Dental Industry Leaders Series: Andy Graham

April 20, 2021

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 [email protected] or Kayla McCann Marty at [email protected].

Tim Constantine

Andy Graham is the managing director of APG Partners. With 40 years of diversified financial services experience, including 30 years as a private-equity investor, he has been involved with a wide variety of businesses ranging from well-established to startup. Over the past 15 years his efforts have been focused on healthcare, with a particular emphasis on dental support organizations (DSOs).

Within healthcare, he has served as chairman, board member or adviser to Access Health Dental, Acorn Dental Capital, Aspen Dental, Dental Partners, GI Scientific, Pure Dental Brands, and TenBrook Orthodontics.

Graham earned B.A. and MBA degrees from Dartmouth College.

Question: How did you get involved in healthcare and provider networks?
Andy Graham: In 1997, I was introduced to the founder of a seven-office DSO in Syracuse, New York, called Upstate Dental. Based on the founder’s background, the company operated a lab within each dental office. I was attracted to the company’s unique business model, the size of its target market and its opportunities for de novo growth. Roughly a year after acquiring Upstate Dental, we made our only acquisition, buying Bob Fontana’s three-office group. Shortly thereafter, Bob was named CEO and we made the strategic decision to rebrand the business as Aspen Dental. For nine years, I served as chairman and we grew, developed and refined virtually every aspect of the business. We managed about 100 offices when we sold the business in 2006. Aspen is now close to 1,000 dental offices. Bob Fontana is an incredible leader and CEO. I’d like to think we both learned from each other, but I know I learned from him. I thoroughly enjoyed being a part of Aspen’s early growth. I have been lucky enough to leverage those experiences and assist other dental groups as they build their unique business.

Q: Talk about your time at Aspen and some of the core values that drove your success.
AG: I have really enjoyed healthcare because you can “do well by doing good.” At Aspen, a few core values drove our thinking. First, we had a keen focus on our target patient and developing services and systems that met their distinct needs. Second, the quality of management company support services was a consistent and high priority. Third, we were committed to refining and building on our de novo growth. Next, we were committed to building a brand that stood for something. Finally, both Bob and I felt strongly about creating alignment between our clinical affiliates and the management company. Each DSO is different, with its own distinct model and philosophy. These are some of the pillars that contributed to Aspen’s success.

Q: What do you think about “crossover” or multispecialty business models that would include orthodontics, oral surgery or even other medical services?
AG: I’m intrigued by how Aspen has evolved. They appear to be leveraging their resources and shared services and expanding into new or adjacent areas, while remaining focused on their core business’s de novo growth and the needs of their target patient population. WellNow (Urgent Care) and Clearchoice (Implants) are examples. Each is a branded system that seems to share a common philosophy as Aspen. Managing the unique elements of patient and provider needs across specialties can be challenging; however, with careful consideration and support, I believe multispecialty networks can be successful.

Q: What are the areas for improvement or things that could be done better?
AG: The pandemic has been challenging in so many ways. At the same time, I believe the severity and breadth of its impact also highlighted the value of well-run management support organizations. As smaller groups look to grow and develop, it’s natural to focus on unit and top-line growth. However, I believe groups of all sizes need to constantly remind themselves that they are in the business of support services and adding tangible value for their clinical affiliates. Growth in the absence of these core tenets can lead to problems.

Q: What are your thoughts on payors?
AG: I wonder if and how new value-based reimbursement models will impact the dental world. Compared to most medical coverages, I also believe typical limits on dental coverage can create suboptimal care or unusual financial burdens for patients. I am hopeful that the importance of oral-systemic health will become increasingly top of mind for patients and payors so patients can access affordable and appropriate care while providers also receive reasonable compensation across all forms of treatment.

Q: How do you see private equity and DSOs competing in the market? What is the future of the consolidation trend?
AG: Consolidation will continue. COVID-19 and many other factors have highlighted the benefits of quality support services from a professional management company with sufficient resources and redundancy to absorb a systemic shock. If you surveyed the market, I think you would find that some systems have been quite successful while others have frayed under the stress of the pandemic. I expect the crisis environment to lead to increased interest from new graduates and those dentists who have simply had enough of running their own practices on their own. Having said that, patient care occurs within the clinic. The most successful groups will align with and empower their clinical affiliates to meet the needs of their local community and patients.

Q: Do you see stagnation or continuing innovation in the future of dentistry? Are there any truly new ideas left?
AG: There will always be innovation. It could come from any number of places, including differing business models, technology, financing options, payor/provider partnerships, outsourced services, service models, incentive plans, marketing plans, etc. Dentistry is still very much a local profession and a patient-driven, personalized service. There will always be a need for a diversity of options for patients. I perceive increased consumerization across healthcare services. The groups or practices that best adapt or innovate to address this trend, while never compromising proper patient care, will be at an increasing advantage. Having said all that, many groups say similar things about their philosophy and the benefits of affiliation. In the end, aside from innovation, effective execution and a purposeful culture are critical. Some groups are more effective in these areas than others.

Q: What is the next evolution for personnel?
AG: I believe strongly that people are motivated by things well beyond finances and incentives. I regularly ask management, “Why do people show up?” Developing a strong culture is key — one which is reinforced through mutual alignment, career development opportunities, valuable training and real engagement. As part of all this, I also believe companies need to identify and reinforce what they distinctly stand for. I don’t know if this reflects an evolution for personnel, but I believe DSOs that approach their personnel in this manner are more likely to succeed.