He Sees 1,200 Dental Tech Applications a Year. Only a Few Get Backed | with Dr. Jeremy Krell, BOAC #69

0:00I practiced for a little less than a decade general dentistry and scaled 10 practices and exited them. After that, I called my passion for technology and my fascination with startup operations into that world. It's really the first and only venture capital fund globally that focuses on dental-related technologies, software, fintech, medtech, so all the kind of business and clinical workflows. Dissatisfaction as a clinician in terms of choosing a technology in your practice is a very difficult thing to do. There's many choices. It's really tough as a clinician to see what the choices are, to do any sort of due diligence on them, know what's real, what's good.

0:36Dental tech was disproportionately told, no, that's too small. We can't help you. We're not interested. There's a quote that I saw that everyone wants to build tech for health care or AI for dentists until they actually go and figure out what's going on. the explosion of options for me in the last five years has gone from five to 500. So now I'm having to make this decision across an even more confusing landscape. The first thing about AI that's true is that this is a tool whereby clinics that use it are going to replace clinics that don't. Most people don't know. It's about a quarter of the dentists in the world are in Brazil.

1:11It's a huge number. One out of every four dentists that there are, are in Brazil. That's a wild number.

1:24Before we get started, this episode of the Business of a Clinic is sponsored by Virillo. Virillo is the trusted marketplace for clinic owners looking to sell and groups and clinic buyers looking to acquire high-performing clinics. There are very few specialized marketplaces in the UK that focus on this transition for clinic operators. Virillo is one of them. Learn more at virillo.co.uk. Now on to the episode. Hi, everyone. This is Jared. I'm one of the co-founders at Coherent Healthcare. I host the business of a clinic. I'm really excited today. We are here with Jeremy, who is a managing partner at Revere Partners, which we'll hear more about, I'm sure, and also previously and or currently the founder and CEO of Barchester Bay Group, which we'll also look to hear a lot more about.

2:09Jeremy, thank you so much for joining. I'm really excited to have you here. I've had a chance to learn more about your background before this call. We'd appreciate if you could maybe give us the two-minute version of how you got here to this conversation, what your journey has been like, and then we'll sort of go from there. Sure. Thanks, Jared, for having me. A real pleasure to be here. I am a dentist here in the United States by clinical background. I practiced for a little less than a decade general dentistry and scaled 10 practices and exited them. After that, I kind of followed my passion for technology and my fascination with startup operations into that world.

2:45I led a department at Oscar Health Insurance, which IPO'd. I went to Quip, the subscription electric toothbrush company, and led a department responsible for standing up the direct to professional channel, which I exited from in a secondaries event. And then to Simplify, which is a patient engagement and fintech platform that I came on as the chief marketing and dental officer to helped roll out that FinTech platform to all the practices through Bank of America that it lent to. And then we sold the company to a PE fund. And then about six, seven years ago, I started Revere Partners. It's really the first and only venture capital fund globally that focuses on dental related technologies, software, FinTech, MedTech.

3:33So all the kind of business and clinical workflows. And again, we're global, not just North America, but all over the globe with our LPs and with our investments. So that brings me here today with sort of a unique and combined perspective, one that comes from the clinical world, a little bit from the startup tech world, and now from the investing world. Thank you, Jeremy. And yes, I think of all the people that we've spoken to, sometimes they've got two hats to wear. Everyone always has one hat. Some people have two hats. Some people have three hats. And it sounds like you've got at least four hats.

4:05that you sort of put on, which is very cool. I guess maybe to start, so there are a lot of different perspectives that you probably hold on. Let's lean into dentistry because that's ultimately where you spend a lot of time. Although I think you've done stuff, obviously outside of dentistry as well. I know Oscar does non-dental in addition to other healthcare. So maybe the place to start is when you go like maybe 100 ,000 foot view, thousand foot view, what is the unifying thread in your career? or your experience that sort of brings those things together? I'm sure there are a lot of things that bring them apart, but what are the core themes that have cut through for you from being the clinician entrepreneur who built, scaled a group, and then exited all the way through to now investing in others, doing things in the dental market?

4:49What are the ingredients that have shown up, that keep showing up in your experiences that you've had in market? Sure. So without getting into kind of state of the union or themes as to where the market is at right now, but more the common thread of my background and career, I think there's always sort of the positive side of this. Right. And in a simple statement, I like helping people. Right. I think that is the biggest positive theme that's behind me being a clinician. It's behind me working in small companies and, you know, also behind me being the investor. I think that, you know, on the other side of that coin, you know, that balances that is also my dissatisfaction with the way that the the world in each of these sectors sort of existed.

