Latest / The Dental Economist Show / Dr. Adriatik Rama on Building a Debt-Free Doctor-Led DSO That Grows Every Practice It Touches
Transcript
- speaker-0 (00:01.004) Welcome back to the Dental Economist Show. I'm your host, Mike Huffaker. And today we are coming to you from the offices of American Dental Companies here in Phoenix, Arizona. And I am joined by the CEO and founder of American Dental Companies, Dr. Audrey Rama. Dr. Rama, thank you so much for joining today. speaker-1 (00:21.068) Thank you for having me. Good to be here. speaker-0 (00:22.818) Yeah, really looking forward to this conversation. appreciate you inviting us in with all of our cameras and lights and everything here. so you founded American Dental Companies in 2012, is that correct? What initially brought you into dentistry at the outset prior to the founding of ABC? speaker-1 (00:42.542) well from from early on I wanted to be in medicine and when I came to America and did went to school, undergrad, as I looked at the medical field and the dental field, I gravitated towards dentistry. And fast forward a few years later I became a dentist. So speaker-0 (01:04.0) And what was it about dentistry that kind of h held that appeal to you? speaker-1 (01:08.31) So when I came to America in the early nineties, the medical field had already transitioned into managed and group medicine. So the independence and freedom of practice that used to be in in medicine was kind of on its way out and dentistry had that at that time. So it had retained that. So the ability to provide patient care and also run your own business. Yeah. And and be your own Boss in a sense. speaker-0 (01:39.214) Makes sense. So the the entrepreneurial side of you. Correct. And so what drove you to found ADC? speaker-1 (01:47.116) Well, I saw the r the writing on the wall. What was happening in in dentistry was basically what had happened in in veterinary and in medicine and in pharmaceutical. When I first came to America there were mom and pop pharmacies on most corners. Right. Right. And that was gone was the C V S and and the other large corporate pharmacies. And then I saw that happening in dentistry. And and as I saw that phenomenon moving across dentistry, I thought, okay, there has got to be a better way to do it than just going to corporate dentistry. Can can we move from a 250-year-old model of single practice dentistry to a 21st century dentistry, but do it in a way that that leaves keeps that independence for the doctors and and does not affect the patient care. The patient care is still private patient care and d and doctor runs it and it's patient focused, but also taking advantage of twenty first century business models, which did not exist two hundred years ago, two hundred and fifty years ago when single practice dentistry kind of model was established in America. So speaker-0 (03:02.382) And so you've grown pretty significantly over the years. I think you're up to about 80 practices now. Correct. we were chatting a little bit before we started recording about some of the affiliations that you've had and the successes that you've had with those practices. And you were sharing about one particular office that was doing around 3.7, 3.8 million in production that is now doing over eight or nine? Over nine million. Okay. So I think most groups would love to have. speaker-1 (03:24.457) Over nine million. speaker-0 (03:30.38) that type of success with practices that they partner with. What do you attribute that to? What do you all do differently that allows you to grow a practice in that in that manner? speaker-1 (03:41.804) There isn't really a secret sauce or a single bullet kind of fix everything. It's doing a lot of things right, a lot of minute things right, a lot of bigger things right. But the the major theme is patient care, the ability to provide great patient care. And also we're a group of doctors that are running the company. Yeah. So it's a doctor-led group. And It's easier to move the needle when you have doctors working together. Specifically if you have doctors that have done those large productive practices providing excellent patient care. When I practice dentistry, I haven't been able to practice for the past few years, very busy running the company. But when I practiced dentistry, I was very productive. And I was able to teach a lot of doctors on how to be productive and how to move the needle clinically and financially in their practices. From wherever they were to their goals that they wanted to be. And once you do that a few times, you kind of learn, okay, what levers do we pull and and how to get it to the next level. But I would say the big thing is you cannot teach what you don't know. So that that would be kind of the secret sauce. You have to have practiced what what the path needs to be where you want to go. Yeah. speaker-0 (04:48.77) Yeah. Yeah. speaker-0 (04:59.864) Do you think that's something that's missing in a lot of DSOs these days is that the clinical leadership from the executive level? Like there's not, there's there's a lot of executives and CEOs now that don't have any dental background or they came from a different industry or they are not a dentist or a doctor. How do you think about the benefit and advantage that you all have as an