Dentistry Uncensored with Howard Farran
Dentistry Uncensored with Howard Farran
How to perform dentistry faster, easier, higher in quality and lower in cost.
Blog By:
howard
howard

1074 Dental Manufacturing & DSOs with Chad Park, DDS, President & CEO of Acero Crowns, Co-Owner of Bravo Dental Clinics : Dentistry Uncensored with Howard Farran [Part 1/2]

1074 Dental Manufacturing & DSOs with Chad Park, DDS, President & CEO of Acero Crowns, Co-Owner of Bravo Dental Clinics : Dentistry Uncensored with Howard Farran [Part 1/2]

6/29/2018 6:51:41 AM   |   Comments: 0   |   Views: 259

1074 Dental Manufacturing & DSOs with Chad Park, DDS, President & CEO of Acero Crowns, Co-Owner of Bravo Dental Clinics : Dentistry Uncensored with Howard Farran [Part 1/2]

Chad Park is the President and CEO of Acero Crowns, a leading manufacturer of preformed pediatric dental crowns.  Dr. Park graduated from dental school in 1996 and completed a GPR residency program at UT School of Dentistry and Hermann Hospital in Houston.  He graduated Harvard Business School in 2010.  Dr. Park and his wife Dr. Rita Ne own and operate 6 Bravo Dental Clinics throughout Dallas.  They have 2 daughters age 8 and 16 and he is a avid Crossfitter.

https://www.acerocrowns.com/

http://bravodentaldallas.com/



VIDEO - DUwHF #1074 - Chad Park




AUDIO - DUwHF #1074 - Chad Park



Listen on iTunes

1074 Dental Manufacturing & DSOs with Chad Park, DDS, President & CEO of Acero Crowns, Co-Owner of Bravo Dental Clinics : Dentistry Uncensored with Howard Farran [Part 1/2]


Howard: It is just a huge honor for me today to be podcast interviewing Chad Park all the way from Dallas, Texas. He is the President and CEO of Acero Crowns, a leading manufacturer of preformed pediatric dental crowns. Dr. Park graduated from dental school in 1996 and completed a GPR residency program at the University of Texas School of Dentistry - that was in Houston? - and the Hermann Hospital in Houston. He graduated Harvard Business School in 2010. Dr. Park and his wife, Dr. Rita Ne, own and operate six Bravo! Dental clinics throughout Dallas. They have two daughters, age eight and sixteen, and he is an avid CrossFitter. Nice job. Did you see the dentist who won the championship like four or five years ago?

 

Chad: I think he was a Masters.

 

Howard: A Masters?

 

Chad: He might have been an oral surgeon. I think I may have actually met him once.

 

Howard: I almost got him to come on the show. We contact, email, he answers usually like "LOL"; he thinks it's funny.

 

Chad: I remember because I was in Aspen one summer and I went to a CrossFit gym and there was an oral surgeon there, just ripped and just making me look old; and later on, I heard that he was a competitor and I think he may have been... I think he was in the age fifty plus Masters’ Division, but yeah, it's incredible.

 

Howard: It's amazing. So, man, you've had a long journey. What you've accomplished is amazing. So, first you started with the South Texas Dental Group and built that to thirty-seven dental offices.

 

Chad: I cannot take credit; that was a team effort, obviously. The two founders, Dr. Barry Gomel and Todd Istre started it, and they opened up six offices.

 

Howard: Barry what?

 

Chad: Barry Gomel.

 

Howard: G-O-M-E-L?

 

Chad: G-O-M-E-L, and, believe it or not, Barry's dad is a world-famous Time Life photographer. If you see pictures of Mohammed Ali or JFK or the Beatles, that was his dad. So, I would go to Barry's house one day and I'm looking at pictures and he's got a picture with him sitting there with Muhammad Ali, and I'm like, "Is that you, Barry?" He goes, "That's me." He's got pictures with the Beatles. It was him. So, his dad was a world-famous Time Life photographer. So, he's got a pretty interesting story. But, yeah, Todd and Barry started South Texas and it got up to six offices and then went to branch out to Dallas and that's when I joined in.

 

Howard: So, what city do they start in?

 

Chad: Houston.

 

Howard: Houston.

 

Chad: Which is why they would call it South Texas, because we're in Dallas and everybody's like, "Why are you called South Texas? Chad, we are in North Texas." I say, "Well, because we were founded in Houston, so we kept that brand all the way throughout Texas, so when we opened up in Houston, San Antonio, Dallas, Fort Worth, just kept the name."

 

Howard: Wow! And then you guys sold that to an even bigger DSO.

 

Chad: Yeah, so, before you knew it, we were up to twenty-some offices. Then all these people started calling us. It was 2008, bad times, right? Recession, but we were rocking and so we were getting phone calls from investment bankers, private equity, and the four of us looked at each other - we're dentists, we don't have an MBA like you, we're like, "What is private equity?" They kept on calling us and then we found out that, hey, this is probably a good time to take some cash off the table and so we partnered with private equity. They helped us grow even bigger with some acquisitions, and finally in 2016 we sold all of it; which is how I got out and my wife and I are starting up the Bravo! Dental now.

 

Howard: He's got a very romantic story. He met his wife in his GPR. So, there was six people in the GPR, the other four were married, two single ones, boy meets girl, and the rest is history.

 

Chad: There you go.

 

Howard: Let's stay with DSOs just for a little bit.

