How to Start Your Own In-House Dental Membership Plan

Do you tend to take insurance providers for granted? After all, it’s a system we are so accustomed to, even if most of us often complain about it.

In this week’s episode, I challenge you to shift your perspective to realizing that cutting out middlemen will not result in a drop in your revenue, on the contrary. Boomcloud founder, Jordon Comstock, shares his expertise on how to get started and what to keep in mind.

Key takeaways:

  • The dental insurance industry is deeply flawed, but there’s something else arising at the horizon
  • Generating recurring revenue stream will increase the valuation of your practice
  • Membership plans vs in-house financing

It all started with realizing that the dental insurance industry is deeply flawed

Jordon realized that many dentists in Utah, US, were complaining about dental insurance. He said to himself that there must be a better way to help dentists manage dental insurance.

One day he went into a dental practice and saw that they had an in-house membership plan. This happened right after he had read the book “The Automatic Customer”, which teaches business owners how to generate recurring revenue.

Jordon’s idea was just a side gig in the beginning and quickly expanded into a profitable business.

Would the concept of dental savings plans work for specialists?

Specialists cannot really have an in-house membership plan because they don’t have a regular flow of customers.

If you are a specialist, you basically have two options:

  • Go for a discount plan. If you are interested in doing that, you should first check the regulations in your state. Discount plans work by having patients pay a monthly fee in order to get a percentage discount off your service.
  • Go for in-house financing. The way this works is if a patient cannot afford a service, you can break out the payments, and then collect interest on these payments. This enables the patient to get treatment, and you get to increase your profit.

The idea is to generate recurring revenue stream

Boomcloud doesn’t currently have a credit check, but Jordon is looking at implementing that in the future. There are currently many third-party software that you can use.

Most dental practices choose to create a payment plan or a membership program. Jordon’s software allows bank transfers from the patient’s bank account to the practice through auto debit. Auto debit is not risky and it’s also quite cheap when it comes to merchant fees.

Jordon wants to help practices generate a recurring revenue stream through in-house financing or an in-house membership program.

If you are a dental practice owner, you should really look into this, because the larger recurrent revenue you can get, the more valuable your practice will become from a valuation standpoint.

Membership plans help increase the valuation of your practice

Generating recurrent revenue increases the valuation of your practice. This recurrent revenue can be valued at four to six times annual recurring revenue, instead of discounted.

When the time comes to sell your practice, you can easily tell the next buyer “This is the recurrent revenue stream that we’re generating. It’s predictable, we have a track record.” If you’re using the Boomcloud software, you also have a projection of cash flows on your dashboard.

If you prefer to keep your insurance system, you can try and renegotiate the terms in order to get a better deal.

Jordon’s colleague Ben Tuinei is the President of Veritas Dental Resources. Through Veritas, Ben helps practices negotiate insurance fees and get better rates.

If you’re a practice owner interested in either negotiating fees or separating yourself from your insurer, you should check out Jordon and Ben’s podcast, Say No To PPOs.

So we’ve convinced you to give membership plans a try. What should you do first?

If you are thinking of giving membership plans a try, you can first speak to your clients and see if they are happy with their dental insurance. Odds are most of them are not. Some may not even know which insurance they have because their employers purchased it for them.

You can then start creating an in-house membership program targeting uninsured patients. Nowadays uninsured clients are more numerous than insured ones. Together with Jordon you can develop a savings plan and start signing up uninsured patients.

The next thing you could do is to focus on an external marketing strategy to attract more patients to the membership program.

Don’t forget to check the regulations

So essentially what Boomcloud is doing is providing an in-house insurance program for the patient, rather than allowing the insurance company dictate its terms. They are cutting out the middleman.

It’s important to remember to check the regulations in your state. You can find many resources on Boomcloud’s website. Lately, Jordon has been working with attorneys in order to understand the laws that are out there. Together with his attorneys, he found a few laws that actually allow practitioners to bypass any type of insurance regulation with a legal agreement.

This agreement is typically called a medical retainer agreement, or a direct patient agreement. It’s a new movement happening in the US. The majority of the US states have so-called DPC (direct primary care) laws that allow dental or medical practitioners to bypass insurance regulations.

