Dr. Mosier possesses over 30 years of experience in dental management. As a coach, leader, lecturer, and author of countless management articles, success seems to follow him down every avenue. His skills include strategic planning, organic growth, employee relations, conflict resolution, communications, marketing, and efficiency; with an emphasis in dental group practice.
Simply put, he places a strong focus on improving the quality of life for his clients by simplifying business systems and increasing productivity, all without sacrificing quality.
As a third-generation dentist, whose grandfather co-founded the American Academy of Dental Practice Administrators, Dr. Mosier’s DNA is strung together with the principles of practice administration and management.
Following in the footsteps of his role models, he received his bachelor’s degree from the University of Kansas, DDS from the University of Missouri School of Dentistry/Kansas City, and obtained his Fellow in the Academy of General Dentistry.
After building his first highly successful dental practice, Dr. Mosier was invited to step into the full-time management arena. Since, he has been utilizing his love for teaching in two dental schools and developing group dental practices for dentists, owners, and private equity.
Once he discovered his passion for consulting with groups, having grown a de novo group into a success, group practice development became his prime focus.
In addition to receiving honors for his achievements, Dr. Mosier has been appointed and elected to several national leadership positions. Currently, he is an active member of the board of directors for the American Academy of Dental Group Practice (AADGP), among other prestigious positions in the industry.
In his free time, you can find Dr. Mosier flying airplanes, attacking the hills of Texas on his mountain bike, or with his family at church. He and his wife, Darcie, have three children: a son in high school, a daughter in college, and their oldest son and his wife; who have blessed them with two grandkids.
http://dsogrowth.com/
VIDEO - DUwHF #1041 - Mark Mosier
AUDIO - DUwHF #1041 - Mark Mosier
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Howard: It's just a huge honor for me today to be podcast interviewing Dr. Mark E. Mosier, DDS, FAGD. He possesses over thirty years of experience in dental management as a coach, leader, lecturer and author of countless management articles. Success seems to follow him down every avenue. His skills include strategic planning, organic growth, employee relations, conflict resolutions, communications, marketing and efficiency with an emphasis in dental group practice. Simply put, he places a strong focus on improving the quality of life for his clients by simplifying business systems and increasing productivity all without sacrificing quality.
As a third-generation dentist whose grandfather co-founded the American Academy of Dental Practice Administrators, his DNA is strung together with the principles of practice administration and management. Following in the footsteps of his role models, he received his bachelor's, a dental degree, from the greatest dental school that ever existed, the University of Missouri, Kansas City, where he graduated two years before me in ‘85 and I graduated in ‘87.
After building his first highly successful dental practice, Dr. Mosier was invited to step into the full-time management arena. Since then he has been utilizing his love for teaching in two dental schools and developing group dental practices for dentists, owners and private equity. Once he discovered his passion for consulting with groups, having grown a de novo group into a success, group practice development became his prime focus.
In addition to receiving honors for his achievement, Dr. Mosier has been appointed and elected to several national leadership positions. Currently, he is an active member of the board of directors for the American Academy of Dental Group Practice among other prestigious positions in the industry.
In his free time, you can find Dr. Mosier flying airplanes, attacking the hills of Texas on his mountain bike or with his family at church. He and his wife Darcy have three children; a son in high school, a daughter in college, and their oldest son and his wife who have blessed them with two grandchildren.
It is just a huge honor. You were a legend back in dental school like I was just one of those humpty dumpty students you were like, what were you like class president or you were in charge of something.
Mark: Well, you have good memory because I used to stand up in front of your class and make announcements. I was on the board of trustees for the student dental association, which meant I got to travel a lot and I had to pay for it so we had a lot of fun. It was a lot of great times and I mainly worked with the ADA as a student.
Howard: Yeah, that is amazing and I'm sorry to hear that you're third-generation dentist, the second-generation, your father, passed away this year. I'm very sorry to hear about that.
Mark: Well, he lived life full. My grandfather practiced until he was eighty-five years old, my father practiced full-time, never even flagged off at all, five days a week until he is eighty-six and he passed away at age ninety still on acting pilot, he restored a couple of airplanes, he was still members of a study club. I couldn't teach him anything ever, he was always up on everything, just like his dad so kept me on my toes but.
Howard: And what city did he practice in? He was in Kansas?
Mark: They both practiced in a small town in Kansas called Harrington, which is interesting. My grandfather settled there in 1922. Also, UMKC it was called Western Dental College. My father graduated in 1954 when it was called Kansas City School of Dentistry and then of course, it changed the name late sixties to UMKC - same school. But my grandfather was out there. He developed a five chair dental office in 1932.
Now 1930s, dentists had one chair, maybe they cut hair at the same time, too. I don't know, it was a long time ago. But to have five chairs back in the thirties, it was really unusual and that's when he and his best friend who was (04:01 unclear) president of American Dental Association. They started lecturing in practice management, it was their passion and he boasted to have the largest dental office west of Mississippi but a lot of study clubs come through. My Dad told stories, the Greyhound buses that come in and he did a lot of in-services there at the office.
But they're very entrepreneurial and vetted a lot of widgets, a lot of things; some things that come and gone, some things still used today, like the chrome steel crown. That's the one thing that I know is still around. Electric surgery in dentistry, pins, post, I remember—remember we had to bring extracted teeth to school? I got some of my grandfather’s and they had like paper clips and screws in them from things he was doing back in the thirties and forties.
Howard: And your dad served with General MacArthur?
Mark: He did. Boy, you did your homework. He served in the occupations, General MacArthur. It’s interesting, General Headquarters is what those or Central Headquarters. My father was in charge of the eleven judges for the Tribunal of Far East. That's the Japanese war trials. Each country had a judge to represent it, there was eleven countries and so he was in charge of those judges. He took care of them, got whatever they needed. He lived in the courthouse, which is the ward minister building. So a lot of stories you got here two and a half years of trial testimony and mailed home a lot of stuff.
Howard: The most interesting thing is becoming a lecturer and get to lecturing all those congenital lecturing for different countries. I was so ignorant of history, I'll never forget this first time I lectured in São Paulo, it’s the largest city in South America and you're driving down São Paulo and all of a sudden you think you're in Tokyo. And then you drive a little further and then you think you're in Berlin. And I'm like, “Whoa, whoa, whoa, what happened?” They go, “Oh my god, everybody knew the biggest, richest industrial people in Germany and Japan knew this was not going to end well. So they all fled the country and they moved down there” and that's why right after World War Two, Brazil started making cars and airplanes and all this. It is amazing down there. Just crazy history.
