Over the last 35 years, tens of thousands of dentists—both GP and specialty—have quietly partnered with IDSOs. Many have accrued generational wealth through the value increase of their retained ownership in either the practice or their new partner IDSO. Others have not yet realized any value in their equity, and may never do so. With over a thousand IDSOs in the US today, dentists must choose wisely to not only negotiate a high initial value with a favorable partnership structure, but also ensure they are picking a long-term winner.
Benefits of IDSO partnerships
IDSOs become a dentist's silent partner by buying 51% to 80% of a practice for cash up front at today's low tax rates. Dentists remain owners, leading their practice for years or decades with their brand, team, and strategy, with either full or clinical autonomy.
IDSOs provide their partner practices with lower costs as a whole, but they are also being reimbursed by insurance payers at higher rates. IDSOs are better at recruiting and retaining team members, marketing to new patients, and adopting new technologies than most independent dentists.
Besides choosing the right IDSO for that upside equity gain, dentists need to understand the difference between full autonomy and clinical autonomy.
Successful dentists are entrepreneurs who have built thriving practices with their own unique formula. They are not eager to be told what to do, who to hire, what to pay team members, and what supplies and labs to use. Those who choose the right IDSO partner will not be micromanaged, and their new partner will not attempt to homogenize their practice to fit corporate standards.
Clinical and full autonomy
Today, LPS considers fewer than 100 of the 1,000-plus IDSOs to be qualified bidders for clients. A typical client dentist will have five or more qualified bidders from which to choose the right IDSO partner. The IDSO qualification test includes the financial condition of the IDSO, its financial sponsors, as well as the management, strategy, and quality of other partner practices. But one of the most important tests is if the IDSO enables their partner dentists to continue leading their practice with full autonomy—not just clinical autonomy.
With many IDSO partnerships (or a sale to a DSO), the dentist will lack full autonomy; many will remove the doctor from all practice business operations, including selecting and compensating staff, setting schedules, and the choice of what technology, supplies, and labs to use.
However, qualified IDSOs deliver full autonomy, existing to operationally support their partner practices as the dentist steers their team and practice operations toward growth.
Future value matters
Dentists should also be concerned about the future value of their retained ownership. When they choose wisely, dentists can gain generational wealth over time. While larger IDSOs may be considered safer alternatives, they may not offer the same potential equity upside as some of the smaller, newer IDSOs.
One IDSO, now with 700 dentist-owner partners, recently completed their third recapitalization at a value approaching $4.0 billion, which was up from $330 million at their first recapitalization. Some dentists achieved gains of 1,000%, and LPS advised dozens of now very happy clients to partner with this IDSO over the last seven years.
However, today there are many promising, newer IDSOs that have experienced financial backers, solid management teams, and unique strategies that can offer higher initial values and long-term equity gains. The key is for the dentist to consider every qualified option, not just one or two.
Timing is also important. With over $7.0 billion of new capital provided to IDSOs in 2024, some initial values are setting records. But dentists over the age of 50 must understand IDSO partnership sooner rather than later. In the last 24 months, more and more dentists in their 30s are also considering IDSO partnerships. IDSO partnership is not a short-term transition strategy; it is a long-term, generational-wealth-building opportunity for doctors of all ages.
Editor's note: This article appeared in the January 2025 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.
