Dental Practice Excellence
DSO Procurement Optimization Series
Dental Group Purchasing Playbook for DSOs
Proven strategies for dental service organizations and multi-practice groups to achieve 18-25% cost savings through centralized procurement, standardized formularies, and data-driven supply chain management.
18-25%
Cost Reduction
30-40%
SKU Reduction
50-60%
Procurement Time Saved
The DSO Procurement Opportunity
Dental Service Organizations (DSOs) and multi-practice dental groups have grown rapidly over the past decade, now representing over 30% of all dental practices in the U.S. This consolidation creates significant procurement opportunities—but only if managed strategically.
Common challenges facing dental groups:
- Legacy Practice Autonomy: Acquired practices maintain their own supplier relationships and product preferences
- Dentist Preferences: Strong product loyalty based on training and experience
- Fragmented Purchasing: Each practice orders independently, diluting volume leverage
- Limited Visibility: No centralized view of total spend or opportunities
- Inconsistent Quality: Product variation across practices creates training challenges
- Compliance Complexity: Infection control standards must be consistent across all locations
💡 The DSO Procurement Advantage
DSOs that implement centralized procurement achieve:
- 18-25% cost reduction through volume leverage and standardization
- 30-40% SKU reduction simplifying inventory and training
- 50-60% reduction in procurement time through centralization and automation
- Improved quality and consistency across all locations
- Enhanced compliance with standardized infection control products
For a 50-practice DSO spending $5M annually on supplies, this represents $900K-1.25M in potential savings.
IMAGE PLACEHOLDER: Map showing dental practice locations across region with centralized procurement hub and distribution network
1. Centralized Procurement Model
The foundation of DSO procurement success is centralization—moving from practice-level to organization-level purchasing decisions.
Governance Structure
Executive Procurement Committee
Membership: CEO/COO, CFO, Chief Dental Officer, VP Operations, Procurement Director
Role: Set strategy, approve major contracts, allocate resources, resolve escalated issues
Frequency: Quarterly
Clinical Advisory Council
Membership: Dentists from multiple practices (representing different specialties and regions), dental hygienists, dental assistants, procurement team
Role: Evaluate products, make standardization recommendations, approve formulary changes
Frequency: Monthly
Procurement Team
Staff: Procurement Director, Category Managers (clinical supplies, equipment, office supplies), Data Analyst
Role: Execute strategy, negotiate contracts, manage suppliers, support practices, analyze data
Frequency: Daily operations
Centralized vs. Decentralized Decision Rights
| Decision Type | Authority | Rationale |
|---|---|---|
| Supplier selection | Central Procurement | Volume leverage requires consolidated contracts |
| Formulary (standard items) | Clinical Advisory Council | Clinical input needed, but centrally decided |
| Specialty items (implants, etc.) | Practice level with approval | Dentist expertise, but cost oversight needed |
| Routine ordering | Practice level | Practices know their needs, order from approved catalog |
| Emergency purchases | Practice level with notification | Can't wait for approval, but track for analysis |
✅ Governance Success Factor
The most successful DSOs balance central control with practice autonomy:
- Centralize: Supplier relationships, contract negotiation, formulary standards, data analytics
- Decentralize: Day-to-day ordering, inventory management, emergency decisions
- Collaborate: Product evaluation, standardization initiatives, continuous improvement
IMAGE PLACEHOLDER: Organizational chart showing DSO procurement governance structure with decision authority matrix
2. Formulary Development & Standardization
A standardized formulary is the cornerstone of DSO procurement. It defines which products are approved, preferred, and restricted across all practices.
Three-Tier Formulary Model
Tier 1: Standard/Preferred (70-80% of SKUs)
- Definition: Products that meet clinical needs for most patients and procedures
- Characteristics: Evidence-based, cost-effective, readily available, negotiated pricing
- Ordering: Default options in ordering system, no approval needed
- Examples: Gloves, masks, bibs, cotton rolls, anesthetic, composite, amalgam
Tier 2: Specialty/Alternative (15-25% of SKUs)
- Definition: Products for specific clinical situations or patient needs
- Characteristics: Clinically justified, higher cost, less frequently used
- Ordering: Available in catalog, may require clinical justification
- Examples: Specialty cements, advanced restorative materials, pediatric-specific items
Tier 3: Restricted/Non-Formulary (< 5% of SKUs)
- Definition: Products not on formulary, require special approval
- Characteristics: Expensive, limited evidence, or available alternatives exist
- Ordering: Requires Clinical Advisory Council approval
- Examples: Experimental products, dentist-specific preferences without clinical justification
Standardization Process
Phase 1: Current State Analysis
- Aggregate 12 months of purchase data from all practices
- Identify all products used across organization
- Calculate total spend by category and product
- Identify excessive variation (e.g., 15 different composite brands)
- Survey dentists on product preferences and rationale
Phase 2: Clinical Evaluation
- Clinical Advisory Council reviews products in each category
- Evaluate based on: clinical performance, evidence base, cost, availability
- Conduct product trials for finalist options
- Select 1-2 standard options per category (primary + alternate)
Phase 3: Formulary Publication
- Document all formulary decisions with rationale
- Create formulary guide for all practices
- Load approved products into e-procurement system
- Communicate to all dentists and staff
Phase 4: Implementation & Compliance
- Phase in formulary over 3-6 months (use up existing stock)
- Provide product training and samples
- Monitor compliance (% of spend on formulary items)
- Address resistance through education and data
💡 Formulary Standardization Example: Composite Restorative Materials
A 40-practice DSO had dentists using 12 different composite brands:
Analysis:
- Annual composite spend: $420K
- Prices ranged from $35 to $95 per unit
- No clinical outcomes data showing differences
- Dentist preferences based on training/habit
Solution:
- Clinical Advisory Council evaluated all 12 brands
- Conducted blind product trials with 20 dentists
- Selected 2 standard options (universal composite + flowable)
- Negotiated volume pricing: $42/unit (vs. $58 average)
Results:
- Reduced to 2 composite brands (83% SKU reduction)
- Annual savings: $115K (27% reduction)
- Simplified inventory and training
- 92% dentist satisfaction after 6-month transition
IMAGE PLACEHOLDER: Formulary tier structure diagram showing product flow from Tier 1 (preferred) through Tier 3 (restricted) with approval requirements
3. Contract Negotiation & Supplier Management
Once products are standardized, leverage combined DSO volume to negotiate superior contracts.