Well, I don't know what you want to. I mean, you could talk about anything from A to Z, but one of the reasons I wanted to bring you on so bad is all the dentists our age think the sky is falling because of corporate dentistry and you're a high quality dentist who I would let you work on me or my children or grandchildren any day of the week. What are your thoughts about this corporate dentistry? Because when you and I came out of UMKC, we already saw the first round in this rodeo with Orthodontic Centers of America. There was a dental trader, Nasdaq and so we've been watching these guys for thirty years. What are your thoughts on corporate dentistry? It’s at the end of the world or the beginning of a new world?
Mark: When I was president of the Alumni Association, Orthodontics Centers of America were trying to pay us nine million dollars at the dental school to get your foot in the door. That was controversial, but it's like anything else. Kmart’s a franchise, Nordstrom's a franchise. I mean, a friend of mine who is an orthodontist and he has two locations. I said, “Well, you're a DSO, you're more than one location” and they're good and bad and different.
Ten years ago, I would not have encouraged my daughter to go into dentistry because as you know you have to wear a lot of hats. But today, with the high quality groups that are available, you can actually go to work Monday to Thursday, leave work at work and focus on dentistry if that's what you choose. So there are good and bad groups. Unfortunately, early on, there were a lot of groups that weren't so great. They were focusing on a lot of emerging dentistry or low-end dentistry and the dentist out of school, it's like one and done like NCAA. They’d get it for one year then they move on and some of those still exist and those are the ones that make the media, particularly in Texas here three or four years ago, those peer groups.
But that's not so much the case today. To retain a dentist, you better have your act together and it’s getting really competitive with the shortage of dentists. Some of these groups are really raising the bar up. Now eight years ago, 5% of all dentists were in some kind of group. Today, it's 32% and there's all kinds of names for corporate, otherwise. The ADA tried to put things in their box and they call things differently, but really the overall catchphrase is DSO.
I represent the groups for the American Dental Association. Every year, we have a strategic planning meeting we call the National Dental Roundtable. We bring the heads of all the specialties and eight years ago, the ADA and the AGD really didn't think that groups are such a good deal and they're quickly getting left behind. Today, it's a complete change of attitude. I mean, complete. There are a couple of things they probably wish they could take back that they said, but it is the future. It happened to medicine, hospitals, pharmacy and as quickly, it happened in dentistry.
So just to finish what I started with, there are some very high quality groups out there that I'm very proud of to know, represent and there are some that aren’t so great, but the ones that aren't so great are getting to be a much smaller percentage.
Howard: So drop some names, who do you think the top three high quality ones are?
Mark: Oh gosh, that's in danger of leaving some out. I mean, here's a small group: Kids Care and that's building it with a k. They're out in Sacramento, high quality pedo. Heartland led by Pat Bauer. I mean, what a great leader. He has a tremendous team; that company has always been pretty good. They're really doing great. Their dental director Dr. Newt is just doing some great things.
Howard: They got a dental director?
Mark: I believe it's Dr. Newt St. Louis. He had specialty dental directors like five hundred or six hundred and they specialize in different areas. One's in Invisalign, one’s in cosmetics, one’s in perio and the key to what Heartland has done is they all say they’re doctor-centered, they all do, but really get behind the doctor.
One of my clients is called Family First group. It's a small group, about thirty-six offices there. They're all in Iowa, Nebraska and it's largely owned by a really good dentist and they look at profits last. First thing they look at is supporting the dentist, supporting the team. Their name reflects what they're about. They go into rural towns and I'm very proud of their strategic plan, how to do things; it's all about the dentists.
When I look at a group, well the first thing to look at is Dr. Retention, Dr. Turnover. It's just like looking at an individual practice. When I grew my own group which is a high quality group called Applewhite Dental. I'm not involved with that anymore, but we're looking at acquiring a practice, we look at the staff turnover and you see assistants, hygienists being there for a year or two. That says a lot about the dentist. I mean here there’s fifteen, twenty, twenty-five years; that says a lot about the business. Same thing in groups. When you have this lengthy retention of doctors, you know they're doing something right. That's always important.
Howard: So where do you think it's going to go? When did you say it was 5%? You said now in 2018 it's 32%. When was it 5%?
Mark: Eight years ago.
Howard: So 2010. So then let's go eight more years out that would be, let's see, eight and eight would be sixteen, twenty-six. Where do you think it’s going to be eight more years?
Mark: Eight more years? I bet it's going to be every bit of 60, 65%.
Howard: You think? So right now it went from zero to a third to two-thirds, so eight years ago, it just started 5%. Eight years later today it's a third and you think in eight more years, it'll be two-thirds.
Mark: I do, I do. I mean there's several things driving that. First of all, we have increased females. This is not a sexist statement; this is a factual statement. We have dramatically increased percentage in females. I mean, the average was 52%, I don't know what it'll be next year. I was talking to somebody going into University of Texas, San Antonio, they said it's going to be 65%. I was talking to their education director, 65% female in the class next year.
So you have increased number of females and a lot of these females, they’re career-driven and they work a few years, they have a child and perhaps they don't want to work five days a week, they want to work three days a week or so to prove my point, they don't want to own because they have other focuses. Now I applaud that, you want to be a mom and do other things. I applaud that, but they just don't have the time or the desire to be the accountant, be the HR, do all the things you have to do, wear all these hats you have to do if you own your own practice. So the increased percentage of females in the industry is pushing towards DSOs.
The other one is the cost of education is skyrocketing. Two years ago, the average was $257,000 for four years. Now University of Texas, San Antonio is about $200,000, Harvard is $450,000, $500,000. It's all over the board but it's high and it's getting higher. So you graduate debt, you've a problem. Before 2008-9, Matco Financing would give you money if you had a doctor in front of your name. Today, that's not true. Matco Financing I believe now is Wells Fargo Healthcare and just because you have a doctor in front of your name does not get you that $600,000 and setup a three-chair office with lease space, just doesn't do it.
So that debt if you want to retire, that cost has a big impact in the growth of DSOs and there are some other things going on. The DSOs that are involved in government programs are getting more difficult to administrate. There's a lot of focus now, we met with the director of medical affairs, a lot of focus and preventative and there's a lot to understand and the DSOs have specialists in these areas to help the dentist to understand risks right down the line.
