Drilling into Dental Industry Trends

Over the past few years, the dental industry, like many other industries, has experienced changes that have occurred at an accelerated rate. COVID-19 and its related shutdowns and restrictions had a significant impact on dental practices, but patients are back, and the dentistry industry seems to be exceeding pre-pandemic levels. To discuss this and other trends, GLG’s Mary Figuers Stallings spoke with Adam Richichi, a GLG Network Member, Chief Executive Officer at Dental Associates of Connecticut, and President of Novo Strategy Advisors. This article is a condensed and edited version of their conversation.

Can you begin by discussing key trends and the competitive landscape of large dental support organizations (DSOs)?

One of the most notable things to talk about here today is the increasing rate and speed of the consolidation the industry has seen in the dental space. From dental practices to the laboratory side and procurement, all the businesses surrounding dentistry are experiencing rapid consolidation. But on the dental practice side, the velocity of private practices consolidating into large group practices like DSOs has increased over the last three years like never before.

An interesting competitive trend is — something I’ve always believed in as an important part of scaling group practice — the integration of specialty care. This, combined with the industry’s rapid consolidation, signals that general dentistry is being done in increasingly fewer organizations. The opportunity of integrating specialty care into those organizations to capture additional revenue streams is massive.

More than just the additional revenue streams, this improves the quality of care dentists can deliver to patients. It improves the quality of the practices of general dentists, who can now collaborate with their specialty peers. This has happened over the last decades in medicine and hospital systems that are known for their breadth and quality. It’s only now happening en masse in dentistry as well.

What’s more, in the last 16 to 18 months, the industry is seeing new technologies that enable large group practices to scale efficiently, from digital dentistry to artificial intelligence.

Finally, there are two remaining points. One is the private equity community’s interest in dentistry in the past few years. They’ve realized that dentistry is a great scalable business that has produced several players in the market looking to scale dentistry. That brings me to the second point, which is a subset of dental entrepreneurs looking to start with small practices, build a platform, and grow them into smaller DSOs — maybe for the sake of a capital event, but that’s becoming a popular and common driving force behind the entrepreneurial dentist.

What specific tech innovations are we seeing within the digital lab and equipment space?

The rise of digital dentistry takes the lion’s share: computer-aided design/computer-aided manufacturing (CAD/CAM), even computer-aided design that is part of the intraoral scanning component, which means taking a chairside digital impression in an office. That has revolutionized the industry more than anything ever in dentistry.

It has allowed dentists to obtain 3D renderings of dental situations without using the unpleasant impression materials that patients hate. It also gives them the ability to better communicate with their dental laboratories, thus creating a closer relationship. Of course, many practices in this country have full CAD/CAM systems, where they manufacture and design on-site, thus cutting out the need for a dental laboratory.

DSOs have generally not embraced full CAD/CAM systems. Typically, CAD/CAM systems in dental practices have been pitched to smaller practices because there were clear return-on-investment (ROI) benefits of on-site manufacturing: Stop paying your lab $150 for an all-zirconia or Emax crown; you could produce it in your office for around $50. That’s not a powerful message to DSOs; because of their buying power, they already pay comparable lab fees with none of the operational headaches of managing a CAD/CAM workflow.

But labs have become more efficient because they’ve had to. They’re using these CAD/CAM systems to become more efficient. Companies like Glidewell have warehouses full of milling machines and 3D printers producing restorations efficiently instead of receiving a stone impression that came from an office that took five days to get there and then needs to be poured and scanned on the lab side. They’re now getting a digital file. It goes to their machines and is produced. This creates a lot of efficiencies.

All these advances in digital dentistry and restoration manufacturing are impressive. This technological revolution is similar to when we got the MRI for medicine; this is how much it has changed dentistry.

What impact did COVID-19 have on DSOs, and what is the rate of recovery from the slowed volume?

In the early days of the pandemic, dentists were barely operating due to artificial constraints: shutdowns by our local government, limited space in treatment rooms, being allowed to have only so many patients in a practice at a time. But as Q4 2022 approached, they began rapidly increasing capacity such that by the end of Q4, dental offices were over 100% capacity.

After that period, things returned to a healthy capacity, but some lasting effects diminished productivity and patient volumes. The spike of Omicron at the end of 2021 mitigated some of our bounce back. Even the introduction of the vaccine, as great as it was, produced many people who were getting their vaccine and not feeling great after and canceling their appointments. It also happened on the employee side.

Now we find ourselves largely out of that territory. The demand for dentistry is not just back — it is bigger and better than ever. Generally, that has a lot to do with what happens when you delay dental care. Whatever a patient’s dental situation was, it has likely advanced; if they needed a three-surface filling, it might now be a root canal post and crown.

The larger concern DSOs especially need to deal with is the staffing issues stemming from both COVID-19 and looming macroeconomic talking points. Some employees are still hesitant to return to the field due to safety reasons. This, coupled with the labor market, has left us in a depressed staffing environment. There is a significant reduction in hygienists in the workforce across the country. It’s restricting our ability for us not just to grow but also to maintain productive levels. And we all have ways of getting crafty to attract whatever hygienists are still in the market.

---

About Adam Richichi

Adam Richichi is the Chief Executive Officer at Dental Associates of Connecticut, a multispecialty DSO in Connecticut with 20+ locations. Previously, he founded and served as the Chief Operating Officer of the Jurim Dental Studio, Inc., a cosmetic dental laboratory that also offers top-quality CAD/CAM restorative solutions. Earlier, he served as the Director of Operations for New York Dental Management Group, a growing organization of private dental offices located throughout New York State. Adam is also a speaker who presents on innovation, dental management, dental technology, start-ups, business strategy, operations management, business incubation, business consulting, web design, and marketing.

---

This healthcare industry article was adapted from the GLG Teleconference “Dental Support Organizations (DSOs) and Dental Labs.” If you would like access to events like this or would like to speak with healthcare industry experts like Adam Richichi or any of our approximately 1 million industry experts, please contact us.

---

Questions Asked during the Teleconference

• Can you begin by discussing key trends and the competitive landscape of large DSOs?
• What impact did COVID-19 have on DSOs, and what is the rate of recovery from the slowed volume?
• Can you discuss the primary areas and segmentation of dental markets, including multispecialty DSOs emerging mid-market and then large group practices?
• What are the growth trends for multispecialty DSOs’ specialty rollups?
• What level of M&A activity are we seeing in the DSO space, and what is the projected rate of growth for de novo vs. acquisition?
• Can you discuss key challenges, opportunities, and best practices for integration with both de novo and acquisition?
• What impact will the integration of health and dental have on cost and referrals?
• Can you discuss reimbursement trends within this space?
• Can you discuss insurance dynamics and typical payor mix?
• What impact does an inflationary or recessionary environment have on specialty DSOs? What have we seen in the past?
• Do you see dampening consumer demand?
• How do you see job loss affecting a decrease in the patient pool?
• Can you discuss key trends and growth drivers within the dental lab space?
• What specific tech innovations are we seeing within the digital lab and equipment space?
• Can you help us understand product segmentation for dental equipment? For example, general and diagnostic devices, treatment-based devices, and others.
• How do DSOs select and add labs to their formulary? What are the key decision factors, and who are the decision makers here?
• What other adjacent services, such as software, are coming to market to support DSOs and dental practices?
• Can you discuss the top trends in PMS systems?
• What opportunities are we seeing in the continuing dental education market?
• What headwinds and tailwinds should we expect in the coming three to five years?