DSOs are growing quickly.
In 2023, the global dental support organization market was valued at $138 billion.
By 2032, it will more than triple to $583 billion, according to Polaris Market Research.
Growth is exciting, but it can also be challenging. Avoiding a DSO “growth trap” in which expenditures outpace revenues is critical. To successfully scale a DSO, leadership teams must:
- Manage workforce shortages and retention during an era when 70% of dentists say recruiting administrative staff has been “very” or “extremely” challenging, according to this ADA poll.
- Adapt to rising operational costs.
- Implement and standardize technology.
- Maintaining regulatory compliance and data security.
- Establish a centralized RCM system while balancing local autonomy.
- Sustain culture and patient experience.
As you scale, you face the ongoing task of coordinating diverse practices, systems, and, of course, personalities. Driving efficiency is your prime directive. This article provides proven strategies and practical tools for using revenue cycle management to keep your DSO growing.
The State of DSO Partnerships Today
More and more dental practices are joining DSOs. In 2024, data from the American Dental Association and Becker’s Dental Review showed that 16% of U.S. dentists were affiliated with a DSO. That’s more than double 2015’s figure of 7.2%.
Today, 23% of dental practices partner with a DSO, according to Lincoln International’s Dental Global Sector Health report, a global investment bank and merger specialist. Projections from the global strategy and management consulting firm LEK show that 39% of dental offices will become DSO-affiliated by 2026.
It’s interesting, too, that the ADA finds younger dentists are more likely to be affiliated with DSOs than older ones. That means that, as older dentists retire, DSO affiliations will steadily increase in the coming decade.
Increased regulatory complexity and stagnant reimbursements in an inflationary economy make economies of scale critical for dentists today. DSOs’ habit of making bulk purchases and negotiating payer contracts more aggressively appeals to them. Dentists are also seeking business support and a better work-life balance. They are finding that DSOs help them achieve these goals.
The DSO Growth Trap: Why Scaling DSOs Struggle
A “DSO growth trap” is a common pitfall where a scaling DSO acquires practices rapidly without implementing the processes and systems to monitor that growth. Inefficiency, chaos, and financial problems result.
Here are several key lessons and common pitfalls DSOs encounter when growing, particularly in revenue cycle management (RCM) and practice operations.
Rapid Dental Practice Acquisition Before Integration
A clear example of a dental support organization falling into the "DSO growth trap" is when a DSO rapidly expands to support more than 10 practices across multiple states. Mismanaging growth can lead to financial mismanagement, extensive debt, failure to pay staff and vendors, and a lack of operational controls.
This scenario illustrates classic DSO growth pitfalls:
- Expanding too quickly without robust oversight
- Underinvesting in practice integration
- Over-leveraging
- Neglecting basic payroll and vendor management
This DSO growth trap can lead to long-term consequences for patients.
When DSO executives prioritize acquiring new practices but fail to integrate them, expensive operational inefficiencies accumulate.
Instead, create a thorough post-acquisition integration plan that accounts for debt costs and operational risks, including payroll continuity, vendor contracts, team retention, and ongoing compliance obligations, to ensure long-term stability and successful practice performance. Failing to make payroll prompts valued employees to leave.
Lack of unified data
When data is siloed within individual practices, it's difficult to analyze performance, create effective training, or measure the impact of new initiatives.
Instead, implement a unified data platform that centralizes operational and financial data across the entire organization.
Use RCM software to integrate and analyze data from patient management, billing, claims, and analytics platforms. These solutions break down silos and enable real-time access to critical KPIs for every dental location and corporate leader.
Rapid growth without building sophisticated workflow processes.
Without standardized systems, locations can fall into management chaos. Rampant disruptions slow collections and disrupt cash flow, creating a "mid-market liquidity trap.”
Instead, standardize data processes and adopt an API-driven architecture to ensure clean, automation-ready information flows seamlessly across all locations and systems. This allows DSOs to pinpoint inefficiencies, measure initiative impact, improve training, and drive consistent performance growth throughout the organization.
While expansion promises new revenue, it also exposes operational cracks that can stall progress.
Key Factors To Successfully Scale a DSO
Scale a DSO with Automated Revenue Cycle Management
Automated dental revenue cycle management helps DSOs improve operations and revenue by streamlining key financial and administrative processes.
AI-powered integrated RCM platforms automate claims submission, EOB/ERA retrieval, payment posting, and denial tracking. This enables DSOs to resolve unpaid claims more quickly and to make data-driven decisions using real-time analytics. These technologies provide actionable insights, speed up payer follow-ups, and reduce manual work, leading to higher collections, faster cash flow, and improved operational efficiency for multi-location dental organizations.
Respected business process management firm WNS Holdings has noticed that AI is transforming dental organizations. Senior Vice President Zachary Madrigal asserts,
is poised to revolutionize predictive healthcare by forecasting potential health risks, moving the focus from reactive to preventive care.”