organization when you're partnering with new practices compared to maybe somebody that doesn't have that same background? speaker-1 (05:27.85) Very good point. Dentistry is very interesting because it does affect it. If you have non-dentist executive team trying to move the needle clinically with the doctors, I would say it's very difficult. Dentists are entrepreneurial, sure, but they're primarily focused on patient care. They want to provide great patient care. So and they respect doctors who have practiced and have delivered on what They're preaching to deliver. So being a dentist and having been surrounded by a group of dentists in our company that are very patient focused, very productive. They have taught dentistry in dental schools and postdoctorate as well. And many of them continue to teach at postdoctorate courses. The group of doctors that we train in our company look up to them and then they see the results and they want to emulate those. Which is hard to do if if an executive group does not have that expertise. Sure. speaker-0 (06:32.972) Or the credibility. Like if you've done it before, you're not just saying, you know, do as I say, you're saying do as I also did. You know, you've got the got the receipts, as they say. Correct. when you partner with a new practice, is there generally a desire from the the the dentist at that practice to grow that production? Like what what's the motivation? And and so I'm asking because I talk to a lot of groups and they'll say that. Post-transaction, dentist motivation often goes down or declines. Maybe they've gotten a check, they've gotten a little a taste, and they might not be as motivated any longer to continue to grow. How do you overcome that? And what is the experience that you have post-partnership? speaker-1 (07:21.41) We're very particular who we partner with, okay, first and foremost, you know, on on what makes a great partner for us. Because once a doctor partners with us, they they become part of the leadership of the company. Automatically they participate in partner meetings, in decisions, company wide decisions. So we're very particular on which doctors we partner with and we interview quite a bit of them. And then make that choice very deliberately. But the the doctors that we partner with, we don't see drop after we partner. In fact, we see growth. And we at attribute this to being very deliberate on who we partner with, into what do they want, what are their goals. So a a great partner for us is a doctor that wants to de-risk and and cash out part of his investment so that they now have cash in hand and then grow from there, grow with us, grow with a group of doctors where we now collaborate together and we we part to them that expertise that has helped grow the rest of our practices. We have averaged historically over the last twelve, fourteen years, about 30% growth in the first year of a d of a practice affiliating with us. speaker-0 (08:40.524) I think that's that's incredible. That's fantastic growth. So you mentioned when you do an acquisition that the doctors immediately become part of the leadership team. They they attend partner meetings. You know, I've heard some folks say that dentistry can be a lonely profession if you're an independent practice. And it sounds like you've you you've kind of built community. what are the interactions that the doctors have with each other? What does that community look like throughout the course of the year? speaker-1 (09:11.458) So we have a partner meeting every month. And then our ex our company is run by the doctors. We do have executive teams and we do have certain business systems and processes that are a must across the platform. So we're unified and uniform. DENECOM being that one of those very important ones. But all those decisions are made by our doctors. So they're not really practicing lonely in their practice anymore. We meet monthly and we make business decisions and we talk about operations and clinical care. So we really create the best conditions for the doctors to cooperate with each other. And what makes a great day of practice in dentistry and providing that patient care? And then what are the best business systems and supports that the doctors need and the clinical teams need to provide that patient care? So I'd like to say that our executive team is at the service of the doctors. the the providers are our our client and our focus. speaker-0 (10:15.34) Yeah, I like that from the outset you're very upfront with what changes, what's gonna look different, how you can support the practices. When I first got into dentistry, I thought this industry was crazy. And this was seven years ago. And everyone was up on stage talking about when we affiliate with practices, nothing changes. We don't, you know, it's like, and I'm like, why why would you want to partner if nothing is going to change? Isn't part of the intent to join a larger organization that you have. better support network and that there's different business systems that can be implemented. What are some of the services that that you're providing for the practices? What what does life look like? How's it different when a practice affiliates with American dental companies from what it looked like before? speaker-1 (10:59.662) You