 

Chad: Yeah.

 

Howard: Because I love talking about DSOs, simply the fact that when you go into every dental office, they have a hard time managing their own office. So, I always tell the kids when they get out of school and they go work at say Heartland, "If Heartland's managing eight hundred offices, are you telling me you can't learn anything about management?" Because they'll come out of there, if they go in with a bad attitude and say, "Oh, it's a mill and I'm working hard, and I want my own", but it's like, "Okay, but did you take every form they have and Xerox it? Did you talk to the office manager?" And they'll come out of like two years at Heartland and I'll say, "So, what's the code for a routine cleaning?" "I don't know." "Who was your district manager?" "I don't know." They didn't learn any of the business and then they're starting their whole life and they're alive in the middle of one dental office and they can't manage it.

 

Chad: Yeah.

 

Howard: And then there's guys like you and your friends where you could manage like thirty. So, first I want to ask you a couple of things. It seems like I've been through this rodeo a couple of times. When I got out of school in '87, Gasper Lazzara had rolled up the orthodontic market into Orthodontic Centers of America, it was on New York Stock Exchange. There were a dozen on Nasdaq. They all folded.

 

Chad: Yep.

 

Howard: Now they're back, but I notice they're back, but none of them can get on Wall Street and no one's going to take it public because it's so capital intensive. I mean, if I'm going to do a hundred-million-dollar rollout, I'm only going to buy one hundred offices collecting a million a year each. So, if you went on Shark Tank and you went to Mr. Wonderful and say, "I want to borrow $100,000,000 to go buy a hundred one-million-dollar houses, he'd probably just have a heart attack or run all the way back to Canada. I mean, it's so capital intensive. What do you think of the health of the DSO market today?

 

Chad: You know, it's booming. It is! What I'm afraid of is this... We were one of the earlier adopters of becoming a DSO. We weren't the first, but we're right there with Heartland. I was with Dentsply in their Pinnacle meeting, where they kind of wine and dine the big guys and I was there with Workman when he only had forty offices.

 

Howard: Was that when John Miles was the CEO?

 

Chad: He was, yeah. Pinnacle went for about ten years I think, and then they stopped doing it. Steve Thorne was there with Pacific and we were all a small little club. Obviously, Pacific and Heartland just ballooned to massive size, but since then, people are... you know, we had to win the political fight with the ADA, right, of the old guard, the local dental societies because we were deemed the death of dentistry - DSOs are bad, corporate dentistry - and we had to really try to educate them going, "Look, you can't just throw DSOs under the bus because maybe one group is doing some bad things." So, we had to win that political fight with the ADA and the local dental societies; and I think we've done that. I think everybody has now accepted - even Gordon Christensen is talking about DSOs are here to stay and it's good. But now, we've got so much money, private equity, looking for investments, they look at us, we're economically resistant, we're resistant to the economy where everybody always needs dental work and things like that. So, the fear that I have is every single doctor out there hears these stories about, "Oh, ABC Dental Office had fifteen locations and so for X millions of Dollars..." and they're chasing after that dream and, "I'm going to open up fifteen offices in a year!" That's where it gets a little scary, is they don't understand the full scope. I mean, for us it was a good partnership. We partnered with the right private equity that wasn't going to shove numbers down our throat, but at the end of the day, private equity wants a return on their investment and I think some of these dentists need to know...

 

Howard: And explain the difference between private equity and venture capital.

 

Chad: Well, it's the level of risk. I dumb it down. Venture capital, they're going to be risking money on very early start-ups, proof of concept, you don't even know. So, they want a higher return on their investment, right? If they get one out of ten venture capital that hits a home run, they're happy. So, VC, I don't know if VC is really in the dental market at all.

 

Howard: No, they're not.

 

Chad: So, private equity is higher up, of course. They're looking for, in the dental space, they're looking for platforms, so established brand companies where they can actually... that has a building, that has a marketing, that has a brand out there, and then they're going to say, "Okay, we think we can multiply this into multiple States." For example, South Texas, they saw that we were branded, we had a great platform, we had a corporate office and collections and billing and all that set. They thought that they could replicate that and go into multiple States. So, they're looking at that. But then now, there are strategic acquisitions, right? If South Texas wanted to go into Alabama, we want to look for a group of practices that have similar culture with us, that is focused on the Medicaid market, pediatrics. So, if we find a group, let's say Dr. Farran has seven offices in Mobile, Alabama, in Birmingham, Alabama, that could be a strategic acquisition for us. So, now it's becoming more and more complex. I would hate to be a dentist - and I'm not even an expert, but at least I've gone through this - I can't imagine how a dentist, let alone coming out of dental school trying to learn how to - what we were talking about - how to run an office, manage employees, now think about all these investments that are coming in. Private equity and strategic acquisitions and EBITDA, multiples of EBITDA. How do you value your company valuations? They spit out all these terms, liquidity event, you know, come on. We would look back and go, "What are these terms? We know amalgam, we know bonded resin, we know caries, we know dentin." They start throwing out all these Wall Street terms, it can become very, very confusing, but it's not going away. I think we've got a strong industry. I think Gordon Christensen said that dentistry... in today's lecture, said dentists are the Number 2 most respected occupation - US News and World Report. We were only second to computer programmers. He gave us that statistic this morning. I was, "Wow!" And I don't know, I can't see the vision of the future. What do you think, Howard? I mean, do you think this bubble's going to burst? There's just so much money being thrown in. 

