Helping Healthcare Scale
Imagine you're friends with multiple CEO's of billion dollar organizations. You can call them anytime you like and ask them all that they've learned about real estate and investing, including some of their biggest mistakes.
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Helping Healthcare Scale
Jeffrey Tomcsik: Transforming Dental Practices and Driving Growth with Strategic Acquisitions and Innovative Leadership at Grand Dental Group
Discover how a marketing expert transforms into a leading voice in the dental industry as we welcome Jeffrey Tomcsik, CEO of Grand Dental Group. Get ready to uncover the secrets behind substantial practice growth and the remarkable journey from marketing whiz to dental CEO. Jeffrey shares his story of revitalizing Tidewater Dental through a keen focus on inefficiencies and patient experience, demonstrating the power of fresh perspectives in reshaping a practice's image and success. Through insightful strategies and a commitment to change, he proves that significant progress is not just a possibility but a reality.
Join us as we navigate the complex world of dental practice growth and acquisitions, shedding light on strategic decisions that fuel success. Jeffrey opens up about the dynamic challenges faced during the acquisition by Allied, now ProSmile, emphasizing the crucial role of cultural alignment and the innovative use of phantom equity. With a keen focus on sustainable growth, he discusses future acquisition strategies that value partnerships with retiring dentists. This episode is a treasure trove of insights for anyone interested in healthcare organization growth, mergers, and strategic business transitions.
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I know guys that have 45 practices that do less revenue than we do out of nine. I don't know if that's something I want, right, right, these tiny little practices I'm trying to manage.
Speaker 2:The goal of this show is to help healthcare organizations scale by leveraging real estate strategies and interviewing high-level healthcare executives in order to pull out lessons learned along the way. If you'd like a free site selection analysis from our team, visit us at wwwreuniversityorg and drop us a line.
Speaker 4:Hello, welcome back to Helping Healthcare Scale. I'm your host, austin Hare, and I'd like to welcome our guest today. His name is Jeffrey Tomsik and he's the CEO of Grand Dental Group. They've got nine locations under ownership in the Chicago area and they are 100% dentist-owned Grand Dental Group. They've got nine locations under ownership in the Chicago area and they are 100% dentist-owned. Today, we're going to talk about mergers and acquisitions and really specifically what you shouldn't do. So, jeffrey, I'm excited to tell your story today.
Speaker 1:Great. Happy to be on. Thank you for having me.
Speaker 4:Okay, let's go. Let's start at the beginning of your career. I know you were with Tidewater Dental that you had eventually sold, so maybe give us that story. How did you start it, how did you grow it and how did that? How did it go when you eventually merged in 2017? Sure.
Speaker 1:Tidewater Dental was actually started by a dentist. That was quite a bit my senior. I joined inadvertently I was, I had been in marketing previously and then I got my master's in education, became a teacher and over my summer break the senior doctor had hired a friend of mine as the new associate doctor to become owner and because they knew I had marketing background and they wanted to grow this business, they asked me to help them in the summertime. So I said sure. One thing led to another. By the second summer we had identified a lot of problems.
Speaker 4:I'm sorry. What year is this? And like how many locations are like what, what?
Speaker 1:So this was one this was a small business. This was when I started. It was one location, about 770,000 in revenue. It was three operatories doing a build out. So I wasn't leaving my I wasn't doing my teaching. I wasn't leaving my teaching job, but I was helping out and and one thing led to another, identify a lot of problems, a lot of inefficiencies, and instead of marketing, we're fixing those so that we can do effective marketing. And we just hit the boom button. It just took off like a rocket within a few years. So maybe this is a double click on that the boom button, it just took off like a rocket within a few years.
Speaker 4:So maybe if I can double click on that, the effective marketing instead of just marketing. I hear that and I think maybe, instead of doing like mail flyers, you switch digital marketing. But what does that mean exactly?