There's a lot of areas that you have to understand and the DSOs help the doctors do that. Technology, gosh. I mean, I can go on and on. Every single dentist that I know who have gotten into a high quality group really like it. I think about these docs that are fifty-five, sixty years old, they get little midlife crisis, they’ve driven their own ship and they join my group and my minimum contract is three years and they're like, “Okay, fine, I'll tough it out for three years then I'm gone.” What happens is you breathe a little life into them.
Now everyone wants to be part of stuff. As you know, everybody wants to be part of Dentaltown. Now they’re a part of something; they're in their own culture, they’re in their own cult and they like it. Some of the stress is taken off. Lee lacocca saved Chrysler by building on strengths. You go in, you focus on these experienced dentist strengths and you support those, you offload their weaknesses and they like it and they do well. 100% of the dentists in these acquired practices, doctors that came with the practice were doing better a year later with the group that went out. Now you can define better; they made more money than they did before, personal income went up, they are happier, their quality of life, their flexibility so they just like it.
Howard: Going back when you're talking about the females, you were talking about how they might want to work less hours because they want to have a kid. I think that's a major factor with women, no doubt about it, but I think the other factor that's just as huge: female dentists are always married to a man with a great job. Whereas, most male dentists have a stay-at-home wife and she says she's going to have some kids. When the kids are graduated from college, she's still staying at home with a very high standard of living. So when you're a woman dentist and your husband makes $10,000 a month, you don't have to drill, fill and bill forty hours a week, but if you're supporting someone who's staying home destroying $10,000 a month in capital, you do. So that's a huge factor.
It's funny you said it's almost like a cult. The word cult actually comes from the word culture. Did you know that?
Mark: I did know.
Howard: Yeah, I mean, it's amazing. But if there were some dentists who said to you, “I've been doing this ten, twenty, thirty years.” What is the DSO has learned that they could apply to a solo practice? What low-hanging fruit lessons do you think that solo practitioners could learn from DSOs? Because I always tell these kids when they go work at a place, like they'll go work in Heartland and I say, “Well, just make sure you realize one thing. Most dentists can't manage their own office. You're working for Rick Workman and his CEO, Pat Bauer and they're managing eight hundred offices.”
So most dentists can't manage their own, these guys are managing eight hundred. Please learn the management lessons. Also, what is the sweet spot of bankruptcy on a DSO? When they got one big successful office, they say, “Oh, I'm going to open up another one.” Well, the first one can cash flow, we’re losing second one and then they would expand to three. It's expanding from two to three most bankruptcies I see are in that three-million-dollar range because when it was your own office, that problem was a little Doberman pinscher. By the time you get to three offices, it's a T-rex.
Mark: Well, you asked about three questions there, I’ll try to keep them straight.
First off all, what could a general practice lawyer from DSO? Well, I mentioned a couple of times, it's possible to do everything really, really well where the DSOs have specialists in different areas. So maybe the private office looks at hiring if he's not going to sell or join, maybe hiring a PEO, somebody to help them or consolidate some of their business systems.
Howard: Hire a what a PEO?
Mark: A PEO, that's a professional employment—it's where you're not a member of DSO, but some of your business systems are consolidated and from that, maybe you get to group negotiating power with your insurances or group buying power with your dental supplies and even your dental labs. So it's really not a DSO and you still retain your ownership of your practice but that's a trend that's taking off right now and that could work for some dentist.
Howard: What are some major PEOs that you recommend?
Mark: Oh gosh, I don't want to go down that road. There are (19:39 inaudible) out now some friends of mine are starting, I don’t want to show favoritism.
Howard: Email me a couple of names after the show.
Mark: Okay. None of them are really well-established. Some of these guys you'll be familiar with.
Howard: Yeah, I’ve never even heard of the concept PEO.
Mark: Well, it's fairly new and it's taken off and if I wanted to maintain my own office, my own ownership, that's what I’m going to do.
Another thing I would consider doing would be maintaining majority owner and selling a portion of it so I can have all the benefits of a DSO. There are so many different templates for DSO. I mean, about the time I think I've heard all I hear new and I say, “Well, that's a great idea.” I mean, there’s one company that they sought out fifteen high-end offices, known dentists. It'd be like you and these are doctors that you really don't have anything to fix in their practice, but it was I’ll do it if you do it. it's all or none and all fifteen of them enjoying joined at the same time and they sold 70% of their practice.
So I'll just use easy figures because I'm not good at math. So let's say the practice worth a million dollars. So they by 70% and they give you several thousand dollars and now all fifteen join. Well, the value of rolling up, you get increased multiples and those multiples go up with increased EBIDTAs and they're up higher today than they were yesterday so a (21:14 unclear) would be five. So let's say because they're all together now it's worth five and they sell it all two years later so that 30% that they retained, that would be three hundred thousand dollars originally but now it's worth five times that. So one point five million so they get one point five plus seven, two point two for a practice that was only worth one million. So that's the value of really enough. Now those actual, a multiple of five is low, it depends on the total EBIDTAs, they do go up quite a bit. The higher the EBIDTA, higher the history, longer history, solid business plan, there are many factors that will affect the multiples of DSOs. That's why it's a hot area. It was a lot of private equity involved in it; seems like half of my consultants anymore is with private equity and valuations.
Howard: But what is the private equity? Because like say you and I, when we got out of school, Lazarus of (22:10 unclear) America was able to go public on the New York Stock Exchange. Never read that again. It doesn't, we're in Nasdaq. Wall Street wouldn't touch any of these people. When I see these venture capital moneys come in, the people that are in the five-million-dollar range who want to grow it for five or ten years and then flip it to someone in the twenty-five million range and then those guys want to buy it and flip it. It's a hot potato. The exit strategy is only I'm a minnow, I was eaten by a fish, now I’m eaten by a shark and I'm waiting on a whale. How come they can't do what all the other businesses do, which is just do an IPO?
Mark: Well, because it's known. They're going with known, that's the best way I can say it. They know. Well, the space is so hot. I already talked about the demand for manpower and why that's there and if 32% are in a group, that means 68% are not in a group and the trend continues to go up. The main reason the trend is going up because money's cheap. Interest rates are low, there's a lot of money sidelines so you've got three thousand private equity groups and a third of those want to be in dental because they know it's hot and only 10% of that third know about dental, understand dental. So you got a thousand private equity groups that want to be in dental and only a hundred of them understand dental, the rest of them want to be in it.