 

Howard: Well, if you go back through the history of finance, all the way back to when they invented accounting, when debits and credits - what was the name of that book we were talking about? 'Debits and Credits', right?

 

Off Camera: 'Double Entry'.

 

Howard: 'Double Entry'. My favorite accounting book is 'Double Entry' because they know you can't teach a kid accounting, so they teach you the history of how accounting was actually invented all the way back to Venice. When you study the history of accounting and the banking and fractional reserve and all that stuff, you always wanted to be on the side of the big government. So, if the government and some European country was storing gold, gold was the best value. Right now, the mothership of the world economy is the US debt. $19 trillion of debt. They don't want to pay that back with gold. That's why they got off the Gold Standard. So, you know they're going to trash gold. So, they've brought interest rates down. So, when you work your whole life and you put a $100,000 in a savings account, back in the day, in the 50s, the bank would pay you 5%, loan it out for 10% and you'd make a nickel for every Dollar in perpetuity. Well, hell, it's been under 2% forever. So, when bonds are paying 2% and the stock market multiple is again in complete bubble territory, we're back to the March of 2000 Y2K bubble pop, where you had all these internet companies with no earnings, like look at the valuations on Tesla with no profit. Amazon. Amazon's...

 

Chad: Yeah. Uber.

 

Howard: Amazon and Uber are going to... Amazon's going to approach a $1 trillion valuation and they don't have profit. Uber, Tesla, all of these. The most fun thing about being fifty-five years old is that you've seen every rodeo three times. I mean, I graduated 1980 when interest rates were 21% and you had double digit inflation interest rates. So, these Millennials, when you hear these Millennials bitching about, "I can't believe if we don't get into a house today at 4%, it might be five by Christmas!" Like, "Dude, my first house was 14%, okay", so with no sense of [sound like history]. So, private equity, they're not going to make any money in bonds, and you know these internet companies on Wall Street trading at twenty-nine times earnings, that's going to crack. So, private equity looks at a stable business of dentistry, where chiropractic - only 5% of Americans see a chiropractor every year - but 100% of the Planet Earth has to go and see a dentist at some level. So, it looks very lucrative and when the S&P 500 average profit margin is 5%, you have to have a pretty screwed up dental office not to be able to make 5%. Back to the big move and back about the DSOs trying to earn their reputation, I feel sorry for DSOs like Heartland because those guys live under a microscope. If something goes wrong at any of their offices, it's on the news. Dude, do you know how many dental offices at right now, today, don't even know their autoclave doesn't work? And these pediatric dentistry desks, they're never in DSOs.

 

Chad: Oh, yeah, no.

Howard: When they sit there and say, "Well, you know, the associates, they have rapid turnover." Well, they have rapid turnover in private practice too. So, all I'm saying about the DSOs is, when we go back to Orthodontic Centers of America, at the end of the day is having dentists, orthodontists and lawyers and physicians to work for you, it's like herding cats. They're highly educated people. If you want to have a million people do whatever you say, join the army. If you want a million employees doing what you say in free enterprise, go own a Walmart. But when you have a bunch of doctors, physicians, lawyers, it's like herding cats. So, they're never happy with anyone telling them what to do, and so they all gravitate to owning their own place. But I think the associates are here to stay as an intermediate thing. I'm getting out of school, I'm going to need a job for three, four, five, six years.

 

Chad: It's a great fit for the Millennials and for the increasing female population that want to start a family. They don't want to open up a practice. You know, what better way to get into the dental industry as a dentist is if you don't do a GPR, if you don't go to the specialty... come on, Howard, four years of dentistry, you graduate, you're legal, and you're safe enough to do profis and some simple extractions, but, come one, how many molar endos did we do in dental school, let alone [sounds like: calcifice]?

 

Howard: I did fifteen canals and now I've podcasted and met several kids that graduated from dental school and only did a few on the typodont.

 

Chad: Yeah.

 

Howard: On extracted teeth and only one canal on a live human.

 

Chad: Absolutely.

 

Howard: This dental school up the street here, I had Brad Gettleman on, who's an endodontist, who wrote Chapter 8 with Rob Roda.

 

Chad: 'Pathways of the Pulp', yeah.

 

Howard: And, basically, when Brad and I were at UMKC Dental School, there were six full time endodontists on the faculty. The school up the street from us, one.

 

Chad: With a...

 

Howard: So, they're going to need a lot of post-graduate experience. The big buzz all week is that KKR, which owns Internet Brands, which owns WebMD, they own Sesame, they own Demandforce. They own so many things. They bought Heartland.

 

Chad: What?!

 

Howard: Yeah, they bought Heartland. So, I mean they...

 

Chad: Are they the ones that paid $1.2 billion?

 

Howard: Yeah.

 

Chad: So, they own Demandforce.

 

Howard: And Sesame. Ryan. I'm trying to find out... oh, our brands, so, check out this. Our brands. So, they own Medscape, Demandforce, Heartland Dental, Officite, Sesame, DentalPlans.com, Health Boards, Dentalfind. So, now you have a venture capital firm that's got a healthcare division and, boy, they're buying everything from Heartland to WebMD to Sesame to Demandforce. And, again, why do they like it? Well, you're not going to make any money on bonds as long as the United States government's $19 trillion in debt. You know they want to inflate the cash, but, hell, the Federal Reserve even tells you in their minutes, their goal is 2% inflation a year. So, the rule of 72, divide 72 by 2, that means every thirty-six years, the money would be half of its value. So, how does that say to you when you retire at sixty-five and you're a female, might live to be ninety-five, and your own damn government tried to cut your money in half. I mean they intentionally want 2% inflation, but if anything goes south, it could jump to four or five or six. Like say, in 1980, when I graduated from high school, inflation was double digits.