5:33Right. And that's where my passion, you know, kind of the combination of those two is where my passion was derived. Right. My drive, you know, sort of came from a dissatisfaction as a clinician in terms of choosing a technology in your practice is a very difficult thing to do. There's many, many choices. It's really tough as a clinician to see what the choices are, to do any sort of due diligence on them, know what's real, what's good. Also very frustrating as a clinician to know how to invest your money. No one teaches you that. It's not part of your medical training. You can invest in your practice, yourself, or in some assets that your financial advisor or your friend might tell you about.

6:15But, you know, really investing in, you know, for example, other things you may know, like the technology inside of your business or practice, you may not, you know, know what that kind of private market route is, but, you know, may want to do. So that's another area of dissatisfaction as a startup operator, especially in dental technology. But I came from Oscar Health. We raised a lot of money as, you know, kind of healthcare tech company, insure tech with very, very brilliant data scientists and actuarial work there. But when we came into, you know, Quip and Simplify, you can't call yourself a dental tech company, right?

6:50Quip was always a beauty product in the eyes of, right, at least early days in the eyes of an investor. And Simplify was always a fintech, right, platform or aspiring to be one. And this is how you would raise money at the valuations and multiples that you were looking for. Dental tech was disproportionately told, no, that's too small. We can't help you. We're not interested, right? Right. And then even as a fund manager, right, I came into this world thinking, oh, the back end software, the fund administrative layer, the legal tax compliance reporting, the CRM, these these back end sort of business workflows for a fund.

7:23And these must be vendors that are well established and really well built. And actually, I found out that one of the three major jobs of being a fund manager, right, one is raising capital, one is investing that capital, and the third is running your fund. And that third area was really thin and very poorly covered. And so we had to kind of partner very closely and build sort of in-house. That's not a vendor to us. That is inherent in the experience that we're trying to build. So I think just as much passion that I have around helping people and wanting the best and to do good by people, kind of paired with the other side of it, my dissatisfaction at the level of a clinician, the level of a startup operator.

8:05and the level of a fund manager, those combined really derived my drive to kind of go from the clinical world to the startup world, to the investing world. And each time, not just take an operator role, but take the role of really a builder. How are we going to redesign this? How are we going to build this the way we envision it, provide a better overall experience or outcome? It's interesting, the twin motivation of we want to help, I want to help people, or we want to help people. And also, I'm just so intolerant of the friction and the badness that people have to confront and sort of move through.

8:42There's a quote that I saw that everyone wants to build tech for healthcare or AI for dentists until they actually go and figure out what's going on. And that's not for me. And I'll go do the software thing over there. So it sounds like you've sort of been through quite a lot of that mud. Yeah, there's a lot of red tape. There's a lot of regulation here. There's a lot of people who will tell you, no, no, you can't. It isn't done that way. Right. And certain of those areas are very legitimate and others, you have to know when to push and how to push. So, yeah, it's a tough space. Healthcare is not the easiest place to, you know, kind of redesign.

9:22But you'll find that if and where you do do that, the impact is often large or maybe even the greatest. Yeah, and unfortunately, very sticky as well, because not a lot of people are following in behind you to go do the same thing. You mentioned something in your sort of introduction, which was, it's very hard for practice leaders, healthcare leaders to think about and buy tech. In addition to investing, you mentioned other things that might find challenging as well. that that front piece I'm really curious about we hear it come up quite a lot which is you know I trained as a clinician and or I'm a private equity person and now I'm having to make decisions about technology which I know will be very important if done well but will equally be crippling if not done well and hey by the way the explosion of options for me in the last five years has gone from five to five hundred so now I'm having to make this decision across an even more confusing landscape.

10:24So maybe it'd be interesting as a, I'm sure, advisor to people buying technology now, as an investor assessing those technologies, and previously as someone who actually had to make those decisions, again, sort of thinking about the different perspectives that you have around tech in healthcare, how should clinic operators be thinking about making good decisions about the tech they buy? What would be the 101 course with you? This may not be something you're good at doing, but here is in one hour, half an hour, if you do these three things right, it's only going to be so bad. Like likelihood is that you get better.

10:58Yeah. So I'll say a few things on this subject. First of all, the pain is real, right? Whether as a clinician or now as a fund manager, right? As a clinician, average, you know, dental clinic, private practice will have about 25 different pieces of software, right? That's an awful lot of software. They're paying for that software typically anywhere from 50 to about$600 a month. So you're talking about cumulatively a real number, right, on their balance sheet. And that has to be, you know, really well understood. You're talking about somebody with a clinical background, right? They don't really have an operations, technical or financial background.