There's a lot of private equity like buying groups and they sit there treading water trying to figure it out. But it's like anything else, the higher the demand, the higher the value and it just keeps going up, up, up and the bigger the EBIDTA, the bigger the multiple. Now there are some things that can lower it a little bit. They say for every 10% of Medicaid that drops a return, a multiple. But as long as there is demand in the market, why do an IPO, you don't need to. You don't need to do that risk and you mentioned venture capital, I don't see much venture capital money in this at all, I just don't see it.
Howard: Yeah, I should have said private equity.
Mark: Well, you know what, they're buying an asset. I mentioned I built a DSO, but it wasn't like I started with nothing. I wasn't doing de novos, buying an established practice so you're always owning something that had a proven productivity.
Howard: Another thing that I think is very, very interesting is like when a rollout, like you have a proven concept like a Chipotle or McDonald’s or Starbucks and you rollout of hundreds of years. When they're doing roll-ups, every dental office they own is different. Like I still haven't seen anybody that came out with a cookie cutter dental offices yet. Every one of our dental offices is four thousand square feet, they're all ten offices, there's no rollout prototype that seems to be able to wherever I opened it, it works.
Mark: That gets back to opinion. My opinion is that the most valuable asset in a practice is the dentist. That's why when I built my group, I never bought a practice that didn't come with a dentist who planned to stay. So that dentist was the most valuable asset, that was it. I mean, I could go buy bankruptcies in Scottsdale or Aurora, Colorado if I want that, but that's not what I want.
So with that said, they're all going to be different of course, because all of these dentists have different strengths that you're going to focus on. Now there are some cookie cutters, but those cookie cutters were some I mentioned earlier where I call it the one and done where they're going to get a dentist and they're going to work through a year and they’re going to move on. You know who they are.
Howard: You mean Aspen?
Mark: Yeah, that's a common one and I don't want to say too much fast for Aspen because I don't know a lot about Aspen to be honest, but I do know that most of their practices are de novos, they do market analysis of where there's a need and it works. But they're catering to a different type of culture need and if they're fitting a need, great, but I don't personally know of too many dentists who worked for Aspen for year after year after year, I just haven't heard it. I think they get a younger dentist, they work there a year or two and move on. I think that is their model. It's not my DNA, I haven't consulted with that type of model. It's just not my strength.
Howard: Well, the interesting thing about Aspen and Heartland is, the consumer doesn't know all these officers are owned by Heartland. They roll them up, they have different names, but the only way you can figure it out is their direct mail piece in very small print you can see Heartland Dental.
Mark: Why would you want to change the name? You Got Dr. Fran’s Office, the patients loved Dr. Fran and they've been going to him for fifteen years and they have a relationship with you and you understand their personal passion and they wouldn't leave you for the world. Why would you want to change that name? I mean, that's the value. The only time I see these groups—
Howard: Well, the only patient like that would be my mom and she knows my name.
Mark: Well, the only time I see them changed names is if there's a big change in the dentist. Maybe they do buy, maybe they do a de novo where there's no dentists are associated with that location. In that situation, they may put Happy Smiles Dental Centers, whatever they're called. They may use the company name then
Howard: Do you think there's a sweet spot as far as the size of the facility? I mean, is it one doctor, two doctor, three doctor? Five, six, ten offices? Are there hours? What is the sweet spot among square footage, number of dentists, hours open?
Mark: Again, that depends entirely on the location, the type of practice. I will say when you talk about number of dentists, I am pretty adamant that you should never put a dentist who is young on experience by themselves. The biggest negative impact on a budget, on income would be a doctor turnover where you put a new dentist with very little experience all by themselves. I think that's a tragedy and eventually, they'll get there, but it takes a long time. When you put a dentist in with an experienced dentist where you have an in-house mentor, that's ideal. If you're going to hire a newer dentist like, I prefer if I'm going to be a newer dentist maybe out of an AGD program or maybe they’ve been a frustrated associate for a couple of years, but they have some good experience but still, put them with a high-end mentor.
You don't know what you don't know and as far as overhead, your question. A two-dentist practice is much more successful than a one, there's no question because they're sharing a lot of things. You start getting more than three and it gets to be a bit much and it really depends on the demand of the area. Now if you have an area where you can put in a twelve ops practice and the market, the demand allows it, great but I don't see that very often. Usually, it's two or three and usually, it's two treatment rooms and two hygiene rooms for every dentist. That's typically what I see now. Whereas, hygiene rooms, they can flip around for emergencies and things but a dentist definitely needs a minimum of two treatment chairs and two hygiene chairs.
Howard: I could ask this the other way. I mean, when I say what is the sweet spot, most of these DSOs are interested in buying a dental office for six-fifty. I mean, a lot of them have a million-dollar floor. Do you agree with that or do you agree with that?
Mark: You're saying they're not interested in paying six-fifty?
Howard: Well, yeah. If your office is one doctor too small, five ops, does $800,000 a year; most DSOs don't want to roll you up. I mean, a lot of them only entertain deals that are over a million so you could almost reverse engineer this to say the sweet spot. Well, it has to do over a million a year in collection because they don't seem to really buy anything smaller than that.
Mark: That is correct. It’s just like a stock resistance. If for me to buy a practice that's only producing eight hundred, I'm going to have to see some type of other reasons. Like maybe the doc was doing one point five and he has multiple shares and he just pushed the cruise control button and slacked back for the last couple of years where you could easily turn it around, he had to. That's kind of an exception. Unfortunately, a lot of these practices are not in highly desirable areas and location, just like real estate, is everything. They take the foot off the accelerator just a little bit, they could fall off the map.
Howard: Let's talk about that. I mean, do demographics matter? I mean, I cannot tell you how many times I hear dentists say—Utah’s a classic example. I mean, when I got out of school thirty years ago, Arizona didn't have any dental school and now they have two graduating two hundred and eighteen new dentists a year. Utah didn't have a dental school, now they have two. Nevada didn’t have a dental school, they have one.
When I talk to demographics people, they tell me the lowest dental income in America is in the state of Utah. Yet I always hear my Mormon buddies saying, “Yeah, I know, I know. I don't care about. My old man lives up there and my wife's mom's getting up in age and I'm going back anyway.” Do demographics matter?