Speaker 1:So when I ask people to tell me what marketing is, everyone gives me an answer and every answer you can give is correct, right, everything is marketing. So if I'm going to do any kind of marketing whether it's a mail or a commercial, whether it's a newsletter or something online if the phone call in isn't handled right, if the first walk through the door doesn't look good, if it doesn't smell right, like all those things matter, because marketing isn't just getting the phone to ring, it's getting the person to become a happy referring patient of record. So it's an internal and external process. That's much larger than a newsletter or geofencing and doing Google ads. It's much deeper than that. So I was trying to create a holistic marketing approach where the team's saying the right thing, the experience feels good, little bells and whistles to this small practice to get it to grow.
Speaker 4:Okay, yeah, so essentially it sounds like they didn't put a lot of effort in the marketing.
Speaker 1:You just knew which levers to pull. Yeah, so we become blind to our practices. If you're the owner of a practice or a practitioner there or an employee there and you've been there for five years, you stop noticing the weird things like the dirt in the corner of the floor, the fingerprints around the light switch, the cobwebs up there or the wet spot on the ceiling tile when you're tilted back in a chair. Those are all a part of marketing. It's all part of the effect. So I came in with a new set of eyes and ideas and it just helped breathe life back into this older practice and make people excited not just to work there but to come there as patients, and we created that atmosphere.
Speaker 4:Yeah, it's kind of interesting. I feel like that's almost true in any form in life. It's like you get stuck in these ruts, almost so you think that because things have historically gone on this trajectory, they have to continue at that trajectory. But they don't, because really at any point in time you can change your trajectory based on the decisions that you make. And so it's interesting how I guess I find myself doing this all the time. We have these kind of ruts, like I guess they would call them neuroplasticity, and we think, oh, this happened at this pace or because of these things, and so that's just like. It's almost like the thinking, that's just the way it is, but it's not hard. Like maybe it takes bringing somebody in like yourself, or maybe it takes, like joining a mentorship program or get or getting a mentor or whatever like, to just like essentially kick you in the pants. Hey, just because it's been this way, it doesn't mean it has to stay this way.
Speaker 1:We can make a couple decisions and totally change the trajectory and it sounds like that's what you're doing. When you came in Correct, yeah, and also having the time to do it. The other two guys are wet finger dentists they're in the mouth all day, so at that size I want them working on patients. It's my job to put butts in chairs right, keep them busy and bring the money in so we have something for the next opportunity or idea. We were turning this practice from three chairs to 16 chairs, so it was a huge build out and we kept it open the whole time, so I had to really focus on getting patients in the door.
Speaker 4:And you guys were growing by de novo. You started with one, and then how many did you get to?
Speaker 1:Yeah, so we got that by 2010. That one was doing about 6 million, with three doctors and six hygienists and an orthodontist rotating through.
Speaker 4:That was in a single practice, single location.
Speaker 1:Yeah, one single location. It's a big practice, which is what I do now with Grant as well. We don't like we take a small practice doing 700, 800,000. We get it to three and a half million before we go look for our next practice. We want that stability. We want that really strong practice that has it's on autopilot. Patients are coming in, you know, regular base new patients, 80, 110 patients a month. Doctors have full schedules. That's our model. We may only be nine locations, but we're doing 30 million in revenue.
Speaker 4:So yeah, no, that makes sense. Okay, so just to get the timelines right 2010, you're doing 6 million. How many do you started doing DeNovo's until you sold in 2017?
Speaker 1:Yeah, yeah, yeah, yeah, we did so. We got up to about 12 million in four locations by 2017. And the younger dentist he had left the practice for personal reasons and myself and a senior dentist were left together and he had his wife had a health scare. He was pushing 70 years old. He's just you know what. I don't want the debt anymore. I don't want the anxiety of that anymore. We need to find a partner.
Speaker 4:So we looked into and were you CEO at this stage?
Speaker 1:Yeah, I was a 20% owner. We looked into private equity, we looked into VC, we looked into doing a strategic acquisition or having ourselves acquired and at the end of the day we found a group out of New Jersey that fit a lot of things. We fit a lot of needs of theirs and they fit needs of ours. So they were a DSO that was heavy Medicaid, based where we weren't. They were like virtually completely in New Jersey and they needed geographic diversity to get their multiple up. So we were a good fit for them.
Speaker 4:They were really say again this was in Chicago Tidewater.