11:39So their ability to assess the technology and they're busy, busy with work and busy with life. So their ability to assess it, even access it, right? They'll go to a local trade show. They'll hear from their dentist buddy. They'll be bombarded with a phone call or a mailer that might come in. But they're not doing any organized sourcing or due diligence on these companies. They'll have the bandwidth to try one or two of them, you know, typically per quarter at the most. And that's an innovative practice. And then if and when they finally do decide to move forward, you're talking about a lot of, you know, staff drag, right, or training drag there, right?

12:21It becomes a change management issue, you know, working with your staff. From the level of a fund manager, the pain is also real. I'm very proud to say that Revere has worked its way into establishing itself within the founder community, within the industry, within the external investor community. We see about two to three different dental technology companies apply per day, weekday, weekend, and holiday completely organically, right? We'll see north of 1 ,200 apply per year and track 120 structured data fields on each one of them. And we've probably diligenced over 4 ,000 approximately now this way, right?

12:56So niche, it's focused, yeah, but it's not small, it's big, right? And so whether in the eyes of the clinician who can't see it all or assess it all and still has to make decisions for their small business or in the eyes of the fund manager who does see almost all of everything, the complete other end of the spectrum, but have to make difficult decisions. We can only invest in, you know, eight, 10, you know, companies a year tops, right? Both sides of the coin, whether you're seeing very, very little sliver of it or a very, very large swath of it, it's actually quite tough unless you really know what you're doing and have the resources, you know, kind of behind you.

13:32To answer your question directly, how should a clinician view this process? I view it less of an external, an externality, right? More as an opportunity for intrapreneurship within the practice. If I were the practice, I'd be looking at my biggest pain points or problems, right? I would be looking at basically, you know, the entire front office workflow. That's really the place I would start from a patient's first discovery to the point where, you know, you have completed their treatment plan and all of the front end workflows and tools that are involved in that. I think that's a natural place to start because it becomes very inflated or bloated if you choose a bunch of the wrong technologies, which, by the way, are not very interoperable, not with your practice management system, which is not really a BI tool or CRM, right?

14:23Not with each other. You don't really talk to each other, right? So there's some clean data issues there. But I would really start with the front because, you know, that's where your, you know, kind of new revenue and even your recurring revenue is coming from. So I think I'd start there before I look at, you know, almost anything else. And what we commonly find is this analogy that I like. If you imagine you have a glass jar, right, in an inefficient practice, they are pouring in water, then sand, then pebbles, then rocks. What do I mean by that? But in that order, right, they're booking columns, they're booking procedures in terms of just who calls in first or who they can slot where.

15:03They're not thinking about production per day or per month or per quarter. They're not thinking about the margin on the procedure. They're not thinking about the ways in which scheduling certain procedures in a certain block of the schedule make the office more efficient or less efficient. They're not thinking that way. They're just trying to fill a column that is white with blue appointment slots, right? And that is super inefficient, right? However, if you look at most of the very efficient and lucrative practices, the thing that they do right is that they typically have the rocks come in the jar first and then the pebbles and then the sand and water, right?

15:45I'm not saying that exams, cleanings, x-rays, hygiene, I'm not saying these things are not important. They are very important to a practice. I mean, a healthy practice can have 25 percent of revenue coming from its hygiene, you know, for example. But you must have if you're if you're big, you know, kind of areas of focus or procedures within your practice are implants or full reconstruction of a mouth or ortho or cosmetic procedures, whatever they are that are your bigger, you know, more larger margin, you know, more revenue producing procedures. These things have to be prioritized. Most of the time we find that the inefficiency is, you know, somewhere from the patient's first discovery to how that jar gets folded.

16:28So where I would tell practices to refocus their energy is on identifying where the gap or the leak is and plugging it. that's really where I would put the first new technology that I would look for and ensuring that they can see this dashboard of clean KPIs, key performance indicators that then help keep that entire patient engagement cycle healthy. I have to say proactively to anyone who does hear this, we didn't pay Jeremy anything. This is not a paid engagement. We did not speak about these issues before this conversation. This is the first time Jeremy and I were talking one-to-one. All the things that were just said were entirely representations of Jeremy's new.

17:13I have to say that because you've probably hit like five metaphors that I personally have died on the hill trying to reinforce everything from leaks to calendar construction. So I just want to be very clear that there's no sponsorship in this conversation. That is true. This is true. Thank you for confirming. And I very much agree. And it is funny because one of of the things that I saw in my practices, and we will now, I mean, I spent three hours with the practice this afternoon, where the only thing we talked about was how efficiently can you move a patient from inquiry to treatment through a consultation process?

17:53And how accurately do you understand why that patient's coming in, where they're coming in from, and what they're ultimately booking for. And as soon as you ask like two questions, the answer is, I'm not sure. And it's in these like tiny technical details. The number of times I've had conversations about cross domain tracking, someone presses book now, and then you totally lose the visibility about where they came from and you can't optimize your marketing spend around it. And the money just starts going out the door. So it's interesting to hear you say that that is where you sort of go first.