know, you made a very interesting observation because as we interview potential partners, we get that question asked quite a bit. What is going to change? And most of the doctors nowadays they have talked to several other DSOs, and we tell them, first of all, we're not a DSO, we're a partnership of doctors. So it's really you call the version DPO, Dental Partnership Organization. And then the next question is. Most of these doctors are referred to as by their friends. And the reason of that referral is because of the growth. Yeah. There is quite a bit of growth occurring in our practices when they join. So that leads me in early conversations with the doctors to say, we are going to change things. If you're looking for that growth, if you're looking for that next stage, that will not occur unless there is change. So if you're really looking to roll up with a group of practices and there is no change, we're probably not it. With us there will be change and it will be change for the better so that you can reach those growths. What are some of the changes? There is a few that are non-negotiable in terms of transparency because we are doctor owned. We want our doctors to feel very comfortable. So financial transparency where all the practices financials are centralized and all the doctors have full access to everything that their practice and other practices are doing in our group. PMS system, DENECON, is a must. Everyone needs to be in the same platform because we can support them better. And then we move into revenue cycle management and all of those centralized services that can be done better at the center to support each one of the providers. speaker-0 (12:44.686) Yeah, yeah. Yeah, it's interesting. I I was talking to somebody at in private equity and they were talking about roll-ups that they were doing and I was like, and the and the challenge that they were having was in the marketplace when you're you're it's a competitive process for a number of these practices. And it's like, well, how do you differentiate differentiate yourself with a desire for partnership? And I was asking, I was like, how often are the practices that you're Seeking to acquire, asking about the success or the track record within your organization. Because I feel like it's not often something that's that's brought up, which is surprising to me. Because I think if I was a dentist, the first question I would ask for anybody is, well, how much do the practices grow? What is the success that the practices that you affiliate with have? Can I talk to some of the other practice owners and and hear what their first hand experience is? And sometimes it feels like the diligence is like a one-way thing and maybe they're just not understanding the the questions that that should be asked. But it sounds like you guys kind of lead with helping them to understand that information so that they're they're well equipped and it's a kind of a mutual relationship on both sides. speaker-1 (13:57.516) Very true. And our due diligence actually goes both ways. So we we do screen the doctors very well. I meet every doctor before they join us as part of the screening process. Then as part of that screening process, the incoming partner will be introduced to a lot of doctors in our group. In fact, we have had and it's mandatory. They have to talk to a lot of our partners because first From then from their point of view, they're learning about us and they're talking to a bunch of our doctors and I'm not in that conversation. They're they're doing one on one, they're calling them at whatever time and they they connect directly with each other so that they can get the entire picture of the of the joining, of the challenges, of that transition for the first three to six months. but that also our partner doctors are interviewing the incoming doctor. Because here's now a partner that will join that will have quite a lot of say. But it is a well-run kind of process where we encourage incoming partners to actually interview our current doctors. And in many cases, we tell them pick from our partner list whatever group of doctors, individual doctors you want to talk to. And they do so all on their own. speaker-0 (15:14.316) Yeah. I think it it's also really interesting with your organization that you grew to a pretty significant scale prior to bringing in private equity sponsorship. I think it's more common that people get to 10, 15, maybe 20 practices, and that's when they'll first bring private equity in to kind of spur the next round of of growth they're looking to achieve. I think you were at 50-ish practices prior to partnering with a sponsor. What was the decision making process in when to bring in a financial sponsor? speaker-1 (15:48.234) Very good question. We grew to about fifty five, sixty practices before we decided to to partner with a private equity. And we did so without leverage. we had run businesses before so we were able to self fund and grow the business and stay away from debt, which is generally the the big in dentistry. And at speaker-0 (16:11.374) Yeah. speaker-1 (16:17.61) About 140, 150 million dollars of revenue, we figured it is time to to see, okay, what strategic what partners could we join with that would take us to the next level. The main decision