Mark: Completely. I remember when I got to dental school. In 1985, you’d remember this, there were a lot of dentists. There were and there are going over the park and Scottsdale. Yeah, there were a lot of dentists. Omaha, Nebraska and I did not want to compete, I didn't want to have a bunch of satellites; I wanted to be busy right off. So I went to a midsize town and I was busy from the get-go. I've done market analysis on this very—
Howard: And what town was that?
Mark: Southwest Iowa called Clarinda, Iowa.
Howard: And what was the population?
Mark: About eight thousand people but it had a drawing area of fifty thousand with newspaper distribution. So all things considered, I see the best dental practices in towns between fifteen and twenty-five thousand.
Howard: Fifteen thousand to twenty-five thousand?
Mark: I see that again and again and again.
Howard: How far of a drive would that average town of fifteen thousand to twenty-five thousand be from an airport that flew Southwest Airlines?
Mark: At least an hour, minimum.
Howard: Would you say it's at least because one of the other metrics I've noticed is by the time you’re a two-hour drive to fly out on Southwest Airlines, you are crushing it. You are crushing it even though you may be getting naps in marketing and advertising and I mean, you can do so many... If you’re two hours away from a Southwest Airlines plane, you could almost get a D in every category and still crush it. But if you can see those planes taking off out of your dental office window, oh my god, you better be getting A's and B's in every category.
Mark: I've never heard that statistic before, but I completely agree with it and even today, I still see that as a trend.
Howard: Yeah and I don't know what they're afraid of because I also keep telling these young kids, do you realize, I mean like when you and I got to high school, did you ever see the iPhone and the laptop and the iPad coming?
Mark: Are you kidding me?
Howard: You know what, I go by—
Mark: (34:33 unclear) peg-board.
Howard: I know. I mean, when I got out of dental school, you know what the greatest invention in my childhood was? I had five sisters so whenever the station wagon pulled up the house, since for some reason I was a boy, I'm the one who had to jump out and lift the garage door made out of all wood that weighed like eight trillion and a half pounds and when dad installed an automatic garage door opener, I thought that was greater than landing on the moon.
What these kids don't realize around the corner is we're into driverless cars. So yeah, no one wants to get up in their house and drive an hour out of town, but you're not going to be driving within five years. You're going to be sitting there in a box just like you're sitting at home in your La-Z-Boy watching your big screen or sitting in a desk on your PC. You'll just go get in a box, put in your coordinates and then all of a sudden you’ll be ding, we're here. So these punishing commutes are almost at extinction level events within five it'll start and with ten it could be critical mass.
Mark: We are closer to that than you'd think.
Howard: Yeah and it's so crazy because we're out here in ground zero with Google's driverless cars and we had one person killed and one person killed and you thought the sky was falling yet they didn't talk about thirty-five thousand Americans will be killed this year by humans driving cars. And on the day the one person got killed by the driverless car, a hundred Americans were killed by humans driving a car times ten were picked up by an ambulance. So demographics do matter. You like fifteen thousand to twenty-five thousand, so do I. Two hours from the airport, huge.
Let's go back to PPOs. There's a lots of consultants out there that advertise they do PPO consulting, are these DSOs, are they successful with negotiating PPO prices?
Mark: Yes, they are. But it really depends on the volume. You're talking about with insurance?
Howard: Right.
Mark: Yeah, they are but again, it depends on the volume and you don't ask, you don’t receive. I remember, oh gosh, it's been over ten years ago. My first experience in this, I was talking to a CEO of a Midwest DSO been around a long time. She'd been CEO for thirty-three years and she was talking about when they negotiated with Delta Dental, that was back when Delta Premier actually was pretty good and I could not believe the results that they were getting. You don't ask, you don't receive.
So they've gotten more accustomed to the negotiations. I believe they have a chart and if you have a certain amount of volume, they'll allow more. But again, if you don't ask, they won't go there. So you have to go down that road, negotiate. I mean you can do it with lab bills, you can do it with insurance. I mean I worked with a fantastic insurance group this last year and the big insurance groups like you think liability like CNA and Medical Protective, they have their protector plan or the package and we believe that can be beat and we did it. We worked with Cincinnati which was our liability carrier, we packaged in some other insurance (38:02 unclear) Workman's comp and property, casualty and we killed it.
What is major growth? You start paying attention to something, it will change so whether it's up, down, sideways, but you have to measure intentionally, you have to have project leaders, you have to have accountability at all levels and you have to visit it enough to make a difference and you have to have transparency. Anybody has an impact on what you're trying to do has to understand how to be a major. It's pretty simple, you’ve just got to make an effort.
Howard: Another question, (38:46 unclear) of ideas so people like Pat Bauer. I mean, just legendary. They know their numbers like nobody else. Steve Thorne knows his numbers. I mean, Steve Thorne has full-time programmers.
Mark: They're brilliant guys, too.
Howard: Yeah but their question is this, are you seeing return on investments in chairside milling upgrade? Is there technology where you say?
Mark: Yes.
Howard: Okay, which ones and why?
Well, I remember when I first got involved with my group doing CEREC and I was looking at CEREC and D4D. I love competition, competition is great. I went through training on both D4D and CEREC and the more you have the more economically. For example, let's say you have twenty-five practices that have imaging units, you could have a central milling center. I've helped groups do that. Instead of having a milling center in each office, they have one office with one or two or three MC XLs, a million units for CEREC and they have somebody there who's brilliant at design and they just send the image to him and they overnight crown to him.
Now they may not be getting it the same day in that situation unless you’re down the street, which is why the advantages of (40:15 unclear) is you get it same day but gosh, it's a good step. I've seen groups that their goals are maybe having a milling center in every office and their budget is so much and it's cheaper to buy three imaging units than one imaging unit and one milling center, but they step in that direction. But as you develop the skills, your overhead definitely goes down.
These docs that are really, really good at CEREC or D4D, they start thinking in terms of limiting factors, which I applaud. I think dentists should always think of limiting factors, his or her time should be a limited factor. They started thinking in terms of getting it in the milling chamber, that milling chamber is going to be the limiting factor and these are the docs that have the technology all inside their office so they may just crown boom, they get imaged, etcetera. I remember working with offices that couldn't afford MC XL but these compact units, the precursors of the MC XL CEREC, they are paperweights, they are dime a dozen. So they buy two or three of those and they get through the different routers and they would send it to one then they send the next crowd and the next one, the next. Yeah, they're slower, but they're multitasking with their milling and it made sense.