18:21If I can push it one level deeper, when you were running clinic, when you were operating, obviously you got much better at this over time. Given your career, you've gotten much, much better at this over time. But in the beginning, site one, site two, site three, when you were sort of learning it yourself and building your own context and understanding of how dentistry, clinic operations, provider operations intersect with some of these things a la CRM, a la intake, conversion efficiency, so on and so forth. What does that journey look like for you on an individual level? How do you how do you not just bury your head in the sand and say, you know what, like, it's good enough.

19:00It's fine. People are coming in, whatever. What's that personal experience for you like as you go through that as a clinician operator? Yeah, I think as a clinician operator, I'm a parts guy, right? I really am fascinated by innovation done well and done right. So sometimes that's difficult, right? I'm the guy who will get a new toy in the practice and I will rip open the box and probably put the instruction aside and believe that I should be able to intuitively use it, right, without much instruction, when I often find that that is not exactly accurate and I get some instruction and I use it, I'm then, you know, either impressed or discouraged by, you know, now using it properly if it, you know, works or the outcome is good.

19:49And then especially if the outcome is good, my next intuition, and again, sometimes regardless of the expense of the toy, which can, again, be problematic, I want to take that thing apart. Right. I want I want the outside facade to come off. I want to run it. I want to take apart the gears or the pieces or, you know, distill out the chemicals that are that are in it and really understand how that thing is working. So again, for better or for worse, you know, in terms of how it works in a day-to-day, you know, kind of business, I really start by understanding the pieces, right? It's like walking into a room and saying, yeah, that's a nice room, open floor concept, looks really clean and modern, right?

20:36That's what I think you'd be saying if you were concerned with, you know, sort of the interior design or aesthetic, you know, of a physical space, right? Whereas I'm immediately thinking, right, open floor plan, they have to run a lot of electric, you know, a lot of plumbing. There still has to be a lot going on behind the scenes in the walls. What's behind this wall here? Is it structural? What's running in there? If I have this kind of problem or that kind of problem, am I going to be able to access it easily or not? Right. I'm thinking what's behind the walls? What's in, you know, where are the studs?

21:10Whereas other people are thinking, you know, kind of where is the couch going? And so I think it's just a different way of looking at something, both looking at it high level from top down as a whole object together doing its job versus kind of bottom up looking at it from all of its individual parts and pieces and how those are working together and where things go right and where things could go wrong. So I think it's having that sort of dichotomous view of both high level, top down, and detailed level, bottom up. Yeah, it's interesting. One of the things we often find ourselves talking about with clinics that we partner with is when you look at new software, thinking about software as opposed to maybe hardware tooling for clinical provision, when you look at new software, like how far past the demo do you go?

22:07the demo will especially now the demo is a delicious it's a delicious appetizer it looks fantastic it does all the things no matter what you say the answer is yes of course it can you know have you have you loaded your sample data in and tried to run your practice fictitiously for a day to actually see what happens and hold on that button doesn't work and what else doesn't work how far into you know to your example the studs and the pipes do you actually go. I'm wondering when you sort of think back over the years that you've, I guess, initially been the buyer of ClinicTech, then the builder of ClinicTech, then the investor behind ClinicTech, where does trust show up in that?

22:52I say that because you mentioned the dentist will hear it from their friend, and then they'll make the decision because their friend said it, and like, I know my friend's practice, I know my practice. So it's all good. You know, the name goes around the SMS group or the email group and everyone sort of jumps on the bandwagon. How does, is trust a proxy for looking behind the walls in healthcare and dentistry more generally? How does trust sort of intersect with one's willingness, appetite to go and find out how these things actually work? Or is it good enough in dentistry to have, they use it, I use it, we're good.

23:30How do those two things sort of run in tension with each other? I think a lot of people do use trust, you know, as a, as a key component, especially you'll see this among the DSOs, dental support organizations, the organized dentistry of, of lots of practices, a key sort of parameter for them in choosing a new technology is, well, how many doors are open on this? What DSOs are using it? Right. And, you know, whether or not you respect that number or that, that organization's own diligence process. I think that is, you know, quite common. But from my personal perspective, I really start from, you know, the point of reference that there, I don't trust, I don't know you.

24:08I don't trust you. I'm going to run my own process. That's great. You know, if, if organization A or B use you, but that's not going to make my decision. Right. And, and the reason that I'm approaching that is not because people are bad people. I mean, And yes, certainly a startup will oversell, right? They go into either clampdown mode and want to share no information or they go into overdrive sales mode and everything can be done tomorrow. And that is the reality of, you know, being in that world because many of them are, you know, eagerly trying to make that sale and really need to make that sale.

