Dentistry Uncensored with Howard Farran
Dentistry Uncensored with Howard Farran
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841 Structured Organization with Dr. Alex Abrahams, Cofounder of Pacific Smiles Group : Dentistry Uncensored with Howard Farran

841 Structured Organization with Dr. Alex Abrahams, Cofounder of Pacific Smiles Group : Dentistry Uncensored with Howard Farran

9/12/2017 1:27:22 PM   |   Comments: 0   |   Views: 184

841 Structured Organization with Dr. Alex Abrahams, Cofounder of Pacific Smiles Group : Dentistry Uncensored with Howard Farran

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841 Structured Organization with Dr. Alex Abrahams, Cofounder of Pacific Smiles Group : Dentistry Uncensored with Howard Farran

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VIDEO - DUwHF #841 - Alex Abrahams

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AUDIO - DUwHF #841 - Alex Abrahams

Dr Alex Abrahams is a general dentist with special interest in Implants and Oral Surgery. 

Dr. Abrahams is the cofounder of Pacific Smiles Group, now an ASX listed Branded Dental Services Organization with over 70 dental centers in four states on the East Coast of Australia with over 350 dentists practicing from PSG centers.

He’s currently retired from clinical practice, but runs implant education for general dentists in PSG via a one year mentorship course and has a role of non-executive director in PSG and as a strategic & dental intelligence consultant to the group.

Howard: It is just a huge honor to be in Sydney, Australia and have Dr. Alex Abrahams come by the hotel room to film a podcast with me and Ryan. This will be a big treat for you.

Dr. Alex Abrahams, General Dentist with special interest in Implants and Oral Surgery; Co-founder of Pacific Smiles Group which now is an ASX listed branded dental service organization with over seventy dental centers in four states on the East Coast of Australia with over three hundred and fifty dentists practicing from Pacific Smiles Group centers. ASX is their New York stock exchange, their NASDAQ. How many stocks are listed on the ASX?

Alex: Oh, that’s a question without notice, Howard, unfair, around two thousand.

Howard: Two Thousand?

Alex: Yeah.

Howard: Unbelievable! Currently retired from clinical practice, but Alex runs Implant Education for general dentists in Pacific Smiles Group via a one-year mentorship course; has a role of Non-Executive Director in Pacific Smiles Group and as a Strategic and Dental Intelligent Consultant to the group.

One of the things I have found most interesting… I love this Dentistry Uncensored podcast series more than really, anyone because I’m probably the only person who has listened to all eight hundred episodes, but I have learned so much and one of the biggest problems with corporate dental chains around the world is associate turnover, but it’s no different in private practice. I mean, I’m fifty-four, I’ve had my practice for thirty years, I consider in the last 30 years it was really good when associates stayed seven to ten years, but for every associate that stays seven to ten years, another one just stays a year or two. And when I look at the... I always tell solo practicing dentists, you could learn a lot from corporate dentistry and the corporate dentistry with the lowest associate turnover like Hartland Dental Group in America or you over here in Australia is you have a continuing education mentorship program for the associates, so the associate says, “well, if I take a job here, they’re going to put me through two-year implant course and at the end of two years, I will have placed so many, maybe fifty implants or I want to go work for this doctor because he’s going to teach me sleep apnea or there… It's a mentorship program and that’s what you’ve figured out with Pacific Smiles Group.

Alex: Yeah, so the two key thing there are… they come out of university, they have a ticket to practice, but they’re not confident to practice. They need a bit of hand-holding and a bit mentorship and sometimes in a small practice they’ll get that, but the principal might be too busy treating patients to take time out to do that. Well, we have structured mentorship programs from new graduates right through to these implant dentists. Now, just to give you an example of the power of implant dentists, five years ago in the Pacific Smiles Group, we’re doing a hundred and fifty implants a year, now I’ve trained over sixty implant dentists and we’re doing over a thousand implants a year, purely on the back of our course. So, that attracts people to our group because they know they can get a bit extra.

Howard: Well, in private practice, it’s actually worse. If I’m placing a bunch of implants and I hire you as associate, you come work for me because you want to learn implants and then what the older doctor does says, “No, you do all the fillings and crowns and I’m going to do all the implants.” So, he just uses the kid to do all the minor basic stuff and the kid came on because he wanted to learn the big cases and the older associates that are keeping these kids for a long time are saying, “No, you do some of these big cases.”

Alex: Yeah, so that’s why we started. How we got ahead even before Pacific Smiles is in the practices I was in, we always said that the new dentist, the young dentist, the associate dentist gets the patients before the principals do, because we had our own source of patients anyway, from our loyal patients so all the new patients would go to them and we didn’t put any caveats on what they could do, they could only do, they could do to their ability and we hoped to improve their ability. So, we don’t have any ties to them to tell them what they should do or what they should not do, they’ve got to be comfortable in what they can do. So, all our dentists in Pacific Smiles are actually independent, they’re using us like a doctor might use a private hospital. So, we as the dental services organization are engaging dentists who are essentially in business for themselves. Do you get that?

Howard: Yeah.

Alex: So, they bill the patient, we collect the fees on their behalf from the patient and then we charge them a service fee. So, they feel good about being business in business for themselves, I get their own tax deductibility, their own flexibility around superannuation, and things like that so they feel like they’re a business owner, a small business owner within our bigger organization.

Howard: For Pacific Smiles Group?

Alex: Yeah.

Howard: How many offices do you have?

Alex: There’s over seventy, seventy-one I think last count.

Howard: Seventy-one?

Alex: Yeah.

Howard: What is the business relationship? Do you own it fifty-fifty, sixty-forty, who owns the office?

Alex: So, this is where we’re different. Pacific Smiles owns each office 100%.  We have the lease on the building, we do the fit out, we hire the staff, we buy the materials, we do the marketing, we do the maintenance and repairs. The dentist comes in and gets all these services that we provide them for about 60% of what they produce so they get to keep the other 40%.

Howard: So you pay your doctors 40% of production or 40% of collection?

Alex: Collections after lab fees.

Howard: Collections after lab fees?

Alex: Yeah, we call it direct cost like implant cost (inaudible 0:05:56)

Howard: So, who pays the lab fees?

Alex: The dentist pays the lab fees.

Howard: Okay, so say it again. So, the dentist is paid 40% minus the lab fees?

Alex: Alright, let’s do it another way. Say, he bills a patient $1,100 and he has a hundred dollar lab fee on that. So, what we charge him is 60% of that $1,000. So, it’s $1,100 minus the $100 lab fee then we use the net receipts, we call it net receipts figure to do our calculation of the percentage on.

Howard: So the doctor pays the lab fee?

Alex: Yeah, but it comes off the top to get you to a net receipt.

