Latest / The Buyout Show with Fexingo: Private Equity, Roll-Ups, and Business Acquisitions / How Private Equity Is Buying Up Dental Support Organizations
Transcript
- Lucas: So, you ever sit in a dentist's chair and notice that the receptionist hands you a tablet asking you to sign a form consenting to data sharing with some corporate entity you've never heard of? Luna: All the time. And the billing address is in a different state. You start to wonder, wait, who actually owns this practice? Lucas: That's the question. Chances are, if you've been to a chain like Aspen Dental or Heartland Dental, the practice is owned by what's called a Dental Support Organization, or DSO. And private equity has been buying them up aggressively. Luna: We've done episodes on vet clinics, urgent care, eye care. Dentistry feels like the next frontier. What's the scale here? Lucas: Big and getting bigger. As of last year, about 15 percent of U.S. dentists were affiliated with a DSO. That's up from maybe 5 percent a decade ago. Some analysts expect it to hit 30 percent by 2030. And the largest DSOs — Heartland Dental, Aspen Dental, Pacific Dental Services — each have over a thousand locations. Luna: So what exactly does a DSO do? Is it like a management company? Lucas: Exactly. The model is that the DSO handles everything non-clinical: billing, insurance negotiations, marketing, HR, supply procurement, even real estate. The dentist — the clinical partner — just practices dentistry. The DSO takes a cut of revenue, typically 15 to 30 percent, in exchange for running the business. Luna: So the dentist gives up some income but gets to focus on patients and not worry about hiring a hygienist or negotiating with Delta Dental. I can see the appeal. Lucas: Especially for newer dentists graduating with huge student loan debt — the average dental school grad owes around $300,000. Joining a DSO means a steady paycheck, benefits, and no business risk. PE firms love this because it's a fragmented industry with a reliable revenue stream. Luna: Before we go deeper, I want to say — if you're getting value out of these conversations, a couple of dollars a month is genuinely what keeps them going. Buy me a coffee dot com slash fexingo, if you've gotten something out of it. Lucas: Yeah, it makes a real difference. And we don't run ads, so listener support is what keeps the show independent. Luna: Right. So back to the deals. What's the biggest player? Lucas: Heartland Dental, backed by the private equity firm KKR. They have over 1,800 supported offices in 38 states. Aspen Dental is owned by a different PE group — JAB Holding, which also owns Panera Bread and Keurig Dr Pepper. JAB has been on a healthcare tear: they own eye care chains, vet clinics, and now a big chunk of dentistry. Luna: JAB is interesting because they're not a traditional PE firm — they're more of a holding company. They buy and hold forever, apparently. Lucas: Right. They bought Aspen Dental in 2010 and have been rolling up other dental brands under that umbrella. In 2025, they acquired a chain of pediatric-focused dental practices for about $500 million. That's a specific example of the trend: specialization within DSOs. Luna: Pediatric dentistry — that's a niche with high demand and often higher reimbursement from Medicaid. Smart move. But what does this mean for patients? Lucas: The evidence is mixed. On one hand, DSOs can bring efficiencies that keep costs down. They also make it easier to accept Medicaid and other insurance plans because they have the administrative scale. On the other hand, there's concern about over-treatment. Luna: I've heard that. The idea that if a DSO sets revenue targets, dentists might be incentivized to recommend more procedures — extra fillings, crowns, even implants — than clinically necessary. Lucas: A 2024 study in the Journal of the American Dental Association looked at this. It found that dso affiliated dentists referred patients to specialists within their own network at a rate 30 percent higher than independent dentists. That doesn't prove over-treatment, but it's a flag. Luna: So the DSO might have a financial interest in keeping referrals in-house. And the patient might not even realize the specialist is part of the same corporate entity. Lucas: Exactly. There's also the question of quality. Some argue that when a dentist is an employee rather than an owner, they might be less invested in outcomes. But the data on clinical outcomes is thin. It's hard to measure. Luna: What about the dentists themselves? Is there pushback against the corporatization? Lucas: There is. State dental boards have sometimes tried to limit corporate ownership of practices. But the DSO industry has lobbied successfully in many states. The American Dental Association has expressed concern, but it hasn't been able to stop the trend. Luna: And the economics are powerful. A single dental practice might do $1 million in revenue a year. When a PE firm rolls up 100 practices, you get $100 million in revenue with centralized costs. That's a great arbitrage. Lucas: And then they can add services. Many DSOs now offer in-house labs for crowns and aligners, which increases margins. Some have started offering membership plans for patients without insurance, which is essentially a subscription model for dentistry. Luna: So we might see a future where most dental care is delivered by a handful of large DSOs. What does that mean for the small independent dentist? Lucas: For now, independents still have an edge in patient loyalty and flexibility. But as DSOs get bigger, they can negotiate better rates with insurers and suppliers. That's a hard advantage to beat. I think we'll see more independents selling to DSOs as they approach retirement. Luna: Any other PE firms you're watching in this space? Lucas: One is a firm called Gryphon Investors, which owns a DSO focused on orthodontics and pediatric dentistry called Small Bites. Another is Roark Capital, which has invested in dental service organizations through its franchise-focused funds. And there's a newer player, a firm called VSS, which backed a DSO called DentalOne Partners. Luna: It's fascinating how every fragmented service industry eventually gets consolidated. Dentistry feels like it's at an inflection point. Lucas: It is. The next five years will determine whether the DSO model becomes the dominant one or whether consumer backlash and regulation slow it down. But I think the trend is clear: private equity sees teeth as a very attractive asset. Luna: I guess it's a good reminder for patients to ask questions: who owns this practice, and are the treatment recommendations really in my best interest? Lucas: That's a fair takeaway. And for now, the independent dentist isn't going away — but the landscape is shifting fast.