Speaker 1:Tidewater. This is a Maryland sorry, oh, maryland, sorry, okay, yeah, yeah, yeah, they were a fit. They were going to let me keep my staff on. They were going to let me run parallel to them as sub DSL and we checked off some boxes. They checked off some boxes. They were one of the highest offers we had, so we joined them and actually it went pretty well. It was successful. We continued to do it throughout Maryland and in New Jersey as well, and then in 2020, november, it was time for their private equity partner to flip the portfolio and we became ProSmile, which was another larger conglomeration of dental groups.
Speaker 4:How much can you talk about taking chips off the table versus letting your equity roll over?
Speaker 1:Yeah, it's all negotiable before anything's signed, of course, but they'll never let you do. You'll know if you're important to the company if you're not allowed to take all your money off the table. So if you're allowed to take all your money off the table, they either recognize you as late stage career, retiring or having already handed the torch over to someone else. If they tell you they need you to stay for a minimum of two years and leave money on the table, you have value to them, so that can be good or bad. But a lot of times they'll let you take 50% off and you leave 50% in until the next turn, and you hope that the turns are five years approximately, because that means you're doing well. If they start to get long in the tooth, you're usually not being as successful as you wanted to be. But it also may not have anything to do with you because you're part of a portfolio of other companies that are held by the private equity.
Speaker 4:It seems like a good balance from both ends because of your you just built this up. It's time to exit. Like the combination, I would think of taking half your chips off the table, but also, like you built, this is your baby and so you leave some movement and you obviously believe that they're going to do what they're going to say too. And then because okay, so you do take a hundred percent of your chips off the table, like now you're in the money management game, which is okay. What am I going to buy? Another DSL? Am I going to invest in real estate or public equities? And at least, like with this, it's okay, I see a viable path forward to continue to compound the that's the point.
Speaker 4:Yeah, so it feels like that's a good balance. So maybe quick post-mortem what, what do you think? Tidewater, what do you guys? What do you think that you guys did? You know really well, what did you do? Really wrong, really, and then, did you get an ally yeah?
Speaker 1:so I'll give you the really first. That goes back to the marketing and the culture. Our patients became a referring group of patients. We were the kleenex tissue of dentistry in our area. We were peninsula-based Southern Maryland, Calvert and St Mary's counties smaller, more rural, but when people said what dentist do you go to, it was always Tidewater, really positive reviews, internal programs to create healthy patient relationships. So we did, I think, all of that. We were averaging in our largest practice over 300 new patients a month and then our smallest was still like 80, 90 new patients a month. So that's which was easy. 300 a month, that's nuts, yeah.
Speaker 1:What we didn't do well was negotiate insurance fees. We were getting we're mid Atlantic, so we're going to be low anyway. We're rural. We were getting 700 bucks a crown that, so we're going to be low anyway, we're rural. We were getting 700 bucks a crown, that kind of thing. Our doctors worked really hard to make their money because they're getting paid less. So in retrospect I would have been more cautious about how I went into the relationships with the insurance companies and how I negotiated those deals, but I was just ignorant at the time.
Speaker 4:Okay, I guess to put a cap on that when you say negotiate better, what specifically would you have negotiated so?
Speaker 1:the small print essentially in any insurance plan needs to be read and understood, even if you have to pay a lawyer to do it.
Speaker 4:There are a lot of plans where the language is basically what about just putting it in chat? Gpt now.
Speaker 1:Yeah, yeah, the it's. This plan is part of another plan. Like in an umbrella fashion. You are going to get the lowest of the, the lower of the two reimbursement values. But I didn't see that. I signed it thought I was going to get 900. Now I'm getting 700 reimbursement. It's that kind of of stuff that now you're stuck.
Speaker 4:Okay, all right, and so then maybe let's do post-mortem on Allied, because I guess they did. They change names to ProSmile. Yeah Well, the DSO changed names to ProSmile.
Speaker 1:I left I guess I didn't notice in January after they acquired in November. For me the writing was on the wall that I wasn't a good fit for them. So I chose to leave. I joined Grand Dental. I had already put my two years in with Allied, so I wasn't required to put another two years in. But I had a large, a pretty serious restricted covenant around all the locations. So for me I had to move if I wanted to stay in dentistry and not stay with the same company.
