Knobias ClipReport

Submitted from Knobias ClipReport.

The American economy has been labeled as one based on services. Agriculture and manufacturing have long been ushered to the back of the line in terms of total gross domestic product. The services that are provided have become so diverse and ranging that it’s almost too easy to make a living by specializing. Doctors, lawyers, accountants, and financial service representatives make up the bulk of the high income work force.

These sectors have been in a phase of evolution ever since their inception. In the old days, doctors, lawyers and accountants were all single person operations normally located on the main drag of their respective cities or towns. They have since evolved into consolidated groups of professionals housed under one firm’s umbrella. From HMO’s and hospitals to the big 3 accounting firms, these industries have gone through massive consolidations to capitalize from the economies of scale.

One related area that hasn’t gone through as large of a consolidation is the dental industry. Dental practices have historically been one or a small group of practitioners that compete against each other for patients. The solitude leaves the firms with higher costs for supplies and lower revenue from deals struck with insurers. The bargaining power they possess is minimal at best when the practice consists of such a small number of dentists.

One company has recognized the needs of these dentists and is attempting to make a name for itself in the niche while others have overlooked this huge market.

Dental Patient Care America, Inc (DPAT) provides multiple services to independent dental practitioners. The Group's principal activity is to organize dentists into a cooperative model of contractually networked practices. It owns two subsidiaries through which it conducts two separate lines of business.

The Group's benefits include programs to purchase supplies, laboratory and other operating services, insurance and employee benefits programs, and opportunities for profit sharing through the cooperative model. The Group also provides dental patient marketing programs, such as the organization of its member dentists into a network, which offers dental care plans to employers and other groups under the trade names "Intermountain Dental Plans" and "Dentist Direct".

Knobias spoke with Vice President, Andrew Eberhardt, about some of the products the Company offers and the unique business model they’re employing.

“The Co-op has two levels of membership. The Associate membership level costs $250 a month and provides practices with cost savings on supplies through our ability to order in bulk. The practices also benefit from their inclusion into the insurance program,” noted Eberhardt.

The Co-op also offers aging dentists the ability to retire at terms of their choosing and at prices that are acceptable by them. Practices that wish to enter this program are offered a price on a percentage basis of their net income on the front end. The practice will then become part of the Co-op and be run by the retiring dentist for a span of time normally ranging 5 years. At the end of the time span, the dentist is then paid the remainder of the price and is given an equity stake in the Company as part of the purchase price.

The practices then become wholly owned by the firm and either have a dentist placed into the practice to run the business on salary or could be sold to a new dentist that has recently entered the profession.

“We have 100 associate Co-op practices currently subscribed and we have two practices that are wholly owned,” noted Eberhardt. “In the next year, the goal is to have funded (bought or transitioned) 30 practices with a longer term goal of 300 within the next 5 years.”

With the number of relationships the Company can make through the Co-op model, the goals seem realistic and are very achievable.

“Practices are experiencing savings that are triple or quadruple direct Co-op dues,” finished Eberhard. “What practice wouldn’t want to experience that?”

With plans to expand their business outside the borders of Utah, the Company could quickly grow their asset base at leaps and bounds. With Arizona being the first target, funding for the expansion could be next on the menu.

“That’s being put in place now,” noted Eberhard on the funding. “We have a bank committed and will announce something publicly in the near future.”

With the barriers to entry being loaded with red tape and the Company supplying such a unique and valuable service to dental practitioners with absolutely no competition, the name is certainly one to track throughout their expansion progress into surrounding states. Investors would be wise to watch.