Endodontic specialists to some degree live on referral island. Isolated from the vicissitudes of new patient marketing now required by general dentists, orthodontists, oral surgeons and periodontists to achieve double digit growth rates, endodontists blissfully rely on referrals to build their business. But that bliss may be challenged when your referral sources partner with an Invisible Dental Support Organization (IDSO).

Captive Referral Networks: Opportunity and Threat

In areas where IDSOs have built concentrations of GP practices, they often then eagerly partner with specialty practices within referral distance of their dozens of GP practices in a particular region or city. One IDSO we know well, for example, is paying an extraordinary value for an Endo client of LPS which has multiple offices and capacity for growth. The IDSO expects that their 50+ GP partner practices in the area will logically begin referring to our Endo client once they are a part of the same family.

Other Endos in that area will logically lose new patient referrals. The magnitude of the decline is an unknown at the moment, but it will be interesting to look at the performance of the Endo practices which are not in that IDSO family a year or so from now. I do not expect it will be pretty.

Plenty of Real Examples

The shifting of referral patterns is not an unproven theory. There is opportunity and risk. We have witnessed it across all specialties, but it has been most acute in pedo and ortho. Several years ago, we partnered a large ortho client with the IDSO which had partnered with five pedo practices in his town of 100,000 people. Despite not receiving referrals from these pedo practices, he had built a $6.0 million in collections ortho practice, by himself, with no associates. The other four ortho practices in town had been gliding along with ALL of the pedo referrals. This changed dramatically.

Today, our ortho client’s practice has doubled in size and the other four ortho practices in town have declined precipitously. If you are in a town with a static population, reliant upon new patient referrals from other doctors, you run the risk of IDSOs entering your community and changing referral patterns. Blood is thicker than water.

Consolidation is Accelerating

Despite high interest rates, geopolitical instability, nonsense in DC and inflation, the consolidation of U.S. dental practices is accelerating. Over $3.3 billion of new capital and financing was provided to IDSOs in the first 90 days of 2024. There are now more eager IDSO bidders for growing practices than ever before and values are still setting records for select practices.

Chip Fichtner