The interview below is part of an ongoing effort by McGuireWoods to profile key leaders in the dental industry. To recommend a dental key leader for a future interview, email Bart Walker at firstname.lastname@example.org or Kayla McCann Marty at email@example.com.
Merritt Dake is the chief executive officer of Rock Dental Brands. Merritt and his team provide centralized practice management services and all back-end support needed to successfully run and grow a dental clinic. In 2011, he entered the dental industry as chief financial officer of a dental support organization, in which he consolidated 11 individual orthodontic practices into a centralized operating platform. Merritt has overseen the growth of Rock Dental Brands through acquisitions and de novo clinics from two locations in 2012 to 74 locations. Merritt started his career at Deloitte providing tax and M&A consulting services to private equity groups, funds and Fortune 500 companies. He attended Southern Methodist University, where he received bachelor’s degrees in business administration, accounting, and in international studies.
Question: How has your business been impacted by (and responded to) COVID-19?
Merritt Dake: Similar to dental clinics in many states, we experienced mandatory closures of our supported clinics for a period of time. In Missouri, clinic closures were approximately two months, and in Arkansas, closures were approximately nine weeks. During this time, we were forced to furlough staff, but upon reopening, our supported clinics were able to bring staff back into the clinics. The closures were difficult, but they also gave teams the opportunity to create innovative solutions to patient care and build comradery.
During the mandated closure of dental clinics in Missouri and Arkansas, we obtained clearance to operate four dental hubs in Arkansas. These dental hubs served patients referred from hospitals that were in need of emergency dental care. We operated the dental hubs with a volunteer team and donated personal protective equipment. The dental hubs were able to serve patients regardless of their ability to pay. In establishing these dental hubs, we also developed software to service the hub model, which ultimately was used across a number of states.
Over the past few months, our team has discontinued the dental hubs as we (and other dental clinics) began to reopen. Our supported clinics are fully open and at near-full capacity. Similar to other dental clinics, the inability to meet full capacity is primarily attributable to the additional safety steps we are taking in our supported offices. Patients are showing confidence in these additional safety measures by showing up at a higher rate than we historically saw pre-COVID-19.
Q: What do you see as the future of dentistry and DSOs for the remainder of 2020 and into 2021?
MD: I am often accused of being an eternal optimist, but I am fairly concerned about COVID-19’s longer-term impact on the market. The governors in Arkansas and Missouri have been steadfast about keeping businesses open, but I believe the school year will provide unique challenges to businesses. In my view, how our industry and other industries fare is inextricably linked to school structures. We expect to face a slight downturn in patient volume because patients will have more limited time when balancing the demands of this school year. I also believe we will see more workforce challenges as the school year begins because some staff will be assisting children with virtual school demands.
I also believe the performance of dental clinics in 2020 and 2021 will be linked to the level of government intervention in various states. The way each state controls activities and implements certain procedures — from virtual school to safety requirements — impacts the way businesses will perform financially this year. Although these changes pose significant challenges, we are optimistic about maintaining services for our supported clinics so they can provide safe, high-quality services for their patients. By 2021, we expect there will be enough data available and/or a vaccine or other treatment options for COVID-19 to provide comfort to patients receiving care in our supported clinics.
Q: Have you seen significant opportunities for acquisitions in the COVID-19 era?
MD: I have seen a limited number of dental acquisitions and affiliations in our market since the COVID-19 dental clinic closures. During the initial weeks of dental clinic closures, we received a number of calls from dentists seeking to partner with Rock Dental Brands for its stability in compensation. However, as governmental relief funds were released to many of these providers, we received fewer affiliation inquiries. Most of the inquiries we received in the past few months are from dentists who do not want the continued responsibility for implementing processes necessary to operate in this climate. They view Rock Dental Brands as an organization with ethical alignment as well as a mechanism to focus on the practice of dentistry without the responsibility for day-to-day management functions of a dental clinic. The vast majority of independent practitioners we speak to are waiting to see how the year unfolds before moving forward with a decision regarding their practice future.
I have also seen a number of strategic and financial buyers struggling to move forward with transactions in this climate. For buyers largely relying on debt to fund transactions, the credit markets have become much tighter in recent months. However, I do believe there is likely an opportunity in the market for a financially capable buyer to purchase several DSOs at a favorable price.
Q: What is your strategic vision for growth?
MD: A month ago, I would have responded that my short-term strategic vision revolved around digitally focused treatment and monitoring. However, in the past month, we have seen patients choosing to obtain dental care in person, even in light of the pandemic. I still believe digitally focused treatment is important, but it will play a less prominent role in our short-term growth strategy, as long as patients prefer obtaining treatment physically in our supported clinics.
Our current growth strategy has evolved to focusing on partnering with dental groups with significant size outside of our current markets. Ideally, we would like to pursue growth through affiliations that would allow us to enter as a significant player in these new markets. In our view, this approach allows us to establish a better support structure in a new market to provide better service earlier. We also will continue to focus on partnering with clinics in our current markets to further deliver comprehensive, trusted services to our providers. These affiliations are always attractive to us and will continue to be in 2020 and 2021.
Q: What is the best opportunity for revenue growth in dental right now?
MD: I think historically both independent dentists and DSOs have been fairly monolithic in their approach to how they attract patients, the experience they provide to patients and the pricing they structure for patients. By that, I mean the focus is on a “one size fits all” approach, as if all patients are the same or desire the same experience. I think the biggest opportunity for any independent practitioner, or those providers supported by DSOs, is to really listen to their patients on what they want, and then build their brand promise and experience around what they learn. That could be something as simple as being able to schedule online or open hours, to a much more comprehensive approach to understanding who patients are and how they make decisions based on more structured segmentation analysis. Those who do this, I believe, will have a significant advantage.
McGuireWoods has published additional thought leadership analyzing how companies across industries can address crucial business and legal issues related to COVID-19.