24:41But from, you know, you have to approach it from your own business's perspective. And if, you know, the way if you truly are growing organically, then that means that, you know, there are unique workflows that you have designed. You have uniquely, you know, kind of arranged your tech stack as it is. You've uniquely hired the people that you have doing the roles that they're doing. There's a whole unique set of inputs on your side. And so simply trusting in the company representative or trusting in your buddy because it works in their practice isn't really enough, you know, frankly, for me. Right.

25:15I trust in my knowledge of what my pain point or problem is as I've assessed it in my practice. And then I trust in the diligence that I do on a company. And are we always right? We're not. We're human. We do make mistakes. If we fail, we want to fail fast and hard and move on, learn and move on from that as quickly as possible. Rather than carry on paying for and trying to implement and use something that's really not going to solve your problem, You need to avoid carried on mistakes like that. But I really have to do it from the basis of, you know, my own assessment and understanding of my business, my own assessment and understanding of the solution and really try to pair those two together.

26:03Now, a quick break to tell you a little bit about Coherent Healthcare, the company behind the business of a clinic. Coherent helps fast-growing healthcare providers engage, support, retain, and nurture their patients from intake to discharge. As you get bigger, your patient body grows enormously, and it becomes much more than just another hire, just another front office team member. It's no longer a people problem. You need technology that can scale with you. Coherent helps you do that by keeping every patient on track. In short, we're the agentic CRM and patient support platform for outpatient hands-on healthcare.

26:38To learn more, visit us at coherentHQ.com. Now back to the episode. You said just now, and it is very interesting, especially given the last couple of years with AI-ification of everything, you said our unique problems, our unique people on the way that we do things. And the reality is, and we see this all the time, two clinics or groups might use the exact same practice management software by title, and they will use it in fundamentally different ways. You know, you get a box of pasta, one person makes the lasagna, one person makes the SpaghettiOs and like they're both pasta, but they end up looking very, very different.

27:11And I think we see that all the time. And it's often what we talk about with the clinic operators that we speak with in saying, listen, you need to understand the context in which you're operating, because that's going to dictate the success of this thing, particularly right now with a lot of the technology. So the word that comes to mind is context, the unique context of your clinic, the unique ways that you do things, the pain points that you know very well in your own practice. when you're looking at, I guess as an investor now, because that's probably how you've interacted most closely with this, when you're looking at it from an investor perspective, how, as it relates to a lot of the AI-ification of front office, back office, whatever it might be, how do you think about context?

27:51How do you think about the uniqueness of the practice environment in which this technology is being deployed and the likelihood that it's being deployed, managed, implemented successfully, as opposed to throw it in there, hope it works, and if it doesn't, it's gone in six months, because we have seen a lot of practices, many of whom have become customers, implement AI receptionists as a good example, only to discover three, four months later, actually, it's wrong 50 % of the time, or it's, you know, whatever, and it creates more chaos than it solves. So how do you think about that sort of context, that specification, that implementation knowledge that oftentimes isn't there?

28:22I think a couple of things, right, first of all, about AI are true, and then I'll get into kind of how we do this as a fund in the space. So the first thing about AI that's true is that this is a tool whereby clinics that use it are going to replace clinics that don't, right? It's capability, not in every application, but it's capability to be, you know, really efficient and add to operational and practice efficiency, clinical efficiency, and, you know, business efficiency is certainly there. It has the capability when used right to do that. And, you know, practices who don't use it will struggle really to keep up with practices that do.

29:01I inherently believe that. I also inherently believe that AI in its current form is not extremely contextual and is not extremely creative, right? It cannot and will not replace some of it today in its current form, will not replace some of the roles that humans, you know, essentially can do due to their level of, you know, higher order thinking, essentially. And so I think that's very important to keep in mind. The other thing, the third thing that's really true about AI is it's changing so rapidly, right? So you can't just do an evaluation, make an assessment, and then allow that assessment to stay static for long periods of time, right?

29:39You need to keep reassessing, right? What is the solution? What is its capabilities? What is the market around these things? Because the one thing you can count on is that that's going to change, right? In a pretty rapid form. So how do we do this as a fund, right, or a fund manager? How do we deal with this space? Because it does create chaos for us, right? There's now a thousand solutions that involve AI, right? So it makes the proliferation of more companies to evaluate, right, even higher. It also has taken valuations and made them extremely volatile. Some of them are off the charts, inflated, right?

