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Connecticut State Dental Association

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CT dentists weigh consolidation prospects

Dr. Greg Schwab spent years helping grow his Stamford dental practice before back problems made it difficult for him to treat patients, eventually forcing the 47-year-old to hang up his tongue depressor and mouth mirror three years ago.

These days, Schwab is using his nearly 20 years of industry experience for a new purpose: buying up dental practices across Connecticut.

In June, Schwab signed a development agreement with Atlanta-based Tralongo, a dental management-acquisition firm aiming to gain a foothold in the state.

Schwab said his goal is to acquire about five practices in the next few years, targeting veteran dentists looking for an exit strategy but still willing to toil at their trade for five to 10 more years.

Schwab and Tralongo are betting there are enough Connecticut dentists willing to cede their independence to join a larger group practice. But that model is largely untested in the state.

While a consolidation wave has swept through Connecticut's physician landscape in recent years, the trend hasn't trickled down to dentists, the majority of which operate as small, mom-and-pop shops.

Nationally, however, the corporatization of the dental industry is slowly gaining momentum, as stagnant reimbursement rates and patient growth, increased regulation, and higher overhead costs make joining a large group more appealing.

"It's tougher to make a living as a dentist today than it was a few years ago," said Dr. Jeffrey Berkley, an oral surgeon who is also president of the Connecticut Dental Association. "Over the last several years a trend toward corporate and larger group practices has become more prominent."

Berkley said he predicts more Connecticut dentists will gravitate toward large group practices so they can gain economies of scale to deal with higher overhead costs and greater administrative burdens. It's not unusual, he said, for 60-80 percent of dentist revenues to go toward overhead. If they can spread those costs out, it can improve profitability.

"Dentists have a lot of material costs — gold, silver, composite materials, lab bills — that are going up faster than the rate of inflation," Berkley said.

But Berkely said it's unlikely a consolidation wave will sweep as aggressively through Connecticut's dental industry as it has for physicians. One reason is because the economics are different. Hospitals have been actively purchasing physician groups, even if they aren't profitable, because it allows them to secure a strong referral base. For dental groups, that attraction isn't there.

Schwab, for example, said he is only looking to recruit dentists operating in the black.

"If it's a profitable practice, we'll go after it," Schwab said.

In Connecticut there are several well-known large group practices like Delta Dental, Aspen Dental, Columbia Dental, and Kool Smiles, but Schwab estimates about 90 percent of the industry operates as one- or two-man shops. The state and dental association don't track the number of dentists operating in solo or large group practices, but there were 3,463 licensed dentists in Connecticut at the end of 2013, according to the Department of Public Health. Nationally, it's estimated about 86 percent of dentists are in solo practices.

Tralongo, which was created in 2013, is making a push to buy up dental practices around the country including in New Jersey, Texas, Wisconsin, and Georgia. The company signs development deals with dentists in each state or region to oversee the market and recruit other dentists to join the group.

In addition to Schwab, Tralongo has signed a development agreement with Dr. Mamta Patel, who owns Stamford Dental Spa. Both are using brokers to recruit dentists willing to sell their practice and become employees of the group. Patel and Schwab essentially act as managing directors; Tralongo provides back-office support.

David Lopez, Tralongo's president, said he believes many small practices are operated inefficiently because dentists are spending increasing amounts of time dealing with back-office duties — purchasing, scheduling, setting fees, marketing — than they are treating patients. The attraction of an upfront equity payout — and leaving behind the hassles of running a small business — is the value proposition Tralongo is pitching.

"A doctor could earn more money if he could focus on the patient instead of focusing a third of his time on running a business," Lopez said.

Fear of the unknown

Of course getting dentists to cede their independence won't be easy. Traditionally, dentists look for an exit strategy when they want to retire. But those aren't the practitioners Tralongo or other group practices are looking to recruit.

They want profitable dentists willing to cash out their equity stake but still able to practice for five to 10 more years.

Although Berkley said he doesn't see a huge consolidation wave taking shape in Connecticut, he is a fan of larger group practices. In fact, he is part of one. His Connecticut Oral and Maxillocial Surgery Centers employ eight dentists across five offices in Mansfield, Fairfield, Meriden, North Haven, and West Haven.

One problem with the large group model, he said, is controlling quality and consistency when you have multiple offices and providers. Concerns in other states have been raised about larger practices pressuring dentists to boost patient volume, forcing them to rush through patient appointments.

There are also some dentists who simply don't want to cede decision-making authority, or risk their staff being cut loose as corporate entities consolidate positions to trim costs.

"There are people who automatically put a negative connotation in large groups because they worry about substandard care," Berkley said. 

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