 

Chad: Yeah.

 

Howard: The government would love double digit inflation because if inflation went to like 12%, what's 72 divided by 12?

 

Chad: Six.

 

Howard: That means in six years their deficit be cut in half. That's what they want to do.

 

Chad: Yeah.

 

Howard: But anyway... so, enough of that, we could talk about it...

 

Chad: I feel like I'm talking to Howard the MBA Wall Street consultant here. It's amazing. You talk about...

 

Howard: You went to Harvard, I went to ASU.

 

Chad: Well, I'm telling you.

 

Howard: I applied to Harvard and they laughed so hard the guy broke his neck laughing and there was... but it's fun to watch the game.

 

Chad: Yeah.

 

Howard: That's what I have noticed about people who love to own their own office, they just love the game.

 

Chad: Yeah.

 

Howard: They don't want to go in and punch a clock and carry their lunch pail and do the eight to five assembly line, fillings, crowns and root canals; they also love the game. So, then you sold your office, your wife's an endodontist, you decided to really stress out your life and have two children, and instead of having two easy boys - so, do you think your two girls will be more difficult than my four boys? Because I grew up with five sisters.

 

Chad: Oh, gosh, I hope not.

 

Howard: And I think four boys was half the work that my old man went through with five sisters.

 

Chad: Yeah, it was me and my brother and we caused some ruckus in our family and with my father passing away at such a young age, it was my mom raising two boys.

 

Howard: How old was he when he passed away?

 

Chad: He was 47. He was 47.

 

Howard: Accident?

 

Chad: No, he was a diesel mechanic, worked hard but he smoked and worked as a diesel mechanic. There's petrol all over the place. Lung cancer. And so, I was a sophomore in high school and I had to grow up pretty fast. All of a sudden, our breadwinner was gone. My mom's flipping burgers at a fast food restaurant and my brother and I are teenagers in high school.

 

Howard: In what city?

 

Chad: Right outside of Houston - Katy, Texas.

 

Howard: Katy, sure.

 

Chad: You know who else is from Katy, Texas, Howard?

 

Howard: Katy, Texas. Is that the singer with the cowboy hat?

 

Chad: There is a singer too, but I'm talking about an actress.

 

Howard: Who's the actress?

 

Chad: Renee Zellweger.

 

Howard: Send me your picture, Renee Zellweger.

 

Chad: So, Renee and I were in the same class.

 

Howard: Are you serious?

 

Chad: Yeah, so I jokingly will tell people - Renee will laugh, and if this message ever got her, she'll laugh at it - I always say I dated Renee Zellweger. Now, let me put that in context. I consider a date... technically a date is if I drive a girl home from a restaurant to her house. I consider that a date, so, in my book I dated Renee Zellweger.

 

Howard: Right on!

 

Chad: I took her from Pizza Hut on Mason Road to her house after a football game. So, anyway, Renee was fantastic. Gosh, I can't help but love seeing the success she's had. She's such a nice person.

 

Howard: Well, you know what's interesting about... another funny story with dentists is that you can't be the CEO of a company or a movie star, you can't do any of those things and be having green teeth and missing, so, all the famous people have a dentist and a lot of them are private about it, but I've met so many dentists over the years who will tell you on the side, "Yeah, my patient's so-and-so, but don't say anything." But anyway, so that's the girl right there.

 

Chad: Yup. That picture caused a lot of controversy because that's the picture that came out and people were all claiming she had bad plastic surgery and then there were other people saying, "Well, no, it's just her makeup", and then a couple pictures later her face looked back to normal again. I don't know.

 

Howard: Well, I know how she feels because everyone always accuses me of Photoshop, on steroids, plastic surgery, and I am all natural. So, you sold your deal to Access Dental and then they're doing that, and then you decide... your wife starts an endodontic practice or...?

 

Chad: Yeah, so, back when I was running South Texas Dental, my wife was an entrepreneur as well. She had three endo offices. She had probably six endodontic associates.

 

Howard: And that was then Bravo! Dental?

 

Chad: No, that was Highland Park Endodontics, Rockwall Endodontics and Root Canal Dentists. So, my wife is a pretty rocking businessperson herself. There was a point in time where she wanted to be more at home and spend time with the kids, pick up the kids, so she decided to sell her endodontic specialty offices. She sold it to a local, smaller DSO in Texas, but she kept the one Root Canal Dentist office, which she opened specifically to treat the underserved Medicaid patients because there was really no other endodontist in the State of Texas treating Medicaid patients because the reimbursement was too low. There are some endodontists that say, "Hey, we do take Medicaid, but that's Wednesday at 1:00 to 1:30." That's not really taking Medicaid. So, she opened up a dental office purely to see Medicaid dental patients because a lot of general dentists don't like doing root canals and they really don't like doing root canals on six, seven, eight, nine, ten, eleven-year-olds. So, she did that. So, she kept that one, but then South Texas, we did a transaction and we sold. So, we put our heads together and said, "Let's do another round of offices." It was nothing to grow to thirty, forty offices, nothing like that, but we wanted to really open up offices throughout Dallas to again help, serve. We both have a background of treating Medicaid patients, so we have that connection with that working class, lower income families and we always wanted to provide them with state-of-the-art dental care, even though they may not have deep pockets. So, I served on the Parkland Hospital Board for two years and I knew Parkland had these big clinics throughout the Dallas county, and luckily, they called me and said, "Hey, we need to have dental services in our medical clinics because dental infections and pain is one of the biggest reasons why people go to the ER." What's the most inefficient treatment in healthcare? What's the most expensive costs of healthcare? ER. And that's costing taxpayers' money, when a person goes into the ER for an abscessed tooth that they should've had extracted at a dental office. So, we partnered with Parkland and we've got dental offices throughout the Parkland Medical Clinics.