So I mean technology. I mean, I think at the Caries Detection Systems, I mean there's no way I’d practice today without some of good quality Caries Detection System. It makes me cringe to think about all the carries that I missed because I used an explorer that was a quarter mile wide trying to put it in and then had a crack that was an eight mile wide, it just didn't fit. I'm looking at it, I’m looking at my eyes, I'm looking at this two-dimensional X-ray and blowing snot off goobers back there at number fifteen. You had to enter one of these and whoa, it’s a huge room there.
At least with these systems as you're getting into, you know do I need to (42:06 unclear) like I use (42:09 unclear) or a BIOLASE or whatever lase. Can I grab that instead of getting the Septocaine out and my slow speed round? That's efficiency. When you have knowledge from technology, you can be very efficient.
Howard: Which Caries Detection System do you recommend the most?
Mark: Well, thank you for asking that. I had the blessing of getting into the research lab at University of Texas where they had them all there and I'll probably, I'm sure Gordon Christian makes enemies when he gives recommendations. The best one by far is Canary, it was no question Canary is the best for a lot of reasons, but for the reason technology. Now the downside to Canary and the reason I say Canary is the best because it works different than any of the rest, it triangulates, it can find cavities and it can approximately find cavities underneath the amalgams, composites and it's accurate. They all have their own pros and cons. The cons are the Canary’s price point, it needs to come down and it's still a little bit cumbersome, a lot of wires and things, hard to move it from room to room. It's gotten better, way better, way better.
But I had DIAGNOdent, I had one in each room. I mean, I had one in all my rooms and downside to the DIAGNOdent is the systems breaks the tips, they don't know how to calibrate them so there's some problems with that.
Spectra is outstanding. Christian loves Spectra. At least Spectra will give you a number and number is not subjective where SOPRO gives you colors. Well, it may be great for teaching moms something but it's not subjective that number compared to last time. But there's several out there.
When I tell docs is get one, learn how to use it, embrace it just like a camera or videos or anything else. I mean, one of my lectures they give it's called gadgets that gather dust. I talk about everybody's elliptical and gym memberships next to the hanging laundry is on the treadmill. Dentists love gadgets and if you're going to have these gadgets, embrace them, use them. I mean, most dental software and dentists I know, use 15 to 20% of it. That's how much they use. If they actually learn how to use what they have, they'll be better.
Howard: I wish you'd put some of your lectures on Dentaltown. We have four hundred and some courses; the views are coming, they're all an hour long, they're ADA and AGD approved, they're coming up on a million views. Millennials love them, they'd rather come home after work and open up this course on their iPhone, throw it up on their big screen Apple TV for one hour than block off Friday and drive all the way down into some brick building convention center and spend their whole Friday.
Mark: Well, you know what I'm going to say about Dentaltown. You fill the need. I mean I think back gosh, I don't know when you started late eighties, early nineties nothing like Dentaltown existed. Where did you go to get a forum of enough dentists have a chi square? It made sense to get opinions on things. I mean, where do you go to learn how to Delta Dental? Where do you go to learn about the best lighting system or implant system or? I mean, you filled a great need at a good time.
Howard: We came out on St Patrick's Day 1999 and Facebook wasn't until 2006. I want to add, you said something about if you have twenty-five practices and everybody's scans, you’d have one milling but you can't get it same day. There is another thing I've noticed massively across many industries and that is when I go into a town and let's say it's a hundred thousand and there's some dental offices on the south side and he says, “I’d have so much more efficiencies if I opened up one on the north, east and west and then if I had four offices, I could afford to have a layer of management where I could have a professional Pat Bauer a marketing person, an HR person, accounting or whatever.” Those are crushing it and I've seen it so much.
I mean, I grew up in the sonic drive-in franchise Dan Beverly Carney were at the same church, they founded Pizza Hut and now I am friends with a guy who owns eight Waffle Houses and some Subways, but you'd take two guys that own eight Waffle Houses and one guy owns eight Waffle Houses in Mesa and the other guy owns eight Waffle Houses spread out over four states. The guys who concentrate—Dan Carney uses that a thousand times that I'd rather be in a town of fifteen thousand with one highway going through it and these franchisees own one Pizza Hut at one end of town on that highway and one Pizza at another. Keep it close together.
You see it in dental laboratories. I remember like, yes, Glidewell has 5% of the entire market. They do one out of every twenty crowns, but it's spread over three and a half square million miles. Whereas, you go up to like where Lourdes is in Wisconsin and it's like they have half the dentists in Wisconsin. Are there clients? Green Dental in Arkansas, I mean, so a lab that says, you know what, there's enough business in Arkansas, we don't need to worry about Alabama and Mississippi and Georgia and Tennessee. Let's just focus on our state.
I tell people that do group, stay close. I mean, look at Patterson, Pete for short. When he started Patterson he said, there's so much money in America. I said, “Why should I go to Australia, New Zealand and United Kingdom?” And while Stan Bergman and Henry Schein went to I think fifty-five different countries, Pete it almost killed him to just add Canada and everybody kept saying, “Pete, if you just raise the North American border hundred miles, you'd get 90% of all the Canadian people.” So I think keeping it local keeps it in focus. Go ahead.
Mark: No, there's two points. One was the question you asked earlier I really never addressed. One point is you have to be able to serve what you have and a common way to do it as what I call a hub and spokes. So maybe you setup a main practice, you set up ancillaries around it and the advantages of clustering a practice geographically, it allows management to have touches with those practice and a common way regional coordinators, field coordinators usually these are front office managers who has tremendous skills.
I mean, I look at Family First for example my clients. That's the way they do it and these are high-end regional coordinators, great skills and they touch each practice in person once a week and that's important. That's important and one thing I learned from I think Midwest Dental made a couple statements. They have great management, they are great guys, great (49:12 unclear) and they said one of the most important things that they learned was, and I agree with this, you have to work through if you have a DSO, work through the dentist.
I'm all about training doctors to be the lead, training doctors to be leaders. Don't just go in the office and work with the office manager because that reduces the doctor to an employee mentality and that enhances a doctor turnover. Do you know about the old Hawthorne Effect valuing, appreciating your doctor? I heard Bruce Christopher lecturing the other day. He's one of the top of all the what do they call evaluations you fill out for speakers of the ADA, Bruce Christopher is one of the top speaker-rated.
