North Texas Dentistry Volume 9 Issue 5 2019 ISSUE 5 DE | Page 29

the quality was not as good as traditional dental practices. Generation 2.0 also often made use of a single brand which could present system-wide reputational issues in the case of problems with the practices. DSO 3.0 - The Future Generation 3.0 gets along with affiliated doctors, complies with the regulations and is generally not reliant on a single brand. In addition, generation 3.0 also offers numerous alternative models: strategic affiliate programs, non-captive DSOs, loosely affiliated dental organiza- tions, dental franchises, buying groups and direct-to-consumer DSOs. Strategic affiliate or partnership oppor- tunities allow dental practice owners to agree to a limited suite of non-clinical support services in exchange for a fee and, if things work out financially, con- vert to a full-blown DSO model. This structure allows the practice to maintain the equipment, leases and any intellec- tual property. A non-captive DSO model is a contractual arrangement that pro- vides certain non-clinical administrative support services in exchange for 3-6% of gross revenues as the management fee. Loosely affiliated dental organizations can be broken down into integrated or non-integrated, but the general model maintains the equipment, leases, intel- lectual property and non-clinical employ- ees at the practice level while the practice owners retain almost complete business autonomy. This structure when properly executed can provide higher multiples when selling the assets of the practices. Dental franchises are also making a comeback. They are typically structured as licensing trademarks without provid- ing any actual clinical control over the practice. The buying groups model idea is to essentially combine several practices and receive discounted prices based on volume akin to that of large group dental practices. And finally the direct-to-con- sumer DSO model provides specialty dental services such as implants, den- tures or orthodontics and can be oper- ated both in brick and mortar practices and not. In conclusion, the generation 3.0 provides numerous alternative mod- els to the DSO that have not been seen before. This variety of options allows all sorts of investors and dentists to get involved with the evolution of dentistry and participate in a DSO model. CONCLUSION DSOs have evolved from the non-regula- tory compliant first and second genera- tions into a streamlined and efficient regulatory compliant model that is best suited to the great evolution of dentistry from solo practices to DSOs. In the next 10 years, the industry is expected to con- tinue its virtually unabated consolidation into DSOs. Brian Colao is the Director of Dykema’s Dental Service Organizations Industry Group. He is widely regarded as one of the foremost authorities in the United States on DSO formation, DSO business structures, DSO related mergers and acquisitions, and regulatory compliance for DSOs. Send email to: [email protected]. Meredith Tavallaee is an associate attorney in Dykema's Dallas office and focuses her practice on commercial litigation matters. She is a member of Dykema’s Dental Service Organizations Industry Group. Send email to: [email protected]. Virtual services to assist dental clients in all major cities and many rural areas throughout Texas Wm Stukey & Associates LLC 8 _ Advanced tax planning for high income clients 8 _ Virtual Accounting Services 8 _ Financial Consulting Services 8 _ Dental Advisory Services 8 _ Services to help prevent fraud / defalcation 8 _ Cloud based payroll services 817.481.3265 [email protected] www.northtexasdentistry.com | NORTH TEXAS DENTISTRY 29