30:17And others are getting wiped out by some other solution, you know, that is, or a perceived threat of another solution that is using AI in some way. And on the other hand, we use AI internally, right? Again, we have humans driving every bit of the process, but we certainly will use it to help analyze portfolio data or help analyze pipeline data at kind of low levels to help us know what's going on there. But those things are true in our pipeline. So as a fund, we kind of every quarter, and then we do a bigger effort every half year, is we look at this from the levels of state of the union, and I'll tell you what I think that is, right?

30:54We go from state of the union to, out of those stats of where we're at, right, as a market, what are the themes? What I really mean by themes are kind of the problem statements that come out of that. From themes, we kind of go down to landscape. Okay, from those themes, how does that parlay into, you know, different areas, different categories of technology? From those categories of technology, we then look at our pipeline. So what percentage of our pipeline is in feeding back to each of those categories? And do we want to be, are we already in them? Do we want to be in them and believe that they're going to be there?

31:29Are they robust enough? Are they multiple winner? We'll look at those categories in a few ways. And then ultimately we get down to portfolio. Who are the top ones that we want to actually invest in? So it's very much kind of a methodical top-down approach there. Bottom up is really looking at what deals do we receive right now? And naturally these companies have some window to their investment. So naturally, we also have to look bottom up at the deal flow we're receiving, you know, just in a chronological period of time. But I'm going to put that aside for a second. Right. In terms of kind of where the state of the union is, you know, at least in my opinion, there's a ton of market acceleration, especially in oral care.

32:06Right. I'd say the global dental market is about eight hundred and thirty five billion dollar valuation by 2034. Some big countries like the U.S. and Brazil are actually a huge part of this. In the U.S., we spend about$170 to$180 billion a year just on dental care, another$50 to$60 billion on insurance premiums, another$40 to$50 billion on mandatory preventative oral care products. So you're talking about a huge kind of market share there that is definitely growing, probably at about a 4%, 5%, 6 % CAGR, depending on the year. Uh, so it's, it's really serious. Um, also, I mean, look at big countries like Brazil.

32:48Most people don't know us, but a quarter of the dentists in the world are in Brazil. It's a huge number. One out of every four dentists that there are, are in Brazil, right? That's a wild number. Most people don't really understand, um, just how big some of these other markets are. Uh, and they may not be the ones you think of. The second area kind of in state of the union is kind of ownership contraction, right? And different types of healthcare are at different levels, right? Veterinary optometry, dentistry, healthcare, they may be at slightly different levels, right? But within dentistry, that owner operator model has definitely dropped from about 85 % in 2000 and maybe five to about 73 % in 2023.

33:26And now it sits at about 30 % consolidated in dental, right? So for reference, there's about 200 ,000 dentists in the United States, about 150 ,000 dental practices, and about a third of those, a little shy of a third of those are actually consolidated now. It's been a couple of tough years in private equity on the dental side. 18, 24 months, it will likely return to something that's more new normal. But in the past decade, it's grown in about a 14 % CAGR in this particular sector of consolidating practices. And that's important because they're often the first pilot site or scale site of these early technologies.

34:00So that drives a lot. And the third area is kind of margin compression, Right. Practices face sort of static reimbursement. There's always this head butting with the insurance companies. Right. Against about a 13 percent rise in OPEX, for example, per dentist and staffing and overhead costs on top of that. I'd say about 60 % of practices right now, if you looked at some of the most recent practice data, report about a year over year kind of same store growth, right? They are growing in production, but they're about the same, right, in terms of same store growth. It's unique in healthcare, right?

34:39In most other industries where inflation goes up, where interest goes up, think about your gas station, think about your car wash, think about your laundromat, the food you buy, the clothing you buy. They can just float prices up. Oh, it's tough times. Inflation and interest are up. Clothing costs more. Food costs more. Right. All these things cost more. Not in health care. Right. They're not getting paid anymore by the insurance. You know, the government doesn't come in and correct. There's no market correction on the reimbursement side. And there's often laws against, you know, balance billing or, you know, any kind of of up billing or certainly up coding.

35:12Right. To, you know, to the patients. So there's the practice continues to get, you know, reimbursed the same amount, even though all of their costs are rising. Right. So it's a very tough business model and their margins get compressed during that time. So that that's kind of state of the union. Then we go to the themes. Right. Which I think are really interesting. So three major themes that we're looking at right now in the current quarter. One of them is what I'll call kind of task automation. Right. We're seeing the replacement of mundane tasks with computational power. Right. And then what they're doing is you're not firing people or hiring less people.

35:46You're refocusing those people on patient experience. That's what we see being done in the most successful practices. The second is tech integration. Are these things interoperable and speak to each other? Is there the establishment of a single data layer within a practice? And I think the third area in terms of themes is really kind of this economic shift. We're really in the practices need to and the organizations, they really need to reframe their unit economics and adapt a new P &L. Because in this world, we're dealing with labor that converts to software power. And in many cases, and we're dealing with treatment, a reactive system that is largely more recently shifted to preventative care, especially in dentistry.