 

Howard: And that's the brand, Bravo! Dental?

 

Chad: Bravo! Dental.

 

Howard: And how many of those do you have?

 

Chad: Those are the six Bravo! Dentals.

 

Howard: Six Bravo. Does she still have the...?

 

Chad: She still has the one root canal dental office, so we technically have seven.

 

Howard: So, the six Bravo! Dental clinics, are those all Medicaid?

 

Chad: Yup.

 

Howard: So, for international people, I know a lot of countries just have dental for the whole country, but in the States, it's Medicare and it comes from the federal government and that's usually the sixty-five and older retirees. But each State has Medicaid, so think of long A, 'caid', State - Medicaid for the State. So, Medicaid and its reimbursement is different all over. It's another problem when you hear American dentists talking about Delta Dental; there's nineteen different Delta Dentals. So, don't think of America as like McDonald's, where in every State you go, it's two all-beef patties, sauce, cheese, lettuce on a sesame seed bun, because it's just not. There's nineteen shades of gray on that picture of what is Delta. Same with Medicaid.

 

Chad: Yeah.

 

Howard: So, I want to hold your feet to the fire on Medicaid. When you look at insurance data, it looks like a flatline heart attack with four big spikes on the four six-year molars. I mean, what tooth's most likely have a filling? An MOD, a crown, a root canal, tracks and an implant. It's basically, 80% of our industry is in four first molars. What would Delta Dental pay for a molar root canal for an endodontist or a GP, and then what would Medicaid pay for an endodontist or a GP for a six-year molar on a permanent tooth?

 

Chad: Well, so, previous... This could be another hour-long episode.

 

Howard: Let's do it!

 

Chad: But previous to... If you follow Texas, the State of Texas got sued by class action lawsuit. It's called the Frew settlement.

 

Howard: The Frew settlement?

 

Chad: Yeah, Frew settlement.

 

Howard: Can you find that, Ryan?

 

Chad: Frew.

 

Howard: F-R-U-E.

 

Chad: So, basically a patient died because they could not find a healthcare provider that took Medicaid; and it was a long-brewing lawsuit, but previous to the Frew settlement, a molar endo was $312.

 

Howard: $312.

 

Chad: Molar endo!

 

Howard: For a Medicaid?

 

Chad: Medicaid.

 

Howard: $300. Was that $300 for the GP or $300 for the endodontist?

 

Chad: $300 for the GP. There was no endodontist that took Medicaid.

 

Howard: Okay.

 

Chad: So, Medicaid patients, you couldn't even refer them to an endodontist because there was none.

 

Howard: And to put that in perspective for our Canadians, what would a molar endo cost from a GP in Dallas today?

 

Chad: I'd say, on the low end, there's probably a GP that will do it for $500 to $600. On the low end.

 

Howard: And what would the mean be, what would the average be?

 

Chad: Oh, gosh.

 

Howard: You don't know?

 

Chad: Yeah.

 

Howard: And what would an endodontist probably charge?

 

Chad: Oh, gosh, what? For a straightforward, no re-treat molar endo would be $900.

 

Howard: Yeah, okay, all right. And, that's why, okay, but anyway, so they were only paying about half the going rate of a molar root canal.

 

Chad: Oh, absolutely.

 

Howard: So, there weren't many providers, and someone couldn't get in and they died, and it went to court. 

 

Chad: So, what happened was the State of Texas was forced to increase the reimbursement rates and the medical side took - I can't remember what it was, it was a 25% increase or whatever - the dental side got smart. The dental side said, "We don't want an across-the-board increase on every single treatment because when's the last time you've done [sounds like: LeFort 1] on a Medicaid patient? No, we want the top fifty codes that we do on dentistry and we want to double the reimbursement. Smart dentists. We're pretty smart. We got it. So, now in 2008, Medicaid rates doubled. So, a molar endo went from - not all fees - but molar endo went from like $315 to basically $600, and so we were right there with typical PPO reimbursement rates. We were doing a stainless steel crown for $68 back then, now it's up to $100 - I can't remember what the latest figure is, over $100. So, the Frue settlement was a massive change. So, in 2008 we were running a very efficient South Texas Dental and we were profitable and then all of a sudden, the State goes, "Hey, Chad, we're going to double your reimbursement rates." What do you think our bottom line went? It went pretty good, right?

 

Howard: Yeah.

 

Chad: But at the same time, my partners and I knew, "Oh, my g*d, this is going to be the gold rush. Every dentist and his mom, aunt, Joe, is going to move down to Texas to be a Medicaid provider dentist." And that's exactly what happened.