Howard: Okay. So, let’s say I do a crown in the United States, for $600 and the lab fee, well, that’s the average…

Alex: Yeah. Well, not a (inaudible 0:06:52)

Howard: Okay, $1 = AUD$0.80. So, AUD$0.80

So, when I got out of school thirty years ago, a crown was $1000.  You would submit your $1000 and the insurance pay half. Now, the insurance companies send you the fee and 95% of the dentists in America take Delta Dental and Delta Dental gives you the fees, that’s called a PPO, and now thirty years later, Delta only pays me $600 for a crown. So, let’s say my associate does a crown, let’s say I do a crown for $600, you pay me 40% the lab fees one hundred. So, you would take the $600 minus the hundred, that’s going to be $500 then I would get 40% of $500, and that is very, very critical dot the I and cross the T because when the doctor pays the lab bill, he’ll send it to Glidewell and get a $99 BruxZir crown. When you don’t have the dentist for the lab bill, they’ll send it to Idaho and have Matt Roberts, the greatest cosmetic dental laboratory technician on Earth, make the crown for $350.

Alex: Yeah.

Howard: What do they care? Economic incentives matter hugely. They’re just very huge so you can’t pay the dentist on production not collection because then they’re not going to do a financial arrangement, they’ll just sit down Molly Brown and do a crown on her and then when she checks out, turns out she doesn’t have any money, she can’t get care credits, she doesn’t have credit card, she got to pay on collections not productions and they have to have skin on the game because among these...

Alex: They get to choose which lab they want to use. So, if they want an expensive lab...

Howard: They can use any lab they want because they’re going to pay for it.

Alex: Yeah.

Howard: Yeah, so, 40% of collection minus the lab fee?

Alex: Yeah.

Howard: Is what you pay?

Alex: Yeah, it’s collections minus the lab fee times 40%.

Howard: Collections minus lab fee times 40%.

Alex: Now, remember: they are independent; they’re working for themselves so we turned it upside down and we charged them 60%. So, it’s a little bit of a technicality, but they’re not employees.

Howard: And do you do that for tax purposes?

Alex: We do it for a few, it does help them from a tax point of view and it gives them more flexibility around their own superannuation, things like that. We do it from a liability point of view. So, we as the Dental Services Organization or the Dental Corporate do not have the medical sovereignty liability, so if an employee dentist splits a lip or something like that…

Howard: Or uses IV sedation and the person doesn’t wake up.

Alex: Yeah. Okay, that’s an extreme case.

Howard: But that’s why you have to cover yourself for.

Alex: Because we employed them, it’s our insurance that looks after them, but in our situation, they’re in business for themselves, they’re buying services from us just like they might buy services from in any sort of associateship. So, they’re buying services from us so, if they split the lip or do an IV sedation and not wake up, it’s on their professional  indemnity, their insurance. It’s quite important to have that.

Howard: I think dentists need to really talk about the extreme cases because with social media in a big country like America or a third of a billion people, at least once a month some kid’s not waking up from sedation..

Alex: That’s right, from wisdom teeth.

Howard: From wisdom teeth and pediatric dentists, oral surgeons and some of these cases, it’s a pediatric dentist specialist so you got a DDS and a MS degree specialist and they had a board-certified anesthesiologist because if you put a million kids under, some are not going to wake up…

Alex: Some of them has an undiagnosed something that’s…

Howard: Especially five and under and eighty-five and over.

Alex: Yup.

Howard: Those are high risk every single time and these dentists have to realize that you’re gambling and it’s high risk and there’s a lot of dentists who have lost everything from this happening. I’ve never done it, I mean, a lot these dentists go to a weekend course at the Holiday Inn and next thing they’re doing is they’re doing sedation and they don’t realize that’s a huge.

Alex: So, it’s a risk mitigation from us at the corporate. Remember we’re listed on the stock market, we don’t want any… we have a risk matrix, we have to uphold that…

Howard: Do you let your doctors do IV sedation?

Alex: Not as the sedationist, we’ll get in a specialist, anesthetist we call them to do the sedation, but we do have some sedation happening in some of our rooms.

Howard: But you have a board-certified anesthesiologist coming in to do them?

Alex: Yeah, but we’re very careful to limit it to twelve-year-olds to sixty-year-olds, we won't…

Howard: Is that your protocol?

Alex: We won’t go down there, our Anesthetist said we don’t want to go under twelve so we said fine. You just set the rules.

Howard: You are, I mean, what you just said is so infinitely intelligent. You can tell he’s probably treated in all seventy dental offices because that’s a caveat that people don’t realize how… like when you talk to an anesthesiologist like, “When you put a child under five, I mean, their lungs are so small, their reserve oxygen is so low, a kid can go from 95% oxygen saturation to 5% *snaps* like that, but not on two older dogs like us. So, you won’t go under twelve and you won’t go over sixty-five so you could only put me to sleep for eleven more years…

Alex: That’s fine.  

Howard: And then I get to go to New Zealand?

Alex: No, we still go to private hospitals; they do a lot of general anesthetics in private hospitals so that’s the full…

Howard: You won’t have to… just tell Ryan that you need me unconscious and he’ll hit me in the head with a shovel without blinking.

So, I want to talk about another point, you talking about -you’re publicly traded, why is it? So, you remember back in the day thirty years ago in America, the Orthodontics Center of America first big roll up, big line of credit, buying all these orthodontic office, publicly traded on the New York stock exchange, fabulously imploded with Lizarus, and you’re so many… how many publicly traded DSO’s that are on the ASX?

Alex: There’s two on the ASX.

Howard: And what are they?

Alex: 1300 Smiles…

Howard: 1300 Smiles…

Alex: Basically in Queensland and us at Pacific Smiles Group. There’s the Australian arm of a New Zealand listed DSO which is the Abano Group...

Howard: Say that again, Abano?

Alex: Abano. A-B-A-N-O, Abano. So they have dental offices in New Zealand and Australia. The Australia ones have been what we would term a “roll-up” where they purchased existing practices, and I want to talk about this because we don’t do that.

Howard: But first, before we go there, I want to talk about why do you think there’s thirty-five corporate dental chains in America that have over fifty locations?

Alex: Right.

Howard: Why are none of them publicly traded on the NASDAQ or the New York stock exchange?

Alex: Oh, are you asking me that question?

Howard: Yeah.

Alex: I don’t know, you tell me.

Howard: Well, I think it’s because this is what I’ve been told so… Do you get the movie, the show Shark Tank over here?

Alex: Yes, I’ve heard of it but I’ve never watched it.

Howard: Okay. Well, so basically, a roll-up, they go get a line of credit for a million dollars?

Alex: Use other people’s money, they buy the offices…

Howard: So you use other people’s money and they’ll go buy an office for a million dollars and they’ll say, “Hey, look at us. We went from zero to a million sales.” Wall Street’s saying, “Yeah, you also went from zero to a million in debt.”

Alex: Yeah, they talk about that.