for us was not the funding, it was actually the strategic help we'd get to go to the next level. This is still a a doctor-owned and a doctor-run company. And even with a private equity partnership that we did, we made sure to To maintain and preserve that structure so that we can continue to protect that doctor-owned, doctor-run business. But what has what we're looking for and has occurred is the business expertise that we're getting from a multi-billion dollar company that now can help us go to the next level as both clinicians and owners of this business. speaker-0 (17:15.512) So it's interesting. So obviously private equity does their diligence on your business, but you're also doing the diligence of the private equity pond sponsor that you would want to to work with. What were some of the things that were most important to you as you evaluated different options in the in the market? speaker-1 (17:31.918) Clinical independence. We wanted to make sure our doctors were clinically independent. That was number one. And we wanted to be involved in and the second one is we wanted to be involved in the business decisions of the company as doctors. We wanted to continue with our partner meetings, we wanted to review all business decisions and proposals from the private equity so that we would understand. It's not an easy process because now you have a lot of doctors come together and then you make Business decisions together. So they have to understand it. But we're dealing with pretty educated and smart individuals that it can be a little bit difficult to get everyone on the same page, but it's well worth it because then you get buy-in by everyone. So first was clinical independence. Second was the ability for us as partner doctors to be involved in the business decisions. And then thirdly was the debt structure, the growth. How do we grow without loading the practices with debt. Because our doctors have monthly not only do they get paid for their individual collections, but there is monthly profit sharing from their practices. And it tr in a traditional DSO model, once you transact with a private equity or with with any bank, then you have a lot of debt put into the practices that eats the profits. So our third point was to keep the platform of the practices debt free so that our doctors would would have immediate benefit on the profit distributions monthly without having to worry about debt load on their practices. speaker-0 (19:12.6) So you've definitely looked at things a bit differently than a lot of the private equity sponsored organizations that are in the market today. You're clearly driving success from a same-store growth perspective, which there's a lot of value in that, of course. But you're also seeking growth from new acquisitions. When you're thinking about what your goals, your targets are, you know, you said you brought in the sponsor to kind of take you to that next level and the next round of of goals that you all had for the business, what are some of those things? Like what are you seeking to achieve and accomplish with with American dental companies? speaker-1 (19:51.298) Controlled growth is is important and bring in partnering with more like-minded doctors. and really in the today's 21st century world of of a lot of AI and a lot of technology options that are coming in in dentistry, being able to integrate safely as many of those as possible to support the the doctors. This is ultimately we're all doctors, so eight to five we practice clinical dentistry, and then outside of that, we're the business owners of this company. So we're looking for ways on how do we best serve the patient to create access to care and provide great clinical dentistry while growing the business and being able to to grow our company as well. speaker-0 (20:45.164) Yeah. You you talk about patient care a lot. So I know that that's an important piece. It's the really it's the cornerstone, right? There's no businessable. No business without that. Right. and you speak about clinical excellence a lot as well. How do you drive clinical excellence at scale across 70, 80 practices? What are some of the things that you all do to ensure that patient care is of the standard that is the expectation within your within your company? speaker-1 (21:12.576) Well, first you you partner with great doctors to begin with. And dentistry has a lot of wonderful doctors. By and large, doctors want to provide great patient care. Then because normally as a single provider you're kind of isolated, we now make use of the group of doctors that were together. So we do clinical reviews on a monthly basis. Blind, so we'll go into practices, our our doctor executive clinical committee. which is made of seven doctors and myself, we'll pick practices and we'll pull down x-rays and chart notes and blind, take away the patient name and and the doctor's name, and then we review patient care. And then we share it together. We go, all right, where can we do better? What did we learn? And how can we improve? And we we share it amongst 140, 150 doctors that we have in our platform. And then individually with the doctor, Once we do that in a blind study, then we go in with to the doctor with the particular cases and go, all right, how can we help you? How does