In the medical field, this practice is called concierge medicine. Dental practitioners call it a dental savings plan or a membership program. It’s basically the same thing.

The movement towards cutting out insurance companies in the medical industry, from dentistry to vets and optometrists, is growing larger and larger. It’s time to rethink your business plan and head for the future.

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How to Take Your Dental Practice From Solo to DSO

Episode 091

This week I am joined by Brian Colao, Director of the leading US law firm Dykema. The firm handles the legal intricacies of expanding your business to a DSO. They offer advice on what practices are best for your business. On episode 91 of Business of Dentistry we specifically talk about how to take your dental practice from solo to DSO.

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Today Brian and his staff represent 350 group practices and DSOs in all 50 states. They handle any and all legal matters regarding compliance that could impact a group practice or a DSO. They help solo practitioners roll their organizations up to affiliate with DSOs, or he helps them get set up to do private equity deals because that’s the way the industry is heading. But if a solo wants to stay solo Dykema can help with any legal issues that affect their practice.

The first step to going from a solo to a DSO is to create a plan for expansion, and have your financing in order. You can do this either through bank financing or groups that offer DSO-specific financing like Citibank. As soon as a solo practitioner has lined up adequate financing to start acquiring or opening up additional offices then it’s appropriate to restructure as a DSO.

When I asked Brian to give a ballpark on how much capital is needed to begin a project like this, Brian says there are many variables that will determine the amount. It depends on where you are expanded, and what geographic part of the country you are in. An example is Dallas, Texas, where he is from, the general rule of thumb there is half a million dollars per de novo office.

As far as acquiring practices, the financing needed could be anywhere from a couple hundred thousand dollars up to 7 figures (depending on how big they are).

If your plan is to acquire as you can afford it, it becomes difficult to hit critical mass. You have to decide if it’s appropriate to take on non-dental investors and establish 15 or 20, rather than one or two at a time. It depends on your preference for your expansion plan.

I also asked him what most of his clients have as their end game, and he says the end game for everybody is to roll it up and sell it.

But how you get there depends on how much fun you are having in your current position. He knows a lot of young, aggressive people who are in their 30s now, and want to roll up and sell so they are financially secure by the time they are 40. They go for as much financing and/or investor funding as they can get so they can grow their organization go from 5 or 10 to 25 or 30.

You can’t typically fund a plan like that yourself, unless you are independently wealthy. A solo doctor would have a very difficult time doing so on their own without some type of outside investment. But if you are adding one or two a year and having fun there’s no rush to do anything differently.

The range for the final sum when selling also varies, according to Brian. If you are doing a deal with an established DSO, a national DSO, it’s probably around 5.5 to 6.5x EBITDA (Earnings before Interest, Tax, Depreciation and Amortization).

Now that’s a conservative deal. The multiple is lower in this type of deal but your future participation is limited. You can stay and exit after a few years

If you’re looking for a higher return (which also carries a higher risk) you’ll want to consider doing a private equity deal. Some of those have paid as much as 18x EBITDA!

But they require substantial future investment. If you do a deal like that you’re going to have roll over up to 40-45% of the amount you get paid as a reinvestment into the new entity. You’ll also have to hang around for up to another 5 years. And the future of how you do it and what your return is depends on the operators, the dental entrepreneurs’ continued involvement in growing the organization.

No one is going to give you a 14 or 15 multiple to exit your practice on the spot! You have to stay involved and be in a leadership role. In his experience this type of deal isn’t generally for dentists who are older because they don’t typically want to stick around that long.

Our next topic is what happens and what it means when you reorganize from a dentist-owned practice to a DSO. To put it simply you split the clinic from the administrative. The dentist still practices dentistry and the dental practice or the clinical entity is still going to employ all the clinical personnel. But all of the non-clinical administrative support functions and non-clinical employees will be performed and operated by a management entity rather than a practice.

Usually these organizations are legally structured as LLCs, you can set up as another entity but these tend to be the most advantageous tax structures for these type of organizations. Brian also explains why you shouldn’t do a C corp and why you should convert if you are a C corp right now.