Howard: Bruce Crispin?
Mark: Bruce Christopher. If you look at all the evaluations for all the speakers of the ADA, he was number one about four years ago. I don't know about today I knew that because they had a program, he’s a friend of mine. But anyway, he lectures about appreciation. We appreciate people. When people leave jobs because of lack of appreciation or lack of value, the old Hawthorne effect. It’s a great study by McGregor. You're a smart guy, you have to read. It's a great study.
Howard: You said the Hawthorne effect twice. So explain that one to the homies about that. That was a great site by Westinghouse, wasn't it?
Mark: I'm not sure to be honest. I know what it is, I know it's about you appreciate me. Remember the old book by Ken Blanchard in 1980, The One-Minute Manager? Pretty simple philosophy. You catch people doing something right.
Howard: Well, I just want to say one thing on the Hawthorne effect because you mentioned twice. It was from Westinghouse and what they noticed is that they increase the light and the productivity went up really, really high. So then they thought, okay, the scientists thought, well, let's decrease the light and see in another factory as the control. So they had multiple factors so they went to another one and decreased the light and it went up. They're like, “Well, wait a minute we increased light, productivity went up. We decreased light.” Long story short, what happened is when the employees realize that the management gave a shit, were caring about them and were concerned about them and that they were the center of attention, they were happier and worked harder. They just want to know that someone cared.
Mark: It's pretty simple. The McGregor study was about what's more important, value or skill and the answer is really both. But when somebody feels valued, it's like the parent-child when your kid feels so valued and so appreciated, it encourages their behavior and they want to please you. And so anyway, these DSOs are sitting in their regional quarters and they’re working with the doctor, they're working with the front office and that's a huge mistake.
The other question you asked earlier had to do with these bankruptcies, these docs that go out and get one, they get two and then three, they go bankrupt. I get a call once a week from somebody who has the money and they have the desire to build a DSO. (52:19 unclear) a DSO, they're willing to build a de novo and usually, it's a dentist who's doing great. They're killing it at their practice, they’re a high-end dental town doc, they are killing it and like you said, if it's the guy that's the dentist, they got the wife at home. They've raised their standard of living. They're pulling down a lot of money every month. They've raised their standard of living to meet that income.
Here's the problem and I tell these docs until you're willing to give up that money tree and devote full-time to your DSO, which means stop practicing dentistry, you're going to be the full-time management. You’re going to be mentoring the doctors, you’re going to be leading the charge? You can't do it. You cannot make two of you. You can't work full-time and build a DSO.
So then there's the guys that aren't dentists that want to build a DSO and the number one limiting factor I see is not having the right management in place and that creates bankruptcies. There's a big shortage.
Howard: Humans are so hypocritical. Oh my god, I just get nauseous when I hear some dentists saying, “Look at the national deficit, they need to start cutting entitlements.” I'm like, “Really? Well, your wife's sitting right over there. Why don't you go tell her that you're going to cut her entitlements in half?” It’s like oh, so you want the president to tell three hundred and twenty-five million people to cut their entitlements but you can't tell Muffy? Really?
So I want to ask you another thing, I just want to go back to something you said earlier, I want you to expand upon it because that might have confused some of the kids. You said that when you're looking at EBITDA multiples that obviously, as you start getting bigger and bigger numbers, like from one million a year in sales to two to three to four to five, the multiples can get higher and get as high as five, but if they take Medicaid or Medicare, it starts knocking them down. So what are your thoughts? Why is that and expand upon what you said. What are your thoughts on Medicaid and Medicare?
Mark: All right, there are several things here. These are almost moving targets and I see the trends as high as multiple of five? No, that's as low as five. Five years ago, if you had ten million EBITDA and fifteen practices, you're going to get a multiple of five.
Today, you get a multiple of twelve. It's gone way up but when the media got ahold of one of the groups, particularly one in Texas that was in the news and the attorney general went after him, accused him of billing for services he hadn't done and about the same time, there was an investment bank on the east coast at a very large summit. Now everybody's doing summits and it was one of the early summits that was sponsored by an investment bank and they had a speaker there that stood up and made everybody think that Medicaid was the bogeyman and all private equity was running for Medicaid because there is a lot of unknowns. Illinois and Texas, they're the ones that there’s an attorney generals coming down hard on everybody and it’s making the news and there's a lot of unknowns and this is at its worse about five years ago, four and a half years ago and now the dust is settled.
I'd rather go to a state like Texas that they've been there, done that. At least you know where they stand and so there is a point in my career where I was not much of a Medicaid expert. Since then I've consulted with some Medicaid groups that are 80% plus Medicaid and I will say that if your practice, your DSO does not have an excess of 65% Medicaid of everything you do at your service mix, if you don’t have an excess to 65% Medicaid, you're going to struggle to have great profits. You really need to position your group to specialize in Medicaid to do well at it.
The groups that have 90% plus Medicaid do pretty darn good and the ones that focus on pedo do even better; it's political suicide to cut children's benefits so those are pretty secure. I hate to put all my eggs in one basket, but these trends change. What I said earlier, so let's say we have a multiple of ten. Let's say we have a group, you got to have enough numbers, you have to have trends. Let's say we have a DSO that’s been around for ten years and they have thirty practices and they have a solid business plan. They have a team in place that's been established for a long time, a good history and their EBITDA is ten million but their Medicaid is 30%. Well, where their multiple was ten, it maybe seven. For every 10% of Medicaid, it reduces what we call one term, one multiple. That's the current trends today. That could be different a year or two from now. It's definitely different than it was a couple of years ago.
Howard: So when you were talking about that Texas team, you were talking about Kool Smiles, right? Kool Smiles Dental Centers?
Mark: Yup.
Howard: This is Dentistry Uncensored. Hey, you're down there in Texas. You're down there in Kerrville, Texas where it's the headquarters of, I assume Kerr Dental?
Mark: No, it’s not.
Howard: No, I know. That’s (58:06 unclear).
Mark: I’m just out of San Antonio.
Howard: Do you know the people behind Dentist the Menace?
Mark: No.
Howard: That blog site because that's down there by you. That's Dentist the Menace, it's kind of a pseudonym. Someone's putting it and I have ideas of who it is, I've been told it's one person. I thought maybe you know the person doing that.