this look and w what's the next level? So that is to maintain the standard of care. Then to go to the next level, we have doctors that are masters in implant, in in TMD, and in surgery. So our doctors have access to some incredible clinicians that have taught. nationally and internationally. speaker-0 (22:41.666) Yeah, yeah. So what is the response from the doctor when their case gets pulled? is it met with like a a a desire to improve? Is there a little bit of like defensiveness that sometimes comes into play? How how does that process work out? speaker-1 (23:04.236) Both. Initially you get a little bit of defensiveness with the new with the new doctors who join, but they all know before they join. We tell them there is gonna be clinical reviews. And no one is perfect all the time. We we all have human bodies very different, one person to another. So there is and we see thousands of patients, you know, really in a month between all of us. So there's always things to learn and improve. So initially there could be a little bit of defensiveness, but once they come into the group of doctors, that are very open, then quickly they move from that to actually eagerness to share what did not go wrong. And they now bring their cases and go, all right, this implant I it did not go at the exact position that I wanted to. Or I could have done the surgery better. And they'll bring those cases so the rest can learn. So it moves quickly from that that apprehension to actually sharing their own cases to help others. speaker-0 (24:02.898) Yeah, I think that's great. So you do this monthly. And it's with all the all the doctors across your you said a hundred and speaker-1 (24:04.992) Monthly. speaker-1 (24:10.52) About one hundred and forty eight or one hundred and fifty doctors. speaker-0 (24:13.29) Okay, like on a big Z on a Zoom call? speaker-1 (24:15.842) Curr some in person, some in Zoom. So whoever is in Arizona, we'll come in in person and we'll order dinner and have it served as we're all working and going through the cases and the the rest of them that we're in fifteen states, so the rest of the doctors will join through Zoom. speaker-0 (24:32.012) Yeah. And now you mentioned additional procedures maybe being added to the the what different dentists will perform or produce in their practice, like implants, for example. Is that a consistent focus within the organization where it's an expansion of skills that you're providing opportunities for people to get trained on things that maybe they had not been trained on before? And do most people view that as opportunity or as like, More work. speaker-1 (25:03.264) Well, it it's we tailor it to each doctor. So it's not one size fits all. W we talk to each doctor and say, okay, what what do you want to learn? And because we have the talent and expertise, we can coach on anything that the doctor wants to learn. But it's not our philosophy is not let's make the doctor work more. We actually I advise the doctors to not work more days than they did when they joined us. And We've been able to grow the practices without adding days for the doctor. So if they're working four days and doing $800,000 a year and a half or two years later, they're now at two million, still working four days. And that's very important because dentistry can be taxing on the body. So you don't want to want to have doctors going into five days or or longer hours. But the clinical skills we we tailor it to what the doctors want to learn. One wants to learn smile design. One wants to learn implants. So we tail tailor the coaching based on their own desires. And some are very happy doing what they're doing. And just mastering that and and becoming efficient at what they do already without adding to the to the skill. And we we support on that as well. speaker-0 (26:17.058) So business is always evolving, it's always changing. What are what are some of the initiatives that you all are working on right now? What are either problems that you're looking to solve or new things that you're seeking to introduce to make the business stronger? Or just kind of anything that that's actively top of mind for your organization? speaker-1 (26:34.908) problems to look into solve. Always talent is a problem. And it's gotten more so. So we face the same challenges that a practice faces on its own. You know, talent acquisition, talent retention, the the employee issues, you know, that one faces as a single doctor. the only difference between that and us is that now there is a group of us working together. So we face the same issues, but now we have a lot more resources to To resolve them. And that's on the issue side. On the forward-looking part of it is really taking advantage of AI and being able to integrate that with a lot of our systems so that we can do things more efficiently and and have more time to properly serve patients and our doctors. speaker-0 (27:25.58) Yeah. Is there any specific examples of things you've leveraged AI for that have created positive outcomes? speaker-1 (27:33.948) DECON has done actually very very well on bringing AI. We we're trying not to go one off where now you splinter between ten or fifteen different companies doing individual processes of of the patient care. So we're working closely with DENICON