Howard: So now (inaudible 0:14:54) let’s talk about that, and then they say, “Well, give us ten more million dollars.” So they go buy ten more offices for a million and say, “Look at this, we’ve gone from one million to ten million.” They go, “Yeah, but look at your debt sheet, it’s gone from one million to eleven million.” So, they grow their revenue…

Alex: Then buy revenues…

Howard: They buy revenue…

Alex: With other people’s money.

Howard: Yeah, they’re buying revenue with other people’s money and then when they buy my office, I’m a fifty-four-year-old dog doing it for thirty years and then I leave and then you replace me with some associate that just walked out of a dental school and I’ve seen it with Orthodontics Centers of America…

Alex: You see it all the time because it…

Howard:  Yeah, with Orthodontics Centers of America, some of these orthodontists were getting two, three million a year and then when he left, they got … orthodontics had a school, he only did a million a year.

Alex: Yeah, so that’s what everyone does in the medical corporatization, they do roll-ups. So they buy the earnings, put the guy on five-year contract or a three-year contract or a four-year contract and hope that they can flog the business within that five years to get their payday. But the thing they fail to realize is that when we buy, when a dental service organization buys another practice, they’re buying their culture, their buying their systems, they're buying their people, and their buying, they’re giving a big bag of money to Dr. Farran guy who suddenly pays off all these debts and goes on holidays and then has to work on 30% or something like that for a while and it starts to get jack of it because you can’t make any decisions. Then they come in and they start saying, “You’re spending too much money on composites use so we want you to use black and gold brand composite” and so then the agro starts up because they’re starting to tell the doctor what to do. So, we know this and we don’t do this.

Howard: So, you only do De novo practices, you…

Alex: We will build practices from scratch.

Howard: So, all seventy of your offices were built from scratch?

Alex: Not all. Some of the early ones, the foundation centers, the three of those merged together…

Howard: How old is your company? How long has it been in…

Alex: 2003 we started.

Howard: 2003 to 2017. Ryan, you did calculus, what is that?

Ryan: What is it? 2003…

Howard: 2003 to 2017… So, for fourteen years… fourteen years, you have seventy offices…

Alex: Yeah, we’ve grown from three to seventy, seventy-one I believe it is now…

Howard: From three to seventy-one…

Alex: Yeah.

Howard: And of those seventy-one, how many were De novo?

Alex: So, this is a roll-out you’re talking about? We would term that to roll-out where we…

Howard: A roll-out? Is that De novo?

Alex: Roll-out, yeah. Okay, so, about sixty-two or three of those would be…

Howard: Sixty-three?

Alex: Sixty three (inaudible 0:17:41)

Howard: I like that, I’ve never heard a roll-out but I like roll-out because it’s the opposite of roll-up.

Alex: So, there’s roll-up and there’s…

Howard: Nice, that’s better than the word De novo.

Alex: So, roll-up is you’re basically buying goodwill, alright? Your practice is worth two or three million dollars based on your production and your earnings, not on your goods or chattels.

Howard: Not on my goods or chattels?

Alex: Goods or chattels, where the equipment and everything else, yeah?

Howard: What’s a  chattel.

Alex: Well…

Howard: Property?

Alex: Yeah, your stuff inside the building,

Howard: Chattel.

Alex: The fixed assets, it’s an intangible.

With the roll-out or as you’d say, De novo, there’s no goodwill. You establish your practice, might cost you $600,000 to do the fit out and the equipment and the X-ray equipment and everything like that then you’ll spend some money on marketing it, and you’ll spend some money on working capital in the first year because you (inaudible 0:18:36) lose money in the first year. So, you lose money in the first year ‘til you get it about, eight, $900,000 in turnover and then you start making money out of it, but because you’ve designed it as you want to design it, you design it like a McDonald’s would be designed, or cookie cutter stuff, okay?

So, to all predictable, what’s in the top drawer? In all our centers, it’s identical. What’s in the second drawer is identical; I can go into any of our offices and see a patient come in without having opened a drawer ahead of time to know what’s in there. So it’s all systemized…

Howard: That’s what Mark Costas does. I’m in Phoenix, Arizona there’s another dentist friend of mine who has a podcast and he has a dozen offices and he’s a… every dental office, every drawer, same thing.

Alex: So, but, over a few years you get this place up to being worth several million dollars, but you only paid six hundred thousand for. But here’s the good thing, it’s when the dentist comes in, the way the drawers are, the materials that we have, everything, they accept it as being that’s the way we do business around here rather coming in and say, “I don’t like using that software, I want some other software.” They don’t get that opportunity, they don’t bother asking so we attract the…

Howard: I want more specifics also. One of the problems with roll-ups is these older dental offices that are thirty years old, they all have these legacy employees that got to raise every year for thirty years and they’re overheard is off the charts because of labor. What do think, give us your goals for overhead. What do like to see overhead at?

Alex: Okay. This is broad, but as a percentage of patient fees, your staff cost might be 19, 20%.

Howard: Wow! So, okay…

Alex: The consumable cost might be 5.5%.

Howard: Consumables, supplies?

Alex: Yeah, dental materials…

Howard: Supplies, 5%?

Alex: 5.5%, yeah.

Howard: 5.5?

Alex: Yeah.

Howard: Okay.

Alex: You have electricity, your utilities, and things like that might be 2 to 3%.

Howard: Okay, doctor compensation?

Alex: Well, that’s the 35 to 40%..

Howard: So, it’s collection minus lab bill minus 40%?

Alex: Yeah…

Howard: Okay.

Alex: But it varies is a little bit depending on the experience and the…

Howard: But that varies in your seventy  offices between 35 and 40%?

Alex: Oh well, even higher. Some of the guys who are doing the general anesthetic and IV work and implant work are doing 43, 44%.

Howard: Okay, so what about rent?

Alex: Well, that varies. Some of our rents are down near 2%; some are up near 10%…

Howard: Okay.

Alex: We tend to… the last five or six years, we have been  rolling out in shopping centers.

Howard: And what is your definition of shopping centers, is that a mall?

Alex: A mall. Yeah, you call it a mall. So, it’s a shopping center enclosed roof, seven-day trading, it’s where the people are. So, what we’re doing now is putting more and more of our centers in shopping malls…

Howard: And is that good? Is that doing well?

Alex: And that we’re getting good foot traffic and they do well from the get-go because we’re also doing seven days a week.

So, you as a family will go to that shopping center once or twice a week, do your groceries or a bit of dress shopping or shoe shopping or something like that and you walk past a Pacific Smiles Center, “Oh, that’s nice, there’s a dentist there but I don’t need one” but then on the weekend, Johnny gets hit in the mouth with a soccer ball and a split lip and a loose tooth and they say, “Oh, there’s a dentist down at the shopping center. I’ll go down there or I’ll ring them up.”

So, this is about putting this patient at the center of our business,

Howard: Patient-focused not doctor-focused.

Alex: Not the doctor. It’s a patient-focused centered business where we want to be accessible, available, and affordable for the patient and therefore…

Howard: Say the three things: accessible…

Alex: Accessible, available, and affordable.

