Failed DSO purchase

[jLaws]

A local DSO is putting a portfolio of 50 practices together to sell to private equity. One large 4000sf practice with 6 ops didn’t make the cut. They had trouble staffing it wi the a doctor and as a result it only produced ~500k the last 3 years.

When I started my search I wasn’t considering something like this but at 375k it would cost me less than startup. The office is built out well. Conventional wisdom says not to buy a failing practice but in this case, if I’m working the practice myself, then I’ve taken care of their biggest issue. Does anyone here have experience purchasing a distressed practice. Any tips?

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[parkinglottoilet]

DSOs are scum, absolutely unreal what they are doing

 

[tinman831]

Why were they not able to keep a doctor?

 

[jLaws]

Why were they not able to keep a doctor?

I’m not sure. The owner of the mini DSO has been described to me as a shark by various professionals, so they may have been rubbed the wrong way by something. The fee schedule is laughable. $700 crowns, $150 fills. Maybe their guarantee ran out and it no longer pays?

Overall, the office could be looked at as a dirt cheap startup, but if I was gonna do a start up it wouldn’t be in that area… not sure how it all balances out

 

[Gen. Beauregard]

What is it about the area that's giving you hesitancy in regards to a start up? Provider saturation? Those rates sound like an insurance mill. If it doesn't make the cut according to a DSO's bottom-line business formula, it might be the right fit for a single provider private practice with a reputable owner.

 

[jLaws]

There is a river that divides the city in 2. All of the other dental offices are on the other side of the bridge along with the nicer communities and the city center. On my side of the bridge is a few large bad neighborhoods. In the outskirts of the neighborhoods the area gets a bit better. To the south is a very wealthy neighborhood but there are several dental offices between me and them. I’m worried that I’m only gonna get the poor neighborhood folks and that no one from the decent parts are gonna wanna travel to the bad section to get dental care. I could be wrong.

 

[Gen. Beauregard]

You could be wrong, but you're probably not. I retract what I said earlier. That explains the fee schedule matching most insurance benefits. The $375k sounds like a steal, but it might be false economy. Sounds like that's the office where the old owner put the new guy.

 

[yappy]

There is a river that divides the city in 2. All of the other dental offices are on the other side of the bridge along with the nicer communities and the city center. On my side of the bridge is a few large bad neighborhoods. In the outskirts of the neighborhoods the area gets a bit better. To the south is a very wealthy neighborhood but there are several dental offices between me and them. I’m worried that I’m only gonna get the poor neighborhood folks and that no one from the decent parts are gonna wanna travel to the bad section to get dental care. I could be wrong.

People from rough areas will drive to nicer areas for healthcare. The opposite is not true