Primary Distribution Strategy
Selecting Your Primary Dental Distributor
Most DSOs partner with one primary distributor for commodity supplies:
- Comprehensive Catalog: Can supply 80%+ of your needs
- Multi-Location Delivery: Reliable delivery to all practice locations
- Technology Integration: E-procurement, EDI, analytics
- Competitive Pricing: Volume-based pricing tiers
- Service Excellence: Dedicated account team, responsive support
Major Dental Distributors: Henry Schein, Patterson Dental, Benco Dental, plus regional distributors like LAC Health
Negotiation Leverage Points:
- Volume Commitment: Commit 70-80% of commodity spend for best pricing
- Long-Term Contract: 3-5 year agreements in exchange for price protection
- Standardization: Guarantee SKU reduction and formulary compliance
- Payment Terms: Negotiate Net 45-60 to improve cash flow
- Rebates: Tiered rebates based on total DSO volume
- Technology: Free e-procurement platform and analytics tools
Manufacturer Direct Contracts
For high-spend categories, negotiate directly with manufacturers:
Ideal Categories for Direct Contracts:
- Implants: Straumann, Nobel Biocare, Zimmer Biomet
- Endodontic Systems: Dentsply Sirona, Kerr
- Imaging: Carestream, Dexis, Schick
- CAD/CAM: Dentsply Sirona (CEREC), 3Shape, Planmeca
- Anesthetics: Septodont, Dentsply
Negotiation Strategy:
- Aggregate volume across all practices
- Run competitive RFPs with multiple manufacturers
- Negotiate volume tiers with aggressive discounts
- Include clinical education and training support
- Establish performance requirements (delivery, quality, service)
| Contract Type | Typical Discount vs. List | Additional Benefits |
|---|---|---|
| Primary Distributor | 25-40% | Free freight, rebates, e-procurement, analytics |
| Manufacturer Direct (Implants) | 35-50% | Clinical training, marketing support, case planning |
| Manufacturer Direct (Equipment) | 20-35% | Installation, training, service contracts, upgrades |
| Specialty Suppliers | 15-25% | Expert support, niche products |
IMAGE PLACEHOLDER: Contract negotiation timeline showing RFP process from preparation through supplier selection and implementation
4. Technology & E-Procurement
Technology is essential for managing procurement across multiple locations efficiently.
E-Procurement Platform
Essential Features:
- Customized Catalogs: Each practice sees only approved formulary items at negotiated pricing
- Guided Buying: Preferred items highlighted, alternatives suggested
- Quick Reorder: Reorder frequently-used items with one click
- Approval Workflows: Non-formulary requests routed for approval
- Budget Controls: Spending limits and alerts by practice
- Mobile Access: Order from smartphone or tablet
Data Analytics & Reporting
Key Reports for DSO Management:
- Spend by Practice: Compare supply costs across locations
- Spend by Category: Identify high-spend areas for focus
- Formulary Compliance: Track % of spend on approved items
- Price Variance: Identify practices paying different prices for same items
- Utilization by Dentist: Compare supply usage per procedure
- Savings Tracking: Measure actual savings vs. baseline
Integration with Practice Management Systems
Link supply management to your dental PM system (Dentrix, Eaglesoft, Open Dental, etc.):
- Auto-populate supply costs in treatment plans
- Track supply usage by procedure code
- Ensure supply costs captured for billing
- Analyze profitability by procedure type
IMAGE PLACEHOLDER: E-procurement platform screenshot showing customized dental supply catalog with formulary items highlighted
5. Practice-Level Implementation
Central procurement only works if practices adopt new processes and comply with formulary. Change management is critical.
Practice Onboarding Process
For Newly Acquired Practices:
- Month 1: Assessment
- Audit current suppliers and contracts
- Inventory all products used
- Calculate baseline supply costs
- Identify quick wins and challenges
- Month 2: Transition Planning
- Present DSO formulary and procurement model
- Address dentist concerns and preferences
- Provide product samples for evaluation
- Develop practice-specific transition plan
- Month 3-6: Phased Implementation
- Transition to DSO suppliers and formulary
- Train staff on e-procurement system
- Use up existing non-formulary stock
- Monitor compliance and address issues
- Month 7+: Optimization
- Calculate savings achieved
- Gather feedback and refine approach
- Identify additional opportunities
- Full integration into DSO systems
Dentist Engagement