 

Howard: So, it did attract?

 

Chad: Oh, competition in the endo Medicaid dental space increased by tenfold. You had a provider on every street corner. We all of a sudden became California.

 

Howard: Wow!

 

Chad: There was a dentist taking Medicaid on every street corner. So, it was a blessing for a few years, but it brought in the competition like you wouldn't believe.

 

Howard: Well, it's funny how, you know, there's a religious mind or a philosophical mind, it's based on right or wrong; but then there's your economist, accountant, scientist, where it's not right or wrong, it's just this is what it is and it's a tradeoff, and a lot of the MDs, a lot of my orthopedic surgeon friends, were very upset when Medicaid decided to start covering chiropractors, because they thought, "MD. You should only see an MD."

 

Chad: Yeah.

 

Howard: And the government was looking at the deal and they were saying, "Okay, well, the chiropractor will treat this back injury for $2,500 and you always want to do a $50,000 surgery and put plates and bolts in."

 

Chad: You want to cut, because that's all they know what to do.

 

Howard: But at the end of five years the same percentage of your patients still have back pain.

 

Chad: Yeah.

 

Howard: So, if no-one's going to get rid of the back pain, we want to treat it for $2,500 instead of $50,000, and in California... and what Arizona is realizing is that if you don't cover Medicaid for dental, well, then they're going to show up at an emergency room where, by law, you just can't kick them into the street.

 

Chad: Sure.

 

Howard: So, 8½% of emergency room visits are odontogenic in origin, and we have a molar tooth ache - the hospital that can do brain surgery, a bypass and amputate your foot, can't do anything, so they just give them opioids and antibiotics and that's $1,500 and they're starting to realize that the reality is, you say you don't want to cover blah, blah, blah; if we would have spent $1,500 on a dental office, they would have final treatment.

 

Chad: Yeah, no, it is.

 

Howard: So, everything is [inaudible], and then when people sit there and say that the government should stay out of their business, then what you do in economics is you do a clarity test. I challenge you to do this because your different cultures, customs, where you're born, religious upbringing, what your mama whispered in your ear, all that stuff, you don't even realize how much Kool-Aid you drink. So, in economics, they try to get a clarity question. So, the clarity question is, if everybody's driving down the highway and they see a four-year-old walking across, is everybody just like, "Well, it's a four-year-old, survival of the fittest, live and let die." No, everybody stops and says, "Shouldn't there be some child protection services? Can I call 911?" Your house is on fire, you know, you want to call. So, your clarity tests on healthcare, which this is one, this is my favorite clarity test - and I stole this from Milton Friedman - because people always say we spend too much on healthcare, and he'd say, "Well, yeah, if you're taking other people's money and spending healthcare on other people, well why would you care? But let's talk about you. So, you have two daughters. Your two daughters have an incurable disease and they're going to die tonight, but I've got this pill." Let's just pick one of your daughters. I'll pick the younger one because she's - how old did you say they were?

 

Chad: She turned nine yesterday.

 

Howard: Okay, and the other one is sixteen?

 

Chad: The other one's sixteen.

 

Howard: So, the sixteen one's already... all kids are perfect until you give a set of car keys and then all hell breaks.

 

Chad: Oh, gosh!

 

Howard: All bets are off when you give them car keys. So, let's take your nine-year-old. She's going to die tonight unless you buy this pill. The whole world says we spent too much money on healthcare. Will you give me your house for that pill?

 

Chad: Absolutely.

 

Howard: Your car?

 

Chad: Yeah, absolutely.

 

Howard: Your iPhone?

 

Chad: Yeah, absolutely.

 

Howard: Nobody says we spend too much money on houses, cars and iPhones. They only say we spend too much money on healthcare. So, what are they doing? What humans like to do? They just bitching. "Oh, we spend too much money, blah, blah, blah, blah." Okay, but let's get a clarity test. The Mayo brothers were the first ones to do it in healthcare because what the Mayo brothers realized, everybody was trying to do healthcare on the cheap and what they realized was that eighty-year-old Grandma, she's had this farm in Minnesota, the whole deal. Grandpa's totally willing to sell the whole farm to take her to the best healthcare possible if you could save eighty-year-old Grandma for another year; and Mayo said, "My g*d, they'll give their farm, cattle, horses. They'll give everything they've got for the best." So, when you say that we spend too much money on healthcare, in 1900 it was 1% of GDP, at 2000 it was 14%, now it's 2018 and it's 17%. Well, here's my prediction. By 2100, it'll be a third of the economy because when you live off the grid and you have solar panels and driverless cars and drones and basically you inherit everything. Your great grandmother, when she dies, you give it to your nine-year-old and she never has to work another day in her life; and then she goes, opens up the refrigerator and her left eyeball falls out on the floor. What would she sell to get her eyeball back? Everything! Ask women. Ask your wife how much money I would have to give her to pull her front tooth and never replace it?

 

Chad: Right.

 

Howard: I mean, it'd be minimum... for your wife, she probably wouldn't take $1 million for it.

 

Chad: Yeah.

 

Howard: She'd probably went $10 million. So, luxury, as you get richer and richer and richer, you bid up the price of luxury. So, what are the future luxuries? Healthcare, clean air, clean water. They're just going to bid that stuff clear through the roof. So, then, talk about your journey. How did Acero Crowns come along?

 

Chad: Yeah.