36:27And that's a whole new P &L. That's a whole new strategy around the P &L. If you don't adapt, if you're trying to drive the same old P &L model in this current world that is more, you know, software enabling labor and preventative treatment as a larger component of the overall treatment plan, then, you know, you're running a different playbook, right, when a different game is being played on the field. Then we go down to kind of landscape. So what are the categories that are really big for this? And maybe five or six of them would be practice automation and AI is one of them. A second is kind of med tech.

37:00We see a lot of robotics, hardware. Another is healthcare, fintech, and RCM. All the pay tech and revenue cycle management stuff that's out there. Another one is diagnostics and imaging and AI come in here in their own way. clinical and operational kind of workflow efficiency solutions is maybe a fifth and biomaterials for us is probably a sixth category. And I'd say some of the bigger ones there are probably practice automation and AI that that first category is probably the biggest among those. And I'd say med tech robotics hardware is maybe the second biggest and the third biggest is going to be that healthcare fintech and RCM category.

37:36So those those are, you know, kind of the categorical view. And then you just drop down from there from a fund manager into pipeline. Right. So what percentages are there? What is the stage of them? What's the valuation of them? What is the revenue and revenue growth? Right. And you understand kind of where within your pipeline to be looking. And then you can establish, you know, fairly straightforward from there. You can establish your top sort of one to 10 list for your portfolio. Who am I going to invest in next and next and next based on that information. So we really kind of go through this holistic effort at least once a quarter, looking kind of from State of the Union to themes, from themes to landscape, from landscape to pipeline, and from pipeline to portfolio.

38:23It's interesting to hear the positioning of the new P &L. We've heard versions of that from some of the larger group operators that we've spoken to, they've described it differently. They've said, you know, the buy and smash model is over. Now we're in a different version of group transformation and economic performance. We've heard internal tooling, replacing like bloated head office, et cetera, et cetera. We've also heard what you said, which is the idea that it isn't necessarily a headcount reduction story as much as it's a refocusing of higher value. and as a result, more competitive positioning of the clinic in light of some of the labor time being spent elsewhere.

39:06So maybe for a version of that, the one that jumps off the page that I think we haven't heard before and that I'd love to push a little bit deeper on is the idea that there's this connection between preventative as opposed to reactive and how that connects into the P &L. because preventative to me in some ways sounds like a retention story with respect to patient body. How do we engage support, follow the patient well beyond the acute point of intervention or point of care? How do we keep that relationship moving? But it's also got clinical components. How does this idea of prevention, obviously there is a clinical story around prevention, but how do you connect prevention to the PNL or to the new PNL?

39:52What does that actually look like? If you're running a dental practice, if you're running a practice of any kind, you're thinking about the way in which you engage, serve, support your patients, and the idea that a lot of the focus is on prevention. What does that feel like on a given Monday or a given Wednesday, really inside the practice in terms of the conversations that are happening there? Which is often considered sort of the first appointment of a practice, is largely either at or actually a loss leader for a practice, right? There's a cost in staff, turning your lights on, staffing your practice, setting up an operatory, spending the time with the patient to be in it, and tearing it down.

40:30And quite frankly, the reimbursement cost of an exam, whether it's fee-for-service or insurance office exam, cleaning an x-ray, you're probably right around cost neutral, if not a little bit loss leader. On the other hand, I said earlier that hygiene can account for as much as approximately 25 % of a pretty healthy practice. Right. This is not just your typical cleanings. Now, this is also inclusive of your deeper cleanings and the treatment of periodontal disease, which connects to a lot of the rest of systemic health. And it involves also kind of the case acceptance component there as well. Right.

41:06So it is a big area. I think what's changed in the industry is really two things. One, the technology has really come an exceptionally long way now. We have AI reading 2D and 3D x-rays. We have imaging solutions that involve non-ionizing radiation that are still able to see 3D reconstructions of the tooth or the underlying tissue and AI that can run to evaluate that. Right. We have software that can help in the case acceptance and patient education process. Some insurers will, you know, allow and pay the dentist to take the blood pressure or take a diabetic, you know, reading in terms of more systemic health.

41:51Others, right, along with the technology innovation of remineralization and regeneration, right, some of them are now actually paying the practice to put on one of these, you know, kind of remineralization solutions. So instead of doing a one surface filling, you can now, you know, apply a solution and get paid for that. Right. So I think we've seen kind of in tandem that the technology really kind of advance in the field and the science behind it. And then the industry itself kind of adopt and understand, accept, and support that, really adopt and pay for that technology. So I think these things have really kind of helped to transform the way that a practice can now really think about prevention.