DSOs are leveraging the transformative power of automation and AI every day.
Consider the case of Gen4 Dental Partners. The 110-location DSO struggled with inefficient manual payer calls, extended insurance hold times, and limited claim processing capacity.
With insurance hold times of up to two hours per call, the organization’s first remedy was to automate its RCM processes with an AI-powered call automation solution. Their next step was to implement automated, AI-supported claims management. Quickly, they found they were saving months of manual effort.
Gen4 Dental Partners provides a compelling counterpoint to the growth trap. It embodies how well-planned system integration, automation, and team collaboration can unlock sustainable improvement and scale.
Within 7 months, Gen4 Dental reduced aged receivables by $700,000. It centralized workflows and significantly enhanced overall team productivity across all locations.
Scale a DSO with RCM System Centralization
RCM system centralization is an essential strategy to scale a DSO with consistent financial performance.
By unifying revenue cycle processes, data, and communication within a single, cloud-based platform, DSOs eliminate inefficiencies. Centralized RCM provides every stakeholder—whether in a single office or a 100-location network—with real-time access to collections data, denial trends, and cash flow analytics.
One of the nation’s largest dental partnership organizations, MB2 Dental relentlessly pursued centralization. This effort included standardizing insurance verification, payment posting, and collections across partner practices. It aligned operations with a new dental practice management system and focused on automation. The resulting centralized RCM operating model improved efficiency, data flows, and reporting accuracy. Ultimately, it established a scalable foundation for growth.
Today, MB2 Dental supports over 800 practices across 45 states, working with more than 1,700 doctors and serving 2.1 million patients.
A centralized RCM system laid the foundation for MB2’s most renowned contribution to the DSO space: the dental partnership organization (DPO) model. This model empowers doctors to retain clinical autonomy while relying on centralized business support.
In the DPO model, a dentist sells a portion of their practice while retaining significant equity and becoming a partner (shareholder) in the larger MB2 organization. This "doctor-centric" model is attractive because it offers liquidity while preserving more clinical and operational autonomy.
MB2 began calling this model a “hub and spoke” partnership. It enables dentists to expand without competing for additional hires.
Key Metrics To Watch For As You Scale
Quality of Revenue
Regardless of how modern your technology or how broad your reach, the metric potential buyers will most closely scrutinize is the credibility and collectability of your revenue streams, called “quality of revenue.” They need to substantiate your claims and projected returns.
The quality of revenue shows whether an organization reliably produces revenue that is traceable, billable, and truly collectible. It indicates how efficiently clinical production is converted into real cash flow. Buyers examine these elements to determine the quality of revenue:
- Revenue cycle management efficiency - claim denial rate, cost to collect, net collection rate, production per provider, and more.
- AR aging
- Revenue source analysis
- Contractual Allowance
- Charge Capture and Coding
- Patient Acquisitions and Retention
- Operational and Technology Impact
EBITDA
This core valuation indicator measures cash-flow efficiency and operational scalability. Higher margins flag well-managed, mature, and investment-ready DSOs.
EBITDA is the principal metric used to value dental practices and DSOs because it accurately represents true operating cash flow and profitability, unaffected by differences in tax planning and accounting methods. Investors rely on EBITDA multiples to determine fair acquisition prices and benchmark returns across various practices and sectors.
For financial leaders, tracking EBITDA and associated metrics allows for effective evaluation of operational performance, assessment of growth opportunities, and transparent reporting to stakeholders. These insights strengthen high-level planning and safeguard the long-term stability of the organization
Accounts Receivable (AR) Days
AR days indicate, on average, how long it takes to collect payment after services are provided. Monitoring and minimizing AR days increases cash flow and reduces the risk of uncollectible debt.
Patient Retention Rate
This measures the percentage of patients who return for additional services and reflects satisfaction, loyalty, and long-term growth potential. High retention often correlates with steady revenue, reduced marketing costs, and better clinical outcomes.
By consistently tracking and optimizing the indicators above, DSOs can build a defensible financial foundation that supports strategic decision-making, scalable expansion, and long-term success.
For a deep dive on metrics, go to posts “What Metrics to Include in Your Dental RCM Reporting” and “How to Calculate Dental RCM Metrics.” [LINK when available]
InsideDesk: A Scaling DSO’s Rocket Fuel
The coming decade should be an exciting time for scaling DSOs. More and more dental practice owners recognize the extensive benefits they can achieve by outsourcing operations and business administration to an experienced, modern partner.
InsideDesk offers a suite of automated revenue cycle management products that help dental support organizations scale. These products centralize claims management, streamline payer follow-up, and provide actionable analytics across all locations. DSOs use them to track denial trends, boost team productivity, accelerate collections, and gain real-time, complete visibility into their financial performance.
Schedule a demo to see how InsideDesk can help manage and collect your 90+ day AR.