Speaker 1:So Grand Dental I had known at the time for 13 years. I had been part of a sort of study group with them, had been out to their practices to train on certain things and they would do that for us. We had a really symbiotic relationship and they had been asking me over the years to come join them anyway. So at this point I said, hey, if you guys are serious, let's talk. I liked what they were doing. They were doing things the way I was doing it building a strong foundation of patients, having an office that is maybe not at 100% capacity but getting close to capacity so you can put it on autopilot and then focus on the next office. A lot of DSOs are just in this buy-buy mode. Everyone's busy on the buy side, no one's fixing the existing store issues, so the issues just exacerbate. Over time they get worse and worse, which is where we see these DSOs get out over their skis too far and they struggle to be successful.
Speaker 4:And so I guess a couple of questions. I know that Grand Dental is drawing via acquisitions not to nobles. Are you, did you I don't know get equity or negotiate equity or buy equity with the Grand Dental group we took? Are you owner as well as CEO in the group?
Speaker 1:Yeah, so I have what you would call phantom ownership or phantom stock, phantom shares.
Speaker 4:As long as you're there for a certain time and you hit your benchmarks, you realize that equity at that stage, okay, that makes sense. Yeah, I guess we're talking off camera about culture and that sort of thing and how that affects M&A and growth and all that kind of stuff. So I don't know how do you see that playing out, like, maybe is there a thread throughout your career that you can't follow back in hindsight?
Speaker 1:yeah, so tidewater and grand are very similar in that how we approach the cultural aspect of an acquisition.
Speaker 1:I did do a couple acquisitions at tidewater and have done one now we're. We have one that's in lli right now for two locations, which we will hopefully have in 11 by January. But what we're looking at is we're looking at usually a dentist that's getting closer to their retirement age but they don't want to jump ship today. We want someone that wants to stick around. They're a little bit tired of the business side of things. They want to focus on the clinical side and they want to go home at night and not worry so much about their business. Then we're looking for where we can have instant savings or instant financial uplift. What are their fees? What are our fees? So if we have them join our insurance, they're going to have an immediate bump up. So the doctor is doing the same amount of work but getting paid better.
Speaker 1:We look at the staff. What are the benefits they currently have? What are the benefits we're going to be giving them? That's usually also another uplift. When we walk in the door we try to show all the positives first. We don't make a ton of change other than the changes that are positive, because we want them, we want to build trust with them, we want them to be happy to have joined us. We want them to refer other dentists who want to sell their practice to us. It might be a six-month process but at the end of the day, our last acquisition the one we're currently in and we have another one that's not quite under LOI none of them are coming to us from the broker side. They're coming to us from the referral through relationship side, which is pretty amazing. So we're not fighting for proving value or getting bidding against six other.
Speaker 1:DSOs. I'm not at this point Now. That's not to say I'm not going to use brokers. Of course I will when I talk with brokers all the time, and they bring great practices but you can't always win the practice, because I'm not going to just be the highest dollar guy. I want to bring the best value to them at a fair price.
Speaker 4:Yeah, that's interesting and I think too, like, on the note of culture, it's like it's common to hear people say culture, the immeasurable part, and then you're obviously your Q and A, quality of earnings and P and L. It's like all that kind of stuff is measurable. But I don't know. There's a guy named Alex Homozy I've mentioned a few times on this podcast that I used to work with, but he has a saying like you can break down almost anything into measurable units, and I think that the same can be said even for culture, and so it's almost as though we view culture as this kind of like abstract pie in the sky type thing.
Speaker 4:It's oh, you fit or you don't, or you have it or you don't, but you could, if you really wanted to, you could probably sit down and measure okay, actually, no, like our culture, these okay, yeah, these are the, this is the revenue we want to hit, this is the ebita we to hit, this is the new patient growth we want to hit X, y, z, but also it's we want people with this type of attitude, right, if you really I just feel like a lot of groups don't really take the time to break it down.
Speaker 1:You can measure culture in your turnover rate with employees. Yeah, you can measure it in your Google reviews. Are people saying good things about specific people in the office and we look at all that and our staff knows that we're looking at that. I think you could. It's softer, but you measure it in HR issues you may. Am I hearing a lot of problems with this office, Offices that are struggling based on commentary that's happening and things that are going on around, and then you focus on that office and you make sure that you find out what the problem is.