We wrap up by talking about the first steps to take if you want to do this: set up a plan for your expansion. Think about and decide if you want to stay in your state, or go regional. You’ll want to know many offices you expect to have for the next 5 years. And you’ll need to answer other questions like who is your target market, do you own all of your equipment and do you own the trademark for your business name?

Once you have these questions answered and your plan is in place Brian shares what happens next, and why a dentist-owned DSO is easier to work with than a non-dentist-owned. Join us for that and more on episode 91 of Business of Dentistry!


Tweetable: “The end game for everybody is to roll it up and sell it.” 

Episode Resources

Dykema’s DSO web site
Email Brian
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Track CE With Sarah Thiel, RDH of CE Zoom

Episode 090

This week on episode 90 of Business of Dentistry I talk with Sarah Thiel, RDH of CE Zoom. We have a great conversation about finding and tracking continuing education through her company CE Zoom. We also touch on how you can set up your course to provide credit through AGD PACE. Worth a listen. Thanks, Sarah – very nice to finally meet you.

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CE Zoom has been in business for 3 years and I’ve been a subscriber since 2016, so I was curious to know how the company came about. When I asked Sarah about it she explained she started dental hygienist school so she could have time for her family, while still making a good income. After completing her education she got a job working 2 days a week, but she had a hard time remembering to get her credits. Her focus was on taking care of her patients and her family.

One day about eight years ago she realized her license expired in four months and she hadn’t done any CE! At the time she lived in rural New Mexico and had no idea where was going to get the necessary credits. She was also 8 months pregnant.

Fortunately she found a conference in Albuquerque, three hours from her home. It was expensive, but she knew she had to do it. So she paid for it, attended and completed the entire conference. As she was walking out the door with her hands full of conference materials, including her certificate for her CE credits, winds kicked up and snatched paper certificate!

She knew she had get it so she dropped everything, took her heels off and ran after it – despite being 8 months pregnant at the time! She did chase it down, but the entire experience was so challenging she wondered if it wasn’t a sign to stop being a dental hygienist.

And she also wondered why were they still relying on paper for something so valuable? Why wasn’t it being done electronically? Everything else could be done online so why couldn’t this? On and off over the next few months she searched for a solution, but she never found one.

When her renewal notice came in the mail, she received yet another push to do something about the CE paperwork situation.

By this time she had given birth to her daughter so she had a four-year old daughter and an infant at home. She took her paperwork and set it down while she attended to something her baby daughter needed. In the mean time, her eldest daughter spilled chocolate milk and saturated Sarah’s certificate. The milk saturated her paperwork so badly she couldn’t decipher some of it. And that was the last straw!

A few months later she was visiting with her brother in Utah when he told her his business partners build apps. A light bulb went off and she knew it was time to take action on her idea.

Despite her brother’s protests, she contacted his business partners. She didn’t work with them but it gave her the idea to do it herself and the push to move ahead. It all came together when Cat, her old boss and now business partner, called her and said she wanted to create it with Sarah. Together they began building it and two years the state-specific CE Zoom was complete.

When telling the story of how CE Zoom came to be Sarah also mentioned she is the vision behind the company and her business partner Cat is the details person, so I asked her about the future vision for CE Zoom.

Sarah says there are big contracts in the works, soon they will be on the map for the entire country! Once that is tied up, they’ll move on to DSOs to help them track their employees’ certifications and CE credits.

Once dentistry is fully built and operational they plan to move into all professions. They have about 120 different professions that have reached out to them wanting their services, everyone from CPAs to firefighters to real estate professionals.

On today’s episode we also talk about we talk about how she met Cat, why I signed up in 2016 and how we finally met in person without knowing it! Sarah is an inspirational powerhouse, tune in to hear more from her about CE Zoom and how their company is helping the dental industry on episode 90 of Business of Dentistry.

Tweetable: “It isn’t something most people know because it’s not taught
in dental school or hygienist school.”

Episode Resources

CE Zoom web site
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Business of Dentistry on Facebook

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