Corporate dentistry is divided into two main organizational structures: (1) Dental Services Organizations (DSOs) and (2) Managed Service Organization (MSOs).
The typical DSO model involves one of two scenarios. The first involves a dentist who has been working as an associate. The dentist and the DSO will enter into an agreement under which the dentist and the DSO will both pay for part of the cost of starting a new practice or buying an existing one. The dentist will then have a minority interest in the new practice. In the second scenario, a dentist with an established practice who is looking to scale back will sell a majority interest to the DSO. The DSO will then take over the administrative duties.
Typically, the dentist is then paid like an associate, based on collections or production, through the dental entity. The management company employs the staff, owns the equipment, holds the lease, and controls all of the administrative functions of the practice. In the case of a dentist who sells an existing practice to a DSO, part of the sale price may also be deferred for several years, to ensure that the dentist continues to work for the practice. Payment may also be conditioned on the practice hitting certain revenue goals.
The typical MSO model involves three different companies: (1) the entity that actually performs the dentistry, which is completely owned by the dentist; (2) a management entity, in which the dentist is a minority owner; and (3) the main corporate entity, which provides corporate support for the management entity and is the main owner of the management entity.
The dentist pays a buy-in for his portion of the management company, but it is much lower than the cost of buying an entire practice. The corporate entity controls the management entity. The corporate entity, through the management entity, controls all the non-clinical aspects of the practice and, in exchange, get as sizeable management fee every month. Whatever is left after the dentist is paid for his or her work and after the management fee is pad is split according to the dentist’s ownership percentage.
There are pros and cons to working with DSOs and MSOs that must be carefully considered to ensure that the arrangement meets with your goals and expectations. Once you sign a DSO or MSO contract it can be difficult to change or get out of it, so you should not proceed without first consulting with an attorney familiar with these contracts.