Now, affordable doesn’t mean cheap, Howard. Affordable means we’re going to work with their health fund, affordable mean might be payments scheme and the like. So, it doesn’t mean cheap dentistry, it means we will work with them with their budget and stage things that all suit them.

Accessible means that’s easy to find, easy parking.

Available means we’ve got urgent care spots every day, we’re available seven days a week and some evenings a week.

So, it’s a patient-centered…

Howard: Does Pacific Smiles Group, do they all have the same hours?

Alex: Pretty well, most of them now are on seven days, we still have…

Howard: What are the hours?

Alex: It’ll go from eight-thirty to six o’ clock…

Howard: 8:00 AM to 6:00 PM?

Alex: Yeah, 8:00 AM to 6:00 PM, the weekends are a bit shorter.

Howard: What are the weekends?

Alex: That’ll be nine ‘til four.

Howard: For Saturday and Sunday?

Alex: Yeah, maybe Saturday a little bit longer, but we do one evening a week, one or two evenings a week.

Howard: So, do you know the convenience store, Seven Eleven?

Alex: Yeah.

Howard: You know where that name came from, Seven Eleven?

Alex: Yeah, seven days a week, eleven hours a day.

Howard: No, 7 AM to 11 PM…

Alex: Oh, okay.

Howard: And now they’re renaming it Seven Twenty Four, for seven days a week, twenty-four hours a day.

Alex: Yeah, alright. So, again this is about making it good for the patient. Now, it’s a challenge to get the dentist to do that but what do dentists want, Howard? Dentists want a full book, they want a well-trained nurse, and they want good gear and materials to work with. So, if you can give them a well-trained nurse and we have training programs for our nurses, you can give them a full book, they will happily work in our system and not get itchy feet and want to move on.

Howard: Nice.

Alex: The other thing we do is our other customer group, we talk about the patient as our customer group, our other customer group is the dentists. We respect the dentists; we give them medical sovereignty— that means they’ve got their decision-making over what they do in their choices of treatment for the patient, we don’t interfere with that; we give them a pathway of education, that can get them up to doing implants on a regular basis. Why would you want to go on and own your own shop with lots of hassles?

Howard: So, you have seventy-one locations…

Alex: Yeah.

Howard: How many dentists work in the seventy-one locations? How many dentists work for you?

Alex: About three hundred and fifty.

Howard: So, how many dentists per office?

Alex: It varies. We’ve got one in the center of Sydney here in Hunter Street corner Fifth and Hunter Street with eighteen chairs and that could have sixteen dentists operating (inaudible 0:25:25)

Howard: So you don’t have a standard?

Alex: No, the shopping center ones tend to be three to four chairs but the one I worked at or recently worked at till I retired up at Green Hills in the Hunter Valley has ten chairs and…

Howard: I want to ask you, I want to play true or false.

Some of the corporate chains in America say that in all their locations that have four or five or six chairs, one dentist. It might be six chairs, like maybe, two hygienists, the doctor works at two to three rooms and has an emergency room. So, we’ll say it a five-chair deal, when one dentist, their HR problems are almost zilch. Whenever they go to two dentists or three dentists, their HR goes through the roof because humans are very tribal. They follow the four-hundred-pound gorilla and when you got one four-hundred-pound gorilla saying he believes this and diagnoses this way and the other four-hundred-pound gorilla dentist diagnoses this way and the two gods… you know most religions are monotheistic because what happens when you have a god of lightning and a god of thunder… do you find in your mall clinics where you have two or four chairs with one doctor, do you find this far easier to manage from an HR point of view than when you go to group practice with three or four ego maniac doctors?

Alex: Okay, the size is not reflective of the difficulty to manage that place, it all comes down to the Center Manager and the Regional Manager, and our Center Managers are not dentists. A lot of people call them Practice Managers but we actually call them Center Managers, they’re doing more than just managing the practice. They’re managing all the HR; they’re managing all the culture of that site; they’re managing all the important areas and…

Howard: So, two or more doctors, it is not (inaudible 0:27:07) in HR?

Alex: Here’s the other thing is that we don’t have hygienists. Generally, in this country hygienists are not used like they’re used in America. So in America, you have a lot more hygienists per doctor, we would only have two, four or five hygienists across the whole group because our dentists are independent and they like to do the hygiene themselves.

So, when we have a six-chair practice, say, on the Central Coast here, Terrigal we have six dentists and there’s no hygienist. So, you’re probably saying we’ve got six four-hundred-pound gorillas but they’re in their own little independent worlds seeing their patients, billing their patients, and as long as we provide all the services to them they’re happy. They’re happy; all go back to the full book, good staff, good materials, good equipment, and flexibility around their holidays and things like that.

Howard: What percent of the dental offices in Australia do you use hygienists?

Alex: I would say, that would be no more than 25%.

Howard: Only a fourth of the dental offices have hygienists?

Alex: That would tend to be the solo practitioners where the principal dentist would have one or two hygienists working more in the way that hygienists in America work.

Howard: The problem in America is that the hygienist in Phoenix gets $40 an hour and the insurance pays $45 for a cleaning, I mean…

Alex: And they take it an hour to do it.

Howard: Yeah, I mean, simple math tells you that the reimbursement rates have had killed the hygiene department.

Alex: What’s the hourly production of a hygienist in America?

Howard: One hundred bucks an hour.

Alex: What’s the hourly production of a dentist in America?

Howard: Why, I hope it’d be three hundred.

Alex: So, you cover your fixed cost much quicker with the dentist than you do with a hygienist, you’re not profiting in hygienists. Now, they’re nice people and they do a good job, I must say that I’ve…

Howard: I know.

Alex: I get in a lot of strife because I have been for twenty years saying the economics and the way we work as dentists in Australia do not support the use of hygienists.

Howard: The most profitable chain in America is Comfort Dental with Rick Kushner of Comfort Dental. They have three hundred and fifty locations and rule number one is No Hygienists.

Alex: There you go. I’ve got to look him up, I’ll go and see them. What’s his name?

Howard: Rick Kushner…

Alex: Rick Kushner.

Howard: He’s out of Denver, Colorado…

Alex: “Rick, if you’re watching this, I’m coming.”

Howard: Yeah, I mean, he says same things, “I love hygienists to death, I love to get my teeth clean for an hour by hygienist, but I’m a rich guy and I pay in cash.” But the consumers are coming in with insurance and the insurance… supply and demand, says a hygienist gets $40 an hour and the insurance is going to pay forty, I mean, forty-five for a cleaning, I mean…

Alex: Square peg in a round hole, it just doesn’t work.

Howard: No, it just doesn’t work.