with insurance verifications, with postings, automated postings, with reconciliations between DENECON and bank statements and insurance deposits and patients deposits. So and being able to use AI where before there was a lot of human labor and hours going into that. speaker-0 (28:16.322) Yeah, yeah. I normally don't do any advertisements for Dennikon or Planet DDS stuff from myself, but because you're an avid user of it, there is this auto-attach feature that's coming out. I don't know if we we've probably already started talking to your team about it, where I think we'll get into a world where batch claims can go away, where claims are having everything attached that they need, have a narrative generated via AI and are submitted without a human even having to touch them. It'll flag the ones where it's like, hey, we probably still need a human to see, but it is offering a really kind of cool opportunity in the future where claims can just be done as they happen without that kind of end of day process. So it's one of the things you talked about, some automations that I think is gonna be is gonna be pretty cool. speaker-1 (29:05.11) Very, very true. Y we as a company were a very early adopters of of Dendacon. I I think I was one of the first users of it, probably now ten years or so. A long time customer where very few people knew Dendacon back in the day. But we saw what it was doing and how it was programmed and the services that it was given. speaker-0 (29:21.132) Yeah, you've been a long time customer. Yeah. speaker-1 (29:33.548) And we figured it would be a a great technology to to integrate and bring into our offices. So, and we've been very happy with that. It is amazing the claim filing process with DENICON actually we've been very happy with because it even without that automation currently, it flags a lot of issues before you can actually file it, which is very helpful because now we have team members in the offices that Don't send a claim because they see that okay, it's missing an x-ray or period probing, which is doing as currently as we speak. speaker-0 (30:08.578) Yeah, yeah, absolutely. Are you guys using radiographic AI? In devices? Yes. What is the biggest what is your perspective on the benefit of that? It is, is it a opportunity to build trust with the patient? Is it really the second opinion piece of having a a a separate view presented for a provider? where where do you see the biggest benefit? speaker-1 (30:14.062) We do. speaker-1 (30:35.512) So we use overjet, yeah integrated with with Dentekon and X rays. Our doctors, because of our clinical review, we have a pretty close watch on quality of care and standard of care. But it is nice to have that AI review of the x-rays, both for the doc from the doctor's point of view, especially the younger doctors, although majority of our partners and doctors are at least ten or more years practicing dentistry, but also patient education. So I think our best use of that kind of technology is really patient education. Yeah. And being able to show patients. with less so doctor second opinion. Yeah. speaker-0 (31:21.47) So the last couple of years have been pretty tough for this industry overall. There's been a lot of groups that have closed practices, a lot of folks that are not continuing to grow, that have gotten stuck and they're over-levered. You guys are the exception of the rule. You've continued to grow, your individual practices grow, as well as the additional affiliations that you have. it looks like, you know, there's probably still some more shaking out to do in the industry as a whole. But what are the things about the space, about dentistry that still make you bullish? Like why why are you bullish on this industry? speaker-1 (31:59.798) It's not going away. It's a clinical need that the patients need. The if if we're able to provide that patient care, that clinical need in a sound business model and clinical model, it makes me very bullish. I think it's it's a great business to be in to change patients' lives for the better. And to do that as a as a group of doctors together. So I'm very optimistic. It it has been difficult in the industry for the last couple of years, but it comes from mainly two processes. First, messing with the clinical care of the doctor and having the doctors not really fully empowered on that. And secondly, leverage, you know, leveraging the practices and putting debt on the practices, which we do not have. And that affects the doctor take home and the doctor income, especially when you have profit distributions. for every practice like we do, every month the doctors get profit distributed from their practices based on the ownership that they have. So but if you address those two wisely, where the doctors are in charge of their clinical care and they retain ownership and then you don't leverage the the practices, then I think the model can can grow quite a bit. speaker-0 (33:19.96) Dr. Rama, you told me before we started talking, this is the first podcast we've done. Yeah. Thank you so much for joining. It was really great. It's always nice talking with you and it congrats on the success for American Dental. speaker-1 (33:24.632) But you True. speaker-1 (33:34.454) Thank you. Good to be here and very happy to do this.