All I want to say to my homies is this: physicians, dentists and lawyers, they're never humbled people. They're always kind of arrogant and it's one thing when your cousin Eddie owes you money, but it's very different when you owe your cousin Eddie money versus the IRS. All these TV shows since I was a kid always had a jury. Well, when you go to the IRS court, there's no jury. It's you and the IRS court, there's no games. Same thing Delta Dental, Blue Cross, Blue Shield, all these private American companies. I don't care if they're for profit or non-profit or whatever, that's a civil deal, disagreement, whatever.
But man, when you start dealing with Medicaid, it's a state level and Medicare is a national level and I know it's confusing to our international viewers because they would just think America had like just one government entitled, but it's got fifty different states where Medicaid is slightly different every state. But my gosh, when Medicaid, if they find a fly on your arm, they're going to hit it with a sledgehammer. And so like I say, it's one thing if you owe your brother money, it's another if you owe the IRS. These guys are brutal.
Mark: They are and when these attorney general’s office, when they hire this young lawyer out of law school and they see go check into this ABC dental group, they don't make a name for themselves coming back and say everything's great. They're going for it and that's how they make a name for themselves by finding something wrong and so let's say.
Howard: So on that point, I mean, you never talk about religion, sex, politics or violence, but you're absolutely right. I mean, the state attorney general's, their average conviction rate on drug crimes is north of 95%. I mean and right now, you can say all these things political, but how many convictions has Mueller already got all around Donald Trump. What does he got? Fifteen? I mean, this is going to be crazy. Do you think we're at the dawn of some crazy stuff out of Washington?
Mark: I'm just glad I'm not in politics. You have to just insulate yourself. I think if I was Trump, I would say just tell me what I need to know, don't tell me what everybody else thinks of me and I applaud Trump for not being a politician. I do. I mean, he's never been a politician. He just kind of runs businesses when the country is a business, He kind of said it like he is some things he probably shouldn't say, but he does anyway. That's just the way he is and I think the politicians don't like it. They don’t like it, that’s not the way they’ve behaved in the past.
Howard: Well, just one final summary on this to the kids and that is again, Medicaid is not the same as Blue Cross and Blue Shield and Connecticut General, that's government. The IRS is not the same as a loan that you defaulted on with Chase National Bank. I mean, the difference between Chase and the IRS or Medicaid and Delta is like two different countries and one will solve all their problems with a sledgehammer and the other one will be you guys will, lawyers will talk. It'll be amenable.
Final question. You promised me an hour of your life and we’re to hour, seven. One last question. The thing that really bothers dentists so much is, going back to insurance, they say, “My hygienists, I have to pay in my market $40 an hour yet Delta is only giving me $55 for a cleaning and my overhead’s two thirds.” I mean, the American Dental Association says the average overhead in America is 65%. Rant on hygiene. What are your thoughts on hygiene? Can it be profitable? Is it just a lost leader so the dentist didn’t do prophy so they can be doing root canals and crowns? What are your thoughts on the hygiene department?
Mark: I'm very passionate about hygiene. It can be very profitable. When I do consulting, it’s one of the first areas I look at. I do an overall service mix and I look at Canberra, then I dig into the perio. I look at everything that's coded perio, including proph and I look at just that.
If a practice is truly upholding the perio standard of care including Canberra, 60% of their perio income and again, I'm talking about just perio plus proph and that also includes adult fluoride or any fluoride. So any fluoride, any perio code plus prophy is a 100%. Of the total billing, 60% of their billing should be all the perio procedures except prophy. A prophy should be 40%. If they're doing that, they're spot on according to the current standard care as established in 2008.
Remember Charlie Cobb, UMKC?
Howard: Yeah, he was our histology teacher.
Mark: He was one of the three that did the research, the ADA, the perio and the American Periodontology. They accepted this as the current standard of care. Standard of care before that was in 2004 and the only change had to do with four millimeter pockets when you have 10% bone loss, but anyway.
So this is an area that most practices don't uphold correctly. So with that said, you could increase perio by just practicing the standard here. When you go into an office and you're not saying you need to whiten teeth or do more veneer or some elective, you're saying the opposite of standard, if you're not doing the standard of care you’re doing something called malpractice. So let's do the standard of care so that's easier to get people to embrace.
Now with that said, how do you incentivize hygienists? I'm a huge believer in incentive style pay. So you got this per hour and you have some incentive style pay and I like to do both whichever is highest and it's easier to get people to buy into practicing the way they’re supposed to practice. Evaluating the risk of Canberra or it's just a lot easier for them to embrace it. I believe a properly designed incentive program should more than pay for itself and should incentivize people's behavior, but it can be very profitable and it can help you practice correctly and the patient can benefit from it, also.
Howard: And I'm not going to turn over any dead stones, but do you remember what Charles Cobb most controversial paper he ever did ever? I'm not even going to say what it is, when he gave his opinion on dental lasers. Oh my gosh. In fact, I wanted him to come on my show. I talked to him, I wanted him to come on my show and talk about what he thought about dental lasers. He goes, “Yeah, I'm sure you do for Dentistry Uncensored. But he goes, “I'm not going to do it.” He said, “He's too tired.”
But hey man, that was an hour, ten. Mark, thank you so much for all that you do for dentistry. Our courses online are an hour long, I'd love to have an hour long online CE course from you, you're so informative. It raises their credibility. If you’re ever bored someday and have nothing to do, build us an online CE course and seriously and thanks for all that you do for the UMKC alumni meetings.
And by the way, you're third-generation, do you think there'll be a fourth-generation dentist in the Mosier family?
Mark: There's a good possibility. Send me in to San Antonio or give me a call.
Howard: Oh, actually I can't believe you just said that. My oldest granddaughter, Taylor Marie, her daddy, my oldest son, is moving east. He told me it's halfway between San Antonio and Refugio because he told me just dental offices he’d been hunting at.
Mark: San Antonio and what?
Howard: San Antonio and Refugio. It’s spelled Refugio. So we went pig hunting on Tim Rainey's down in Refugio, Texas and so he knows every city by Dad's dentist friend that he's been to or hunted at or whatever. But anyway, they're moving there.
Mark: He won't leave; I'll tell you that.
Howard: Oh yeah. So I'll be flying down there all the time to see my little granddaughter. So next time I'm flying to I’ll let you know.
Mark: Give me a shout.
Howard: All right, buddy. Have a rocking hot day.
Mark: Hey, thanks Howard.