Alex: So, you have a dentist and they do, and we make it work. But our dentists are not asking for hygienists, if they were, we could put, supply them but…

Howard: You know what’s really interesting in America is they built up this high production machine that started in the 50’s and the 60’s and the 70’s and the 80’s when insurance was from unions and was paying outrageously higher prices, like a thousand bucks for a crown, a thousand bucks for (inaudible 0:30:34) and the prices have come down about 40% in real dollars but they still have this high overhead expanded function hygienists, assistants, whatever. And then when you look at these mature markets when you go around the world and look at these mature markets in Italy, and Japan, and Singapore, it’s, most probably dentists there are one chair, no employees except maybe one person that answers the phone, house clean, whatever, and they might only do three fifty a year, but they take home two fifty a month and  a lot of the dentists in America that take home two fifty, they could do a million dollars of running around with all those… it’s almost like their priority is more about creating jobs for six or seven staff members, two of which are hygienists making $40 an hour…

Alex: You would know the danger zone. So, the one or two principal practice will do well and the larger practices will do well, it’s the middle zone where you got three or four dentists, I’m talking about private practice, it’s three or four dentists and what the dentists are doing are running around doing the management because they can’t afford to employ managers so while they’re doing the management, they’re not on the tools. So, that’s the danger zone I call it, you either need to stay small or get big and get professional management in and that’s why Pacific Smiles started because we wanted to make sure dentists were doing dentistry and managers were being managers.

So, our mantra is that managers should manage, dentists should do dentistry and shareholders should be shareholders.No partnerships, no associateship, shareholders and because it was set-up as a PTY limited company in the first place, it had flexibility around ownership based on shares not on how much you build or anything like that. So that’s why we started, to make sure the dentists was doing 99% of their work by treating patients and that was better for the patient too.

Howard: A lot of dentists believe that the way to attract patients is with a lot of expensive high technology like chairside milling. Do you think chairside milling, same day dentistry is one of the reasons Pacific Smiles Groups is so successful?

Alex: We don’t do them chairside milling. It’s reasonable technology, but do you want to be a lab technician or do you want to be a dentist?

Howard: A dentist.

Alex: Right. So, why are you taking time designing something on a machine?

Howard: I know they pay $150 000 to be demoted from a doctor of dental surgery to a lab tech.

Alex: That’s’ right. So, we got one for a trial for a while at Green Hills and three or four of the dentists we learned it all and we got it and after a month I said to them, “How’s everyone going?” At first I said, “Oh, this is great. We can do this, this, and this.” Then after a month, I said, “How’s it going?” They said, “We feel like we’re a technician, a lab technician. We’d rather take the impression and send it to the lab, patients aren’t asking for it to be out day.”

It’s not a marketing ploy for us, it’s a service to the patient in some areas where there might be short of patients and everything is a Cerec, everything that walks in the door is a Cerec. If you are a Cerec machine, guess what your patients are going to need? If you’re paying the lease payments on a $200 000 Cerec machine, guess what treatments most of the patients are going to need?

Howard: A Cerec.

Alex: Because you got to fund your lease payments. Now, what I do think with the big wave of the future will be scanning. Intra-oral scanning will be I think the next big wave that we’ll be looking at…

Howard: Are you rolling out scanners (inaudible 0:34:27)?

Alex: Not yet, we’re looking at it, we’re assessing it from my looking at the market so far, all the scanners, the heads are too big. We keep saying that it’s… you don’t have to have an impression in your mouth for three or four minutes but by golly, have you’ve seen the size of the heads of some of the scanners? So, until they get it down to about the size of a high-speed handpiece, I think it’s still a way off.

Howard: What is your overhead goal for these seventy-one locations? What do you like to average overhead to be per office after you pay everyone, dentists, everything?

Alex: After we pay everyone? 20%.

Howard: Is that your goal or is that where you’re at?

Alex: No, that’s our goal though it sounded better.

Howard: Yeah, but what is reality?

Alex: The reality is a whole mixed bag because of the new practices have no marginal (inaudible 0:35:15). After one year, in one to two years, they might have 5% margin and they might have 10% margin. So it takes time for these things, so overall we won’t have the margin…

Howard: So, what did you average for seventy-one offices last year? What did 2016 nett profit average for seventy-one locations?

Alex: So, in terms of as a percentage of patient fees it’s around about 18, 19%.

Howard: 18, 19%?

Alex: Yeah. So, we have some that might be up near 25% but then we’ve got some that are as I said, all the new ones are like but we’re investing in the future, we’re doing the long game here. You talk about these roll-ups where they buy a practice, they buy a Howard Farrans practice, what are you, fifty-four? Where are you going to be in five years’ time? It’s got a use by date on that practice; our practices don’t have use by dates on them. In a hundred years’ time there will still be a practice at 8 Molly Morgan Drive, Green Hills because it’s built on a culture of its brand and its delivery of great dental services to their patients not on individual dentists.

Howard: Of the seventy-one locations, what percent do you rent versus own land and building?

Alex: We rent seventy-one.

Howard: Yeah, since you’re not in the real estate business.

Alex: We’re not in the real estate business. So, what’s the return on real estate, 6,, 7%?

Howard: And it’s an illiquid asset for the whole life of the practice.

Alex: That’s right. What if you suddenly realize it’s the wrong location, will you just surrender your lease and take the lease somewhere else? I’m not saying real estate is a bad investment, but for us, for Pacific Smiles…

Howard: Actually real estate, real estate is becoming a very bad investment because with As Amazon’s revenue goes up for online trading, I mean, you drive around any American major city the most common tenant in every retail center is “space available” because Amazon is cannibalizing all these retail…

Alex: But America owe the bill, your population per square meter of mall space is three times Australia, so that’s why you’re shutting down your malls, that’s not happening here and yet…

Howard: Not just… I’m not talking…

Alex: And yet, Amazon’s coming…

Howard: I’m not talking just malls, I’m talking all those retail locations. I mean, so, I’ve been in Phoenix for thirty years and all the little shops, anything that can be sold on Amazon like clothes, so many things, they’re all gone now. It seems like the only thing that still has retail renting you-need-a-human-involved type for restaurant to cook, human to cut your hair, a human to do a mani-pedi…

Alex: So we’re identifying this in the shopping center’s week… The shopping malls or centers we want to go into are: one, is where there’s a food hall, and there’s cinemas, and there’s social engagement with people, there’s medical centers and things like that where you’ve got a gap like dental centers that’s why the shopping center owners like having us there because there’s another reason to drag people to the shopping center, we’re not a retailer.

Howard: Well, retail’s going to go where you’re going to need to explain what… there’s just going to need to be a human there— a human is going to need to cook the food, cut my hair, fix my tooth, touch me, mani-pedi, but if it’s just, “I’m going to take this, I’m going to buy this item, and I walk up to you and say check me out”, that’s going to Amazon.

Alex: I know.

Howard: There has needed to be a physical reason that human to be in the mall (inaudible 0:38:44)

Alex: I’m glad I’m not in the retail business.

Howard: Yeah, it’s a whole changing landscape. Okay, so what percent on, for these seventy one stores, do you average for marketing?