42:43This area is not going to be the rocks in my analogy of any practice. They are not big enough, right? But they can be a very substantial, right, sand or pebble layer. So layered in correctly to the practice, but they can be a very substantial, you know, layer. So yeah, while it's true that a practice that is financially performing very well does do a good job of getting its rocks in first and prioritizing them. It is also true of a practice that's doing very, very well that they have a stable, steady layer of these sand and pebbles that come in. They just need to come in at the right, you know, kind of priority within the practices, scheduling techniques.

43:36Makes sense. I'm conscious of time, Jeremy, you've been very generous with yours, I guess a closing thought question related to what you just said. A lot of the practices that we either speak with, work with, come to engage with in some way are at a stage where I think they are rock to pedal using your language. So they have that established base. It is performing, but it's not giving that that unlock to grow, to drive bottom online to reinvest in the practice. Going back to where I started the conversation, there are hundreds of things you can do, I imagine. Certainly in the practice when I was running, there are a hundred things you can do, but that's often the problem.

44:22And so if you are a multi-site, 10 sites as you were before you sold, or nine sites before you got to 10 that ultimately sold, what was the one thing that lets you build, excuse me, that lets you build efficiently, that pebble layer, because I think there is a lot of focus on the rocks. But how do you get that? What is the one thing that you would relentlessly, obsessively lose sleep over with respect to establishing as compelling a pebble layer as you would that rock layer to really start to build a really high-performing, really interesting practice? What's that one area of focus for you? Right.

45:01The one is really I would. Medicine, dentistry, they are people businesses, whether or not we have robotics, AI, other things helping us. They are people businesses first. And they, in my opinion, will be that for the long term. You need to relentlessly train your associate level of clinician. Right. those associates, not the owner dentist we expect, you know, or the head, you know, clinician in an individual practice or the more experienced one, whoever that, you know, kind of person or individual is, we expect that they are the starting pitcher, right? Every time and that they're capable of that, you know, being there, they've earned their way there, they continue to perform there, they are staying in that position.

45:49But if you're bench, if you're second string, if you're, if your associate level is not able to produce at that level, or even sometimes greater than the master in the practice, those practices have a very difficult time truly succeeding. If they're multi-clinician practices, whether those clinicians are in there at the same time, and it's lots of operatories, or they're in there at different times taking shifts over a smaller number of operatories, or however it is that your model runs, if you've got an associate healthcare professional in there, relentless training of that person to be able to be clinically efficient and productive, as well as to close and close really well, right?

46:36I think that is super important. And then the point five is, and my ability to track it, right? I need them to be trained so that I can step away and handle other, you know, broader business workflow and business management matters. But I need to be able to track it. And I need to know that that training has paid off and that they are performing at that level and continuing to improve. Right. So I that's just a visibility layer that I think is is necessary. Right. Or how do I even know that the training, you know, that we've invested in and, you know, whatever I've witnessed on a couple of days is actually going to stay in stick?

47:15And if it's not, how am I going to respond, you know, in a time efficient matter to make sure that we do remediate there, you know, and handle that problem. But I think if I really had to choose one, I think it is it is relentlessly, you know, training that associate provider level to be as productive, if not more productive than the master as kind of a North Star. And if you do that and you do that well, you will see massive changes within the business. It will move your KPIs more so than almost anything else. I will say it will even make it difficult to pick up on the gaps and the leaks in your marketing because your providers are doing a lot with maybe the too little that is trickling down to them, but they're doing so well at that level that it can actually make it even harder to find the gap or the leak in the patient engagement cycle.

48:10So relentlessly training the associate level.

48:19I can't help but find the humor and the irony that in a day that is so overcast with AI, we go back to people. This has come up a lot. Everyone's talking about AI, and I always tell what's the one thing, and I say, oh, well, really, it's just about the people. That's really the I think that matters here, which is always interesting to hear and to hear from you as well, given the many versions of healthcare that you've seen and experienced and been part of building. Jeremy, thank you so much. I really do appreciate your sharing the time, the expertise, the wide ranging views of how innovation, technology, business building shows up in healthcare on this episode of Business of a Clinic.

48:58Well, anyone who's building in dental tech, I'm sure either knows about you already or after this episode will be in your inbox very quickly. So we can thank the episode for that. You can always reach me at jeremy at reverepartnersvc.com. And thanks again, Jared, to you and to the audience for listening. Thank you so much for joining us on this episode of The Business of a Clinic. We hope you had a good time. We hope it was helpful. If you can think of anyone who should join the conversation, feel free to nominate them, send them our way. We'd love to invite them to participate. If you like what you saw, give us a like, share, comment.

49:28We hope we'll see you again next time. Thanks so much.