growth rate, and market valuation.

3. Pacific Dental Services

Pacific Dental Services can be found in 19 states and has 625 dental office affiliates. It was established in 1994 and privately owned by Stephen E. Thorne IV, the company's founder, Chief Executive Officer, and President. There were no known public funding rounds for the company. In terms of available growth data, Pacific Dental Services' affiliated offices grew from 500 dental offices in 2016 to 625 affiliates in 2018. The company's value in terms of its revenue is around $358.94 million. We also were not able to find Pacific Dental Services' funding information, growth rate, and market valuation.

4. smile Brands

Smile Brands is present in 15 states and has 360 dental affiliates offices. It was established in 1998 and privately owned by Gryphon Investors who bought the company in 2016. There were no publicly-known funding rounds information for the company. With regard to its growth data, the company was able to add more affiliates from 350 offices in 2016 to 360 in 2018. In the absence of publicly-available valuation data, Smile Brands' value was reflected by its available estimated revenue of $599.09 million. We were not able to obtain the company's funding information, growth rate, and market valuation.

5. Great Expressions Dental Centers

Great Expressions Dental Centers' operation involves 300 affiliated dental offices located in ten states. Great Expressions Dental Centers' DSO was founded in 1982 and acquired by the Roark Capital Group in 2016. There were no publicly-available funding information for Great Expressions. In terms of growth, the company's progress can just be inferred from its increase in dental office affiliates from 269 offices in 2016 to 300 affiliates in 2018. The company's market valuation is not available as well, so we have included its available revenue of around $113.58 million to give an insight into its value. Note that we were not able to get the company's funding information, growth rate, and market valuation.

DSO Statistics

In order to identify the required DSO statistics, we have gone through industry reports, related articles, journals, press releases, credible websites like ADA, and other relevant sources. From these multiple sources, we were able to identify the total number of dentists in the US, the percentage of dentists that are affiliated with DSOs and those that were not. We were also able to find related statistics that relate to the future of DSOs in order to determine how the affiliation statistics changed with time.

CALCULATIONS

To determine the percent of dentists that are not affiliated with the DSOs, we have gathered the following statistics.
The total number of dentists in the US per year was estimated to be: 2013 – 191,389; 2014 – 192,271; 2015 – 195,770; 2016 – 196,468; and 2017 – 198,517. The number of dentists that are either practicing solo or part of a group practice who are DSO-affiliated is 16,213, which is roughly 8.3% out of the total number of dentists considered for the count in 2016. The number of non-DSO affiliated doctors involved in solo practice is 54,294 (27.9%), while the ones that are part of a group practice is 123,895 (63.7%) dentists.
To determine the number of dentists who are not affiliated with DSOs, the number of non-DSO solo-practicing dentists number above was added to the number of non-DSO group-practicing dentists.
The Total number of dentists who are not affiliated with DSOs = 54,294 + 123,895 = 178,189
This gives us:
1. Non-DSO Affiliated Solo and Group Practice - 178,189
2. DSO-Affiliated Solo or Group Practice - 16,213
The percentage of DSO-affiliated vs. non-DSO affiliated ws then calculated as follows:
Total number of DSO-affiliated and non-DSO affiliated dentists: 178,189 + 16,213 = 194,402
1. % of Non-DSO Affiliated Solo and Group Practice = (178,189/194,402) X 100 = 91.6%
2. % of DSO Affiliated Solo and Group Practice = (16,213/194,402) X 100 = 8.3%
Note that a dentist who operates in multiple states is included in the count for each state in which the person practices his profession. Therefore, it is possible that some dentists are included twice in the data count. Because of this, the calculated total number of dentists in the US may be different when tallied against the state-specific numbers given in the tables.

DSO Affiliate Trends

Based on a dentistry report, around 70% of dentists are still independent of any DSOs or group practices but this percentage is decreasing each year, based on the assessment of the American Dental Association’s Health Policy Institute. Big dental practice groups with more than 500 employees have increased by 12% between 2002 and 2015. In fact, the number of dentists who manage their own clinic has already decreased from 84% in 2005 to 77% in 2017.
Small dental practices meanwhile remained at the same numbers. Dentist participation in DSO also has grown from 7.4% in 2015 to 8.3% in 2016.
The reason for the decreasing number of dentists who are going solo is due to the burden of huge student loans that were accumulated by the ones that recently graduated. New dentists today have student loans that usually average around half-a-million dollars. New dentists also prefer a better work-life balance that will not be possible if they are overseeing their own clinics. Furthermore, big group practices are becoming more prevalent with the support of private equity funding.
Given the statistics and trends above, it appears that dentists's preferences have shifted towards joinin large organizations like DSOs.
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