Alex: So, across the board, we would spend 1.5% of our turnover on marketing.

So, I want to get back to marketing because the best marketing is word of mouth…

Howard: Right.

Alex: We know that. Treat someone well and they’ll tell a dozen people. In fact, in today’s world, treat someone well with social media, they could tell five hundred people who will tell another five hundred people. So, it’s treating the patient that you got them the chair well, giving them an experience which is better than anything that they’ve ever had before, that’s the best marketing. Other than that, it’s we’re doing a lot of what we call “pop-ups”. So in the shopping center, we’ll take a temporary space out in the main traffic with a couple of girls on the desk talking to any passerby, giving them a free toothbrush and talk about oral health. What have you said the pop-ups are going well, we make appointments…

Howard: Pop-ups are when you have a human out there working the crap…

Alex: Here, we have a human. Again, we have a human, yup.

Howard: And they’re talking to passersby.

Alex: Yeah, saying “hello” and giving them something free.

Howard: What is the average life expectancy of your associate dentists? How long does… in the seventy-one locations, how long does the average dentist stay with you before they quit and move on or get a job from somewhere else? What’s the average turnover?

Alex: Okay. So, the average turnover is about 20%. So we’re turning over 20% a year but we’ve got a large…

Howard: So, one-fifth move on every year?

Alex: One-fifth move-on every year so we’ve got to get new dentists not only to cope with our expansion, but also to replace them. That figure is coming down because as the practices in general are getting, the practices in Australia are getting more competitive, less patients, we’re getting more dentists because we’ve got the patients because we’re, remember, we’re in the shopping center where the people are so our turnover is dropping. We have some dentists who have been with the group and its predecessor for thirty, thirty-five years, we‘ve got a bunch of high-end dentists who’ve been with us since it started in 2003. So, it’s about them trusting and believing and loving the experience of working from one of our places.

Howard: And would you hire a dentist straight out of school?

Alex: Yes.

Howard: Straight out of school?

Alex: Yeah, and we’ll mentor them. We have a formal mentorship program— one of our senior dentists will have two of them as mentees and I look after them, but we also have formal education and they come in to head office and we do some stuff around on patient communication, record keeping, impression taking, all these stuff. We finish off their education that they didn’t really get finished at university.

Howard: Well, when you’re out of school, I mean…

Alex: How we love to grow your own.

Howard: You like to grow your own dentist?

Alex: Oh, in fact, we literally have done that. One of our best dentists has been with us for forty years and her daughter is now one of our best new graduates.

Howard: And what percent of your dentists are male versus female?

Alex: 60% female, 40% male.

Howard: So, do you, that’s what we see in the United States. The United States corporate dentistry is running two-thirds women, one-third male. Do you think the women are more inclined to want to just have a job?

Alex: They’re less likely to want to invest in a practice, but are now actually saying that about the males as well. So, why would you go on invest five, $600,000 in a practice when you can do as well at somewhere like Pacific Smiles and you spend no money getting in? So, and you get more flexibility and you don’t have the staff hassles and things like that. So, that’s what it’s a real appeal.

Back in 2003, that’s what I identified, two macro changes— suddenly the patient was less loyal to an individual and was moving around more so they’re more loyal to their convenience, so, seven days a week or so. So, we have a change in the patient— no longer were they Howard Farran’s patient, they were today’s dental patient. See? So, no longer were they our safer hands patients, they were Pacific Smiles at Green Hills’ patients so when I’m not there, they’re happy to be there. So those are change in the attitudes of the consumer and those are the change in the professional. The professional didn’t want to own a practice like the traditional post-war scenario where everyone wanted to own the practice. Some of them still have that itch that they want to own their practice and they leave us to go and do that and some actually come back to us. So, they’re the two macro changes that occurred way back in the beginning of the last decade which we’ve capitalized on well before anyone else.

Howard: So the patients are more loyal to themselves than the doctor?

Alex: They’re more loyal to convenience, they’re more loyal to accessibility and availability and affordability than they are to the individual doctor. That doesn’t mean that when they, if they’re being seen Dr. Bailey for years they’re going to ring up and say, “I normally see in Bailey, can I get in with her? now where else we can do that?” Or “She’s away for six weeks” “No worries, we’ll see someone else.”

Howard: Right.

Alex: So the bolted on loyalty to an individual is gone. We don’t have names on the door, we have Pacific Smiles on the door. We have names on the entry to the room to identify Dr. Farran… did you say you’re coming to work for us by the way?

Howard: Yes.

Alex: I’ll find a spot for you.

So, Dr. Farran there -so you know who you’ll be seeing but often if I see a friend on the street, so my daughter said her best friend, goes to Pacific Smiles at Salamander Bay and I said, “Which dentist does she see?” and she said, “I don’t know. It’s the guy with a blonde hair.”

Howard: Yeah, I know. I hate that my office when those have…

Alex: It’s a change. It’s a change for (inaudible 0:44:56)

Howard: They’ll be on the telephone and they’ll go, “and which dentist is it? Well, is it the short, fat, bald guy or the tall, good-looking guy?” and I’m like, “can you explain it some other way than that?” But that’s what they remember.

Alex: Yup. So, look, there has to be a shift in egos too. So, the guys that, “I’m going to be sexist. The egos that men have which is, “I can do it. I can do it really well and stand aside.” So they want to own the practice, they want to pay the wages, they want to hire the staff, they want to fire the staff, they want to do the deals with the leasing executives, they want to do the marketing and all that sort of thing because that suits their ego. But they fail to realize they’re spending 25% of their time doing low billable stuff because you could pay someone $30 an hour to do all that stuff. So, there’s an ego thing.

So, I really like the dentists who don’t have the really strong egos. So, I call it the middle pash— the personality dentists at the top will never guarantee to attract them because they’re too interested in having the top drawer organized the way they want it organized. That’s fine, I’m not going to say they’re less a person because of that, but they need to own their own four walls and everything inside it. And then you have the low-level ones who really need to work in a supported situation like government clinics and whatever. So, we want the stuff in the middle there and we do well with them.

Howard: I want to say I (inaudible 0:46:35) a lot of you might be wondering, “Wow he only spends 1.5% on marketing, I thought most people crushing it are spending 3 to 5% on marketing.” But you’ve got to remember that the people they have to spend 5% of marketing are in medical dental buildings where no one can find them. If you have location, location, location, if you have visibility, your rent actually is your marketing.

Alex: It is part marketing. So, in that shopping centers, we’re paying a shitload of money for rent, but I justified it on the basis about one-third of that rent is foot traffic.

Howard: Right, sure.

Alex: But you have to take advantage of that by being open seven days a week, but as long as you have the patients, keep the dentists happy, the employee staff they’re happy, we’re big employer, we have over a thousand employees, so, we’re actually achieving a lot, by making ourselves successful by helping a lot of other people (inaudible 0:47:32)

Howard: So you have three hundred and fifty dentists?

Alex: Three hundred and fifty dentists, yeah.

Howard: And one thousand employees?

Alex: Yeah.

Howard: Wow. So, you’re averaging three employees per doctor?

Alex: No, no. We’re two employees per doctor but you got to head office people, you’ve got part-timers, although when you’re talking about human beings says a lot about when you go…

Howard: Oh, so full-time equivalence…

Alex: Full-time equivalent is 2:1

Howard: Full-time equivalence is 2:1?

Alex: Yup.

Howard: And that’s how you keep your labor at 20%?

Alex: Yup. So, we don’t have… When I travel to America and been over to see Hartland and Pacific Dental and Aspen, and one thing that impressed us, well, didn’t impress us, but alerted us was this 3:1 thing and happening in America. When you got someone employed just to do the health fund stuff, the insurance stuff because you got to get pre approval for everything or most things, but you don’t have to get that here. So, we as doctors have medical sovereignty to be able to do it.

Howard: You know, that’s so sad because…

Alex: If you got to do it, go and do it and bill the  health fund. Now, if they’re blowing their annual limits, that’s the patient’s problem not ours.

Howard: Yeah, it’s so sad because… there’s a big debate on the cost of healthcare and the last president wanted everyone to be covered, but the cost went off that seemed big. It’s just typical government that they have this grand idea to cover everyone, but they didn’t have any ideas on how to cut costs, and one-third of the cost of the whole health care scheme in America is freaking paperwork and they’ve could’ve eliminated, they could’ve cut it in half a hundred different ways but they never have an idea to cut cost, they just have ideas to give more shit away for free.

Alex: Yeah, and in Singapore, it’s about 4 to 5%.

Howard: Yeah, and America it’s a third.

Alex: You see, you’re the highest paid.

Howard: And usually the smart people in America copy off the smart Asian kid at the front of the room. They could’ve just gone to, they could’ve just copied Taiwan, they could’ve copied Singapore, they could’ve copied the smart Asian kid, but they just… Yeah, it’s a…

So, when you do marketing, what do you think is more important? your accessibility, easy to find; your availability, the hours; or are you doing Facebook ads, Google Adwords, direct mail…

Alex: We’re doing a beta Facebook, a bit of Google, we’ll have campaigns around a new center opening so we all do location services around that area, it depends. If someone’s got a toothache, its availability, I want to be seen before lunch today so you got to have the urgent care spot already pre-allocated in the book, you got to be open. If it’s Sunday you want to be open and you got urgent care spots there. So you have a whole bunch of people who need urgent care so that’s a different appeal in terms of those three things to someone who’s trying to balance a budget and wants it to be affordable. So, we have a thing called “dentalwise” which you can join and pay a monthly fee so you can pay to a payment through the year depending on which one you choose, one or two check-ups a year you get 10% off your fees and you get other things.

Howard: So, this is your own in-office insurance plan?

Alex: In-office plan, dentalwise.

Howard: And this is called, dentalwise. Is this a separate website?

Alex: Yeah, dentalwise is a separate website.

Howard: So, is it at

Alex: It’s just being rolled-out, we’ve been piloting it and this year we’ll be rolling it out, so that’s helping people…

Howard: Will you roll it out to non-Pacific group dentists?

Alex: Not at this stage.

Howard: So, that has to be a proprietary competitive advantage just for Pacific Smiles Group.

Alex: Yeah.

Howard: So, when you went to America and you studied Rick Workman’s Hartland Dental’s,  Stephen Thorne Pacific Dental Group, Aspen Dental, did you learn anythings to do or did you mostly learn things not to do?

Alex: Okay, I go back- we did that in 2009, we went over it. I go back to 2005 we went to the U.K. the CEO John Gibbs and myself, he’s still the CEO, we went to the U.K. and there we looked at the corporates there, Oasis and a few others and what we learned there was what not to do, which is basically the roll-up strategy. They had a roll-up strategy, they did very fast and they didn’t know how to manage all those practices. We came back, the only thing we’ve picked out up was the dental plan idea, they have in the U.K., so that’s where dentalwise was based on their dental plan ideas.

When we went to America, we’re really impressed with the location of the Pacific services. One, they are in the shopping malls, on the edge of the shopping malls…

Howard: Okay now, shopping malls. Okay, so in America, a mall means like a huge one building two or three stories tall, that’s a mall…

Alex: Oh, okay.

Howard: But a retail center…

Alex: Yeah, they’re on the edge of retail centers…

Howard: Yeah, retail center.

Alex: They had an attempt of being fairly consistent, but I must admit, Aspen were the best on consistency. We’re really impressed with their training of new dentists, they brought them into the head office for a week, they were consistent in all their forms and the way they (inaudible 0:52:47)

Howard: Did you meet Fontana, the CEO?

Alex: Yeah. What’s his first name?

Howard: Is it Joe Font… Mark Fontana? Joe Fontana?

Alex: Yeah. Now, we were impressed with him, we were also starting to look at how people doing their IT because we had a dispersed IT system. We had servers in each office, but Aspen had this consolidated model.

Howard: On the cloud you mean?

Alex: Well, that stage it wasn’t the cloud, it was on big servers and everything, but we liked that idea, but our connectivity in this country wasn’t good enough for that, but now, it’s getting there now.

So, we were impressed with Aspen we came back thinking we got to have a cookie-cutter approach. So, we didn’t do any new centers for twelve months while we went back and redesign everything, we did to a cookie-cutter approach.

Howard: I think one of the… smartest things…

Alex: That was useful. I’m sorry, Hartland to complete, Hartland looked after their dentists well. They engage well with their dentists so we got that side of it.

Howard: So, the Hartland’s core competency was engaging the dentists?

Alex: Yeah. We spoke to a few of the dentists who worked in Hartland and they were just raving about it.

Howard: Yeah, I think Hartland keeps their doctors the longest…

Alex: Yeah.

Howard: And I think it’s because they have the most continued education programs and they’re long programs like two-year implant system courses. I think Aspen, what Aspen does best is… American dentists all want to go to where all the rich people live and do full-mouth rehab and Aspen goes to the underserved poor areas with medicaid's and actually, I think one of the best corporate change is affordable dentures because every dentist I know hates dentures.

Alex: Yeah, so we’re looking at that at the moment and..

Howard: So, they go to all the areas with a bunch of trailer parks, bunch of retirees, bunch of senior citizens with removable and they set-up amazing, affordable dentures and they’re able and it’s the…

Alex: So, they have a lab as well with them?

Howard: Yeah.

Alex: A big laboratory?

Howard: And what they do that’s genius is they always go into an area and they advertise the lowest price for an extraction like they’ll say like, “$69 for an extraction.” Well, no one comes in for one extraction and usually they come in for… if someone’s coming in for an extraction…

Alex: Particularly in those areas.

Howard: They got a lot of dental work done, I mean, when’s the last time you got a tooth extracted?