 

Howard: So, was that part of the Medicaid reimbursement? So, they doubled the fees, so the root canals are very profitable now, and then the [sounds like: chrome-steel] crowns are very profitable because... is Acero mainly chrome-steel crowns?

 

Chad: It's stainless steel.

 

Howard: What's the difference between stainless steel crowns and chrome-steel crowns? Is that just semantics?

 

Chad: No, stainless steel has a little bit of chromium, has a little bit of nickel, has a little bit of... stainless steel has multiple elements in there. I don't know if anybody makes a chrome... I mean, there's a lot of people are still confused on just 3M. What's a 3M Unitek crown? What's a 3M ESPE crown? But basically a preform stainless steel crown is... they're all the same, other than when I went out to make a better stainless steel crown... so, it all started one day where South Texas is doing well and my partner and I, Todd, were sitting in his house and we're having a glass of wine and we're just, I don't know, we're just talking about nothing, and I said, "Todd, you know, the dental offices are doing pretty well." Todd is the creative guy, he comes up with ideas. He's not the executer. He comes up with ideas and then he finds people that can execute.

 

Howard: He comes up the ideas or the wine comes up with the ideas?!

 

Chad: I think a little bit of both, absolutely. So, we're sitting there and he's like, "You know what, Chad? I've always wanted to make stainless steel crowns because 3M's price is just going sky-high."

 

Howard: And the 3M was the 3M Unitek crown?

 

Chad: The 3M ESPE crown.

 

Howard: The 3M ESPE crown.

 

Chad: The ESPE crowns are the curved crowns that pretty much 99% of the dentists use because they snap onto the undercut. The Unitek is the straight wall where you've got to cut and cramp and manipulate to make it fit.

 

Howard: So, the 3M ESPE crown is the majority.

 

Chad: Yeah, the majority.

 

Howard: And the other one is the 3M...?

 

Chad: It's called Unitek.

 

Howard: Unitek?

 

Chad: But all dentists just refer to it as the 3M crown.

 

Howard: Okay.

 

Chad: Yeah, nobody hardly buys the Unitek.

 

Howard: And they're all stainless steel?

 

Chad: They're all stainless steel. And so, we got frustrated because we use so much stainless steel. Any pediatric dentist, any Medicaid provider, knows that your highest supply cost is probably going to be stainless steel crowns because you do so much of them, because what does a kid need? A sealant, a filling or a stainless steel crown. That's it. You're not doing implants on kids, you're not doing veneers. So, our stainless steel supply cost was going sky-high, even with Schein, even with us being in special markets, we're paying $40 for a box of five.

 

Howard: What's forty divided by five?

 

Chad: So, I'm looking at that stainless steel crown going, "How can this thing be $8?" And then I was also frustrated with their numbers.

 

Howard: Okay, so it was $8 a crown, but how much was the insurance reimbursement for it? $100? 

 

Chad: It was $68. We started it before this whole Frue settlement. We were thinking about it and we were talking about. And so, he just said... and for some reason...

 

Howard: So, you'd have eleven and a half. So, if you're paying $8 for a crown for $68 chrome and steel crown, 11, 12% of your costs would be just for the crown?

 

Chad: Yeah.

 

Howard: Yeah, okay.

 

Chad: Other than that... you add that... obviously you're using cement and all, it's not...

 

Howard: Right.

 

Chad: It's just the volume of it.

 

Howard: It's like a lab bill. It was like having a lab bill of 12%.

 

Chad: Yeah, and so, I just looked at this going, "How could this be $8?" and for some reason that idea stuck in my head and I said, "Todd, I'm going to get it done." Now, little did I know how tough it is to weave through the FDA regulations and little did I know how hard it would be for me to try to design it, find someone that could make it, but I was passionate. You know, they always talk about entrepreneurs and what...

 

Howard: Now what year are we talking? 2007?

 

Chad: This was 2007.

 

Howard: And how old were you in 2007?

 

Chad: How old was I in 2007? I was ten, eleven years younger than I am now. So, I was thirty-seven.

 

Howard: Thirty-seven, and what he just said that you might've missed is, starting a family, having a child, a business, is a sh*tload of risk, and you've got to be risk-averse or you just do it. I mean, like people in dental school, they're like, they... I graduated May 11, I had my office open 133 days later, September 21st. I knew it was going to be... I knew I knew what I knew, but I knew that I knew that what I didn't know was going to be ten times bigger, and, my g*d. Same thing with a kid. When I decided we were going to have kids, we had four kids in sixty months. There's no good time to have kids or start a business. So, what do you do? Just do it.

 

Chad: Do it.

 

Howard: Just do it. He didn't know until after he started that he's going to have these obstacles, like the Food and Drug Administration and finding people to manufacture it. So, dentists overthink sh*t. They work as an associate for six years because they're still trying to design their logo for their dental office. Why don't you just open your damn dental office and be late on your logo? 

 

Chad: Yeah, so, people will say, "Hey, Chad, what drove you? How did you do it? What was your success? Are you smart? Are you this?" I said, "Look, it is just pure passion. I had this drive for it. I'm going to get this done." And it kept me going because I had so many doors shut in my face. Why do you want to...? I'd go to manufacturers, I'd go to engineers and they're like, "What do you want me to make? What do you want me to help you design? What is that?" I'm like, "Look, I don't need to tell you why or how. I just need to know, can you do it?" Because I knew what I wanted, but I'm not an engineer. I'm not a metallurgist. I don't know, you know, but anyway, late nights, Googling and I didn't want to just make another stainless steel crown to copy 3M. I wanted to make it better. After treating thousands and thousands of kids, I knew... Howard, if you saw a lot of kids, you would know, why didn't somebody change this? 3M uses the Palmer numbering system. Do you remember what the Palmer numbering system is?

