Doctors are often afraid of entering into an IDSO partnership and losing control and autonomy! If you choose your partner poorly, as many doctors over the last three decades have done, it is a justified concern. Many doctors swap horror stories of selling out to a DSO or partnering with the wrong IDSO, and the subsequent inability to independently run their practice as they deem fit. Sadly, these stories are TRUE when a doctor chooses the wrong IDSO partner!
Of the 900+ IDSOs on The Blacklist, the ever-changing list of IDSOs which LPS will not allow to bid on LPS clients, many join the list due to providing their doctor partners with only CLINICAL autonomy. The doctor gets to make all the clinical, patient care decisions, but does NOT make other key practice management decisions like who to hire/fire, what supplies and labs to use, payers to accept, procedures to perform and how to set their schedules.
#1 Concern: Loss of Autonomy
In an LPS advised process, doctors will achieve FULL autonomy, not just clinical autonomy. The owner doctors will continue to make ALL critical practice decisions, not just clinical decisions. There is a big difference!
In a very simple step in the LPS process, we prove to clients, long before choosing their IDSO partner, exactly what life will be like with that specific IDSO partner. Once a client has decided on the IDSO finalists in a bidding process, LPS will connect clients with doctors who joined the finalist IDSO bidders. Clients will have doctor to doctor conversations and ask questions like:
- What changed? What did not change?
- Do you have the promised autonomy?
- Did the IDSO do what they said they would do?
- Knowing what you know now, would you choose this IDSO partner again?
These confidential doctor to doctor conversations enable LPS clients to enter into IDSO partnerships knowing exactly what to expect from a partnership. This results in very happy owner doctor partners, long after the initial partnership. The conversations sometimes also result in doctors choosing a different finalist bidder!
#2 Concern: Timing
Doctors fear that they are “selling out” at the wrong time. Some doctors mistakenly believe that if they continue to grow and increase their EBITDA, they will achieve higher values in the future. This is not necessarily true.
Doctors in an IDSO partnership will not sell 100% of their practice! In fact, many younger doctors are only selling 51% for cash now and retaining a 49% ownership directly in the practice.
With the Earnouts available today, typically paying doctors for performance in the two years after an initial partnership, doctors will be paid for FUTURE performance at today’s record multiples of EBITDA. Their practice performance can be significantly higher during the two-year Earnout period as the doctor will access their new IDSO partner’s resources for lower costs, higher reimbursements from payers, recruiting and new patient marketing, among many others. The IDSO support will also increase the value and cash distributions from the doctor’s 49% direct practice ownership.
More importantly, doctors will start the clock on the potential upside in the value of the equity ownership the doctors retained. As a recent example, LPS partnered dozens of clients with an IDSO over a seven-year period. That IDSO grew rapidly to over 750 partner practices. The value of its equity increased by 1200% over the seven years. The IDSOs value grew from $330 million to over $3.8 billion. LPS clients experienced those gains.
When this IDSO was recapitalized for the third time in late 2024, doctors who joined them five years prior saw the value of their equity increase by 500%, doctors who joined three years prior gained about 300%. The two-year delay to hopefully increase EBITDA cost many doctors millions of dollars in missed gains on their equity.
The Real Risk in IDSO Partnership: Waiting
Once doctors understand the answers to the top two concerns above, they should actually be focused on the biggest risk to practice values today: declining collections due to stressed consumers. Apparently, people with teeth are opting to buy groceries, pay rent, make car payments and pay the now 28+% national average rate on their record level of credit card debt in lieu of dental care.
Practices with declining collections will not qualify for high value IDSO partnerships. Maybe your patients are not financially stressed today, but they may be soon. I am NOT trying to be a fear monger, but liquidity in troubled times can be very valuable. There are optimists, pessimists and realists. Realists today are reading the consumer tea leaves and they are not trending towards the optimists’ dreams…
National trends are not positive, and global trends may be even more challenging. The US dollar has declined in value by over 10% in 2025 and the global fear gauge, GOLD, set new record highs in April at over $3500. As of today, GOLD is up almost 30% so far in 2025.
Interesting chart from the Federal Reserve Bank of St. Louis on Credit Card debt: Percentage of People with Credit Card Debt 30 Days Delinquent
Auto Loan Default Rates at Highest Level in 13 Years: US Auto Loans Delinquent by 90 or More Days
Not Encouraging Data Out on June 4, 2025: Fed ‘Beige Book’ economic report cites declining growth, rising prices and slow hiring
If we have not had a conversation recently, please contact us. Growing practices with younger doctors are still achieving record values, but the IDSOs are becoming far more selective.
P.S. Watch out for state legislation which may make your practice unsellable in an IDSO partnership at any value in certain states.
- The Fears and Concerns About IDSO Partnership - June 11, 2025
- The Emotional Benefits of IDSO Partnership; It is Not All About the Money - May 19, 2025
- Taxes are Paid! What Happens Now to Practice Values? - April 17, 2025