Alex: Yeah.

Howard: So when someone’s coming in and says, “Yeah, I need this tooth extracted” my God! They need a whole treatment plan of dentistry. So, they go with the lowest extraction price and then they advertise a very low cost denture, but then they have a higher cost denture with like Ivoclar...

Alex: I’ve seen their website.

Howard: Then they add denture on two implants or maybe on four implants and (inaudible 0:55:32) all the way to all on 4…

Alex: It’s successful?

Howard: It’s very successful, extremely successful. I think they have a hundred locations and they have… it’s a cash cow. So, I think they know their market, they have a market focus.

Alex: They’re appealing around the affordable denture, tagline. So, if I need a denture, good idea, I want it to be affordable they must be good at doing dentures. So, this is where I think…

Howard: And then they upsell 20% to an implant supported denture.

Alex: So, it’s the opposite end to the high ego, high personality dentist…

Howard: Right, exactly.

Alex: And that’s where the orthodontics from the 80’s roll-up and any attempt by business people to roll-up a group of specialists, generally end in tears because you can’t make a buck out of it unless you control the professional, but the professional doesn’t want to  be controlled.

Howard: Right.

Alex: But we have (inaudible 0:56:33)

Howard: You roll-up specialist, you’ll end in tears. That’s classic…

Alex: Yeah. So, we don’t have many specialists in our group, few orthodontists and a couple of endodontists, but they just come and go a little bit. They’re on a sessional basis, they are not their main game so we just, good dentists, quite a few of them can do wisdom teeth till the cows come home, can do implants and what have you because they’re going out and got extra education.

Howard: So, you’ve talked about a lot about implants…

Alex: Yeah.

Howard: What about invisalign? Do you try to teach all your doctors how to do invisalign?

Alex: Yeah, yes. We’ve got a quite a few who’ve done the course, we don’t do the course ourselves, but people who do invisalign courses do that and…

Howard: Is that a very big part of (inaudible 0:57:19)

Alex: It’s not lucrative, the trouble with again, not wanting to offend people in their profession, but invisalign take the majority of the fee. If you think about what the patient pays, for it to be economical for the patient, invisalign takes the majority of the fee.

Howard: So, what’s the lab fee on invisalign case?

Alex: Oh, I don’t know, it’s three to $4,000. So, particularly, I mean, if you’re doing lots of them you get a better deal from the invisalign, but they control the market. It’s a great product, it’s a fantastic product.

Howard: You’re saying it’s a better deal for invisalign?

Alex: It’s a phase shift from the dentist to the lab. It’s like using the lab that you spoke of earlier in the $350 crowns, but to get invisalign, you don’t have the flexibility. There’s not enough market pressure, not enough providers in that space to create pressure on the market. So, the patient fee instead of  no more than a third going to the lab, it’s a fair bit. So when you do put in the calculation to some of our dentists it’s not financially viable. So, unless you charge the patient a lot more…

Howard: Same question, a lot of kids are wondering is sleep apnea, a great snore guards, sleep apnea is that a great lucrative thing to get into?

Alex: It’s actually a crisis out there with people with sleep apnea and the crisis on work and driving and risk is huge unfortunately, certainly in this country, medicare and the health funds don’t seem to recognize the significance of it. So, they don’t pay well on it. So inferably, it ends up being a private expenditure by the patient and so sleep apnea devices have to be done for $2,000 because you’ve got to pay seven or $800 to the lab and there’s not much in the middle to manage it. So, it’s not a big, there’s not a lot of demand for it.

Howard: So, then what are you mostly focused on? just back to basics cleaning?

Alex: So, we’re not just cleaning, but we do a whole gamut of restoration work…

Howard: Which is what?

Alex: Direct composites, indirect composites, composite veneers, porcelain veneers, implants for the dentists who have been through the courses, good wholesome basic, middle of the road dentures. Look, we really believe in having good oral hygiene and good oral health would lead to better whole body health and that’s one of the things we really (inaudible 0:59:48).

Howard: So, you are mostly doing cleaning exams, X-rays, fillings, crowns, and root canals, and extractions?

Alex: Yeah, root canals, implants, dentures…

Howard: So, bread and butter dentistry?

Alex: Bread and butter dentistry, a bit of ortho, but a lot of that… in fact, if I think about what gets referred from, the majority stuff that would get referred would be orthodontics, complex molar endo and complex oral surgery would get referred. The rest of the stuff we do tend to handle— we have general anesthetics for the kids, and such that we have…

Howard: And what about urban versus rural?

Alex: Yeah, well, it’s working, both are working for us. We started out more rural or we call it regional because there were less dentist per ten thousand people. So, it’s just natural that there’d be a market place there for it. But, harder to get the dentists to that area because they like to be in the city, city is easier to get the dentist, harder to get the patient?

Howard: That’s acute though, their mom migrated here all the way from India or Sri Lanka, and then the second generation you can’t even get them to go one hour out of town. It’s like your mom came six thousand miles from Sri Lanka or Bali or Indonesia for you to have a better life and you won’t go an hour out of town.

Alex: That’s right. I mean, all the associations here, the dental associations are crying that there are too many dentists in the country. We don’t have too many dentists, we have a maldistribution of dentists.

Howard: Sure.

Alex: There’s too many here who want to be ten kilometers from the CBD and none not one want to be more than a hundred kilometers from the CBD.

Howard: What then one kilometer of the opera house is two hundred dentists? I mean, every dentist wants to have an office that overlooks the Sydney Harbor Opera House.

Alex: Smart dentist is somewhere out in the west suburbs or the southern suburbs. He might live in near the suburbs, but he drives out there to see his patients.

Howard: Well, I can’t believe I was so lucky that you came all the way to the Hyatt Regency in downtown Sydney overlooking this beautiful harbor and come talk to all my homies today and you just said so many profound things that was so informative and it’s so nice to get someone on here who walks the talk because lots of times I listen to a consultant and say, “Well, does that consultant have an office? Is this all talk? Is there any walk?” And here’s the guy that’s publicly traded, owns seventy offices and everything he says is spot on, and what’s sad is the condition of the human is you don’t want to hear spot on. You want to hear what you want to believe and so many people just are making a fortune off dentists telling you what you want to hear, telling you what you want to believe. They do it in politics, they do it in religion, they do it in practice management, and here’s a guy, another just real world guy with seventy offices telling you some very brutal facts and I know my homies love you to death, I know a lot of this stuff you didn’t want to hear but it’s true. I mean, they don’t want to hear that you need to open on evenings and weekends and Saturdays and Sundays, they want to hear you say, “No one shows up on Saturdays, no one comes up on Sundays, and you should have this big staff doing all your cleanings and all of your help even though the insurance fees are going down every year, every year, every year.” But thank you so much for coming by.

Alex: That’s right. Thank you, Howard.

Howard: And you’re awesome, buddy.

Alex: Good.

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