 

Howard: Yeah.

 

Chad: A, B, C, D, in each quadrant. So, if I say, "Howard, give me an A2." Well, I got to tell you which A2 do you want - the upper right, the upper left, the lower right, the lower left? Versus how are we taught in dental school? Baby teeth are A, B, C, D, E, F, G. So, if I tell the assistant, "Hey, Judy, I need a size A2", she knows that's the upper right primary second molar. "Give me a B4", she knows that's the upper right primary second molar. It's like what we were taught in dental school. The Palmer system, "Give me an E4." They're like, "E4. Okay, that's the Palmer system, so that means it's A, B, C, D, E. Okay, E4. Which quadrant?" "Oh, give me an E4 upper right." How confusing can that be? So, I used the universal numbering system. I researched metallurgy, I found out there was a surgical grade, stainless steel, higher grade, more resistant to occlusal wear and I incorporated that. I laid out a user-friendly tray set-up. So, I had all that planned, but the difficulty was trying to get someone to make this for me.

 

Howard: Don't tell me, you went to China?

 

Chad: I went to China - I went to many places. I went to China.

 

Howard: Where were all the places you went?

 

Chad: Well, Googling and calling all throughout the US too. I went to jewelry stores. They do casting. I called up numerous people just in the States, got nowhere. There's this huge world conference that only dental manufacturers go to. I can't remember the name. It's in Shanghai. Massive and there's no dentists there.

 

Howard: Is it yearly?

 

Chad: It's, I think, maybe every other year, but one of my friends said, "Hey, you should go to this thing. It's in China and all the manufacturers are there." So, I went there, saw all the people that are making burrs, that are making crowns, and everybody's looking at me going, "What do you want? We don't understand it,” and nobody's interested. The laboratories are more of ceramics and casting. A stainless steel crown is a preformed metal. Finally, we went by this one booth that had curing lights and I said, "We break those light tips off the curing lights all the time. I'm going to see if I can get a good deal buying a bulk of curing light tips for my South Texas Dentals, because we have so many offices." And luckily the people there were from Taiwan, and so in the Asian country... This may not be politically correct, but Taiwanese are little bit more Westernized than hardcore mainland China, and so my wife, being Taiwanese, could connect with them a little bit better. They were...

 

Howard: So, your wife is from mainland China?

 

Chad: No, she's from Taiwan.

 

Howard: I mean Taiwan.

 

Chad: Yeah. But in this conference, or show, we went by a booth and they so happened to be a Taiwanese company, so my wife and them got along quickly and we're about to leave, I found the light tips, and I said, "Okay, well, can I buy a dozen of these to see if they work well for us?" and so, but then I said, "You know what?" I pulled in my pocket. I got a 3M crown out because obviously that's all we had. I said, "Could you guys make something like this?" And the guy just looked at it, he goes, "Can I take this?" And I said, "Yes, sure." That was it. That's all it was, Howard. Thirty days later I get a call and it's that guy. He goes, "Hey, I showed it to my engineers here and I think we can do it." Sure enough, six, seven, eight months later, back and forth, video conferencing, emails, and how I designed it and all that, we had our first crown. And that's how the journey started. So, this company was ISO certified. They actually make a lot of things for US companies. They make amalgamators, they make sterilizers.

 

Howard: So, ISO certified is the European deal?

 

Chad: No.

 

Howard: Didn't it start in Europe, though, and headquarter in Europe?

 

Chad: CE is the big European… but ISO might be. I don't know.

 

Howard: CE is the big bigger one or is ISO?

 

Chad: They're different.

 

Howard: Okay.

 

Chad: CE is the recognized seal of approval for any medical device to be sold in Europe. So, I can't sell my crowns in Europe without a CE registration. ISO is just the internationally adopted standard that all manufacturers have to follow to get that ISO certification. You've got to have your books. It's pretty much like if you cut your finger, our manual says that you will go to the sink, wash your hands with soap and water for three minutes, apply an adhesive bandage around it, put pressure. I mean, it's that technical on every aspect of your manufacturing process. That's what basically ISO is, and ISO1345 is specifically for medical device manufacturers. So, anyway, this company - people say, "Oh, 'Made in China', Chad, where did you get it done? Some alleyway?" No, I found the right people.



Category: business
More Like This

Total Blog Activity

133
Total Bloggers
2,721
Total Blog Posts
1,494
Total Podcasts
1,215
Total Videos

Sponsors

Site Help

Sally Gross, Member Services
Phone: +1-480-445-9710
Email: sally@farranmedia.com

Follow Hygienetown

Mobile App

WITH HYGEINETOWN . . . NO HYGIENIST WILL EVER HAVE TO PRACTICE SOLO AGAIN

WWW.HYGIENETOWN.COM - WHERE THE HYGIENE COMMUNITY LIVES

9633 S. 48th Street Suite 200 • Phoenix, AZ 85044 · Phone: +1-480-598-0001 · Fax: +1-480-598-3450
©1999-2019 Hygienetown, L.L.C., a division of Farran Media, L.L.C. · All Rights Reserved