Speaker 4:The problem of person when you say commentary. Do you guys have a system for that, Like a feedback system?
Speaker 1:We're using the team's chat. We're using all day long, we're using, obviously, email and things like that, but I guess more like you'll hear a office manager complaining to a middle management that this is going on or that's going on in the office and then sometimes you'll even see like a slide in in the schedule being filled and what's going on. We're obviously not focusing on filling chairs, we're focusing on something else. And if you're focusing on something else, there's probably it's a problem. You're putting out a fire rather than being proactive, which is filling chairs.
Speaker 4:Yeah, I like that. So what's the goal? What's the long-term goal with Grand Dental Group? What are you guys trying to do long-term?
Speaker 1:So we are trying to stay owned completely by dentists without backing from private equity. At this point we're hoping to create a healthy enough of a model that our doctors can retire and still own and treat this like an annuity. Obviously, it's always a challenge because it slows your growth down, because you can't You're not getting the same financial backing as you would with private equity. Trying to balance happiness, personal happiness with our businesses, as opposed to yeah, I built something big and it's worth a hell of a lot of money, but I'm not proud of it. You know that's the balance we're trying to keep.
Speaker 4:Yeah, that's cool and so I think it's a great goal to strive for, especially on the culture side keeping the dentist happy, building something to last. Have you thought about what that looks like in terms of like you thought about revenue, growth or new, because I know it's always it's hard. A lot of people just don't like talking about revenue, so that's why it's like the de facto common talk is unit a number of locations. But if you thought about either one of the like, what kind of growth you guys want to have is, I guess my question would be like you've struct structuring more for optimization or more for maximizing growth?
Speaker 1:Currently optimization, because I feel like if you get optimization right, growth happens naturally, no matter what. So the the the better we're organized and the more understanding every individual has about what their role is and what the expectations of that role is, the the less problems you have, the less fires you're putting out and now you can start focusing externally rather than internally, and that's been our approach so far. We watch numbers and we work on growth and profitability. For sure, it's extremely important to us, but it can't be the most important. You got to worry about your people, first your employees and then your patients and then the rest will follow.
Speaker 4:Yeah, as we come to our time here, is there anything that you want to talk about that we didn't get a chance to talk about?
Speaker 1:I just encourage people to really think about what they want and focus on that rather than just an endless open goal. I don't know that it makes sense today. You can always hit a goal and create a new goal, yeah, as opposed to just having some infinite. Oh, I want a hundred practices, all right. I know guys that have 45 practices that do less revenue than we do out of nine. I don't know if that's something I want, right? These tiny little practices I'm trying to manage that aren't highly productive?
Speaker 4:No, totally. So I have short-term rentals and it's like the same thing. I know a lot of people just measure doors but they'll have these little three, twos versus like. My preference is like really large, massive properties, sleep 20 plus people with a lot of acre. Because it's like to your point point do you want? It's just less headache for the same. It's the revenues, it can be the same, but it's less headache if you have less location. So it's like why not maximize your revenue and profitability per location before?
Speaker 1:I have nine levers.
Speaker 4:I have nine levers to pull, not 45 levers to pull, just like with your rental analogy especially the software costs, right, like not that's a massive part of the pnl, but but like they charge per seat right or per location, and so if you've got these much, much bigger practices or locations, then you just get a lot more economies of scale. So, yes, but okay, cool. So listen, this was really fun. And if people want to learn more, what's a good resource for them to reach out?
Speaker 1:Yeah, they can email me it's jomsik at granddentalgroupcom.
Speaker 4:Okay, and that's T-O-M-C-S-I-K, t-o-m-c-s-i-k. That's correct, because it is a difficult one to spell. Yeah, yeah, awesome man. Yeah, thanks so much for your time and this was a lot of fun.
Speaker 1:Thanks, austin, I appreciate being on the show.
Speaker 3:If you need help finding the perfect location for your practice or you're ready to invest in commercial real estate, email us podcast at leadersreecom R-E, as in realestatecom, or go to leadersreecom and fill out our form. See you next time.