The Commoditization of the Small Practice Owner

Picture of by Dr David Phelps

by Dr David Phelps


omething I’ve seen regularly in conversations amongst dentists and professional practice owners is denial

 denial about industry disruption; denial about the fact that the model of healthcare (and therefore of dentistry) has changed, is changing, and will continue to change. 

Now, that doesn’t mean that dentistry or another professional practice is a bad career choice. It just means that you have to go in with your eyes wide open to what it is, because it’s not what it used to be.

Even compared to 10 years ago – let alone 20 or 40 years ago, when I graduated dental school – it’s become a different ball game. If you don't understand or create the rules of the game, then you end up playing by somebody else's rules. And today those rules are set primarily by the insurance companies.

The vast majority of professional practice owners – doctors, dentists, chiros, vets, etc. – play by the insurance companies’ rules. Why? Because they feel like they've been caught in that trap, where insurance companies dole them out patients. By taking discounted fees, they are essentially paying the insurance companies to do their marketing. It’s a bad model altogether, but so many practice owners default to it.

If you're playing that game of insurance reimbursements, being marginalized more and more over time, especially if you're a soloist or small practice – you’re going to get run over. This model is not sustainable. 

I'm going to say it again: This model is not sustainable.

Now, if you're within a few years of exiting your practice, don't worry. Just roll on out and call it a day. But if you've got more than five years left to stay in practice, then you better decide which lane you're going to take. The only way for you to play the insurance game long-term is to have the leverage of a large group – multiple practices, multiple doctors. You can be in a private group, or you can be with a DSO, however you want to play. But you've got to have leverage.

The insurance companies are not going to play ball with you if you’re a small soloist; in fact, they couldn’t care less about you. If you're a small practice, they may be playing ball with you now during the interim time, but eventually they'll have no use for you at all. They will just continue to marginalize you to the point where you give up or you change your model – and most people will not be able to change their model.

A very small percentage of you will be able to maintain primarily a fee-for-service boutique model and remain independent from insurance companies. Whether you can do that depends on the demographics of your customers, your skill sets, and your marketing ability.  For those of you who have a model like that now, I would tell you to stay very tight on that model. If you deviate and enter a model in which you need to start taking insurance reimbursements, it's game over for you.

So you need to decide: You can play big and build leverage against the insurance companies by joining or creating a group – insurance companies will play ball with you if you're big enough. If not, then you better find a tight niche, learn how to market it, and provide the right services for the right demographic who will pay for it. But it will not be a large part of the population. You're in an industry that is highly regulated and is being increasingly commoditized. Just face it. That's what it is.

The other side to look at is how can you evolve from where you are? Yes, you've got a lot of time, money, and other sunk costs into your career. I'm not telling you to quit – you’ve just got to figure out your model.

If you're going to stay in and be a small boutique practice, that's great. Just realize it’s all on you – you can't scale that kind of model. And your exit plan in that case will be very limited because there aren’t many people who can buy your business. The market to sell that practice is extremely diminished. So you may not get much of a multiple, if any, for that kind of practice. 

Right now certain practices of a million dollars or more in adjusted production are being taken by the DSOs and private equity. That window is also going to close, because once they’ve filled their stomach with existing practices, they're going to go out and find something else to buy. So you've got this window of opportunity right now. If you have the chance to sell for a high multiple and you're in the right place in your career to take that equity, I would say, do it now. You don't know how long this window will stay open.

If you're not in that position, or maybe you're younger in practice, then figure out what lane to take and be intentional about it. Don't just continue to deny the disruption happening in the marketplace. Remember what happened with denial around businesses like Blockbuster, Kodak, Sears, Radio Shack, and many other retailers. The medical community is being steamrolled too, and if you're denying that it’s happening, you're playing the wrong game altogether.

So become intentional about where you're going, and how and when you're going to exit. Have a Plan B. Have other means of wealth building outside of the practice model, so you don't have to count solely on selling your practice as your exit strategy.

There’s lots to think about, but ultimately you've got to get clarity on your game plan.

To your freedom!

P.S. Whenever you’re ready, here are some other ways I can help fast track you to your Freedom goal (you’re closer than you think) :

1. Schedule a Call with My Team:

If you’d like to replace your active practice income with passive investment income within 2-3 years, and you have at least $1M in available capital (can include residential/practice equity or practice sale), then schedule a call with my team. If it looks like there is a mutual fit, you’ll have the opportunity to attend one of our upcoming member events as a guest.

2. Get Your Free Retirement Scorecard:

Benchmark your retirement and wealth-building against hundreds of other practice professionals, and get personalized feedback on your biggest opportunities and leverage points. Go to to take the 3 minute assessment and get your scorecard.

3. Ready to Step Away?

“How Much is Enough?” This simple question keeps hard-working professionals at the hamster wheel of active income far longer than they need to be. Watch this free training, and discover a proven model for determining how much you really need before hanging up the handpiece!

4. Apply To Visit The Mastermind:

If you’d like to join dozens of dentists, docs, and practice professionals on the fast track to Freedom (3-5 years or less), visit to apply for a guest seat.

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