Irvine-based Pacific Dental Services Inc. is using a combination of real estate and technology to bring various types of dentistry under one roof for growth.
The company builds and manages offices for dentists, offering services that take care of just about everything except the actual dentistry.
Pacific Dental is what’s known as a dental practice manager and handles daily office operations, human resources, managed care contracting, billing and collections, and buying supplies.
The privately held company is opening offices and aiming for revenue of $450 million this year, up from $353 million in 2010, according to Chief Executive Stephen Thorne, whose father was a dentist.
It has 250 offices in California and five other states, including 17 in Orange County. Pacific Dental’s operation includes 4,500 employees and contracts with 800 dentists and dental hygienists.
Company Growth
The company now goes as far east as Houston and soon will expand into Oregon, Utah, Oklahoma, Tennessee and Georgia.
Pacific has stuck to growing on its own because it’s found a better return there compared to making acquisitions.
“Almost all of our (growth) is organic,” Thorne said. “We either own the facility—own the dirt, the building—or we lease a building. That’s how our business model works.”
Once a Pacific office opens, it hums along for awhile, officials said.
The company doesn’t “really invest any dollars back into the facilities for about eight years, on average,” Thorne said. “We build these things rock-solid.”
Pacific’s offices generally have several dentists and dental hygienists who offer a range of specialties, putting general dentistry, orthodontics and endodontics—or root canal work—in one location.
The company also uses technology as a selling point, with digital processes for patient records, X-rays and even taking impressions of patients’ teeth.
It considers a number of factors before entering new markets, including the ratio of dentists to population, available real estate and whether a potential state is “pro-business or not,” Thorne said.
Organic growth is likely to continue as the company’s main strategy, but Thorne said Pacific will look at potential deals that fit in with its approach.
Pacific’s offices generally serve middle- to upper-middle-class patients. It wants offices “mostly near shopping centers—wherever women go,” Thorne said, citing statistics showing that women make about 80% of all dental appointments, often handling the task for other family members.
Other local dental practice management companies include Smile Brands Group Inc. of Irvine, which has about 320 affiliated dental offices in California and 17 other states, and Orange-based Western Dental Services Inc., which has more than 260 offices in California, Arizona and Nevada.
Publicly traded companies in dental practice management include American Dental Partners Inc. of Wakefield, Mass., and Denver-based Birner Dental Management Services Inc.
Thorne said he doesn’t consider those companies competition.
“We view our primary competitor as more the traditional private practice of dentistry, not the corporate dentistry big practices,” he said.
Thorne, who founded Pacific in 1994, is the company’s majority owner.
He has thought about a possible public offering.
“We’re always evaluating what the best capital structure is,” Thorne said. “Dentistry is still highly fragmented, and the group practice provides a much more cost-efficient delivery model to the public.”
Americans spent $102.2 billion on dentistry in 2009, the most recent data available from the American Dental Association.
The Bureau of Labor Statistics projects that demand for dental care will rise in coming years because of population growth, middle-aged and older people keeping their natural teeth longer, a greater awareness of dentistry’s importance and increased ability to pay for services.
Dentists are looking at ways to cut costs because reimbursement rates from insurers are unlikely to rise, according to Thorne.
“Most dentists get very little, if any, training on how to be a good businessperson,” he said.
Pacific links up with dentists in several ways, including recruiting at dental schools and marketing itself at conventions and other industry events.
The company also is picking up offices stocked with dentists who have sold their previous practices and decided Pacific can provide a better location and staff, according to Thorne.
Pacific said it is hoping to attract “many, many more dentists” by offering its buying power, information technology systems and billing and collections processes.
The Beginning
The company has its roots in work that Thorne—a graduate of the University of California, Los Angeles, and Chapman University—did for his father.
“I worked for him for a couple of years and saw the opportunity,” he said.
Thorne said “lots” of his father’s colleagues asked for help with the business side of their practices and he “figured there’s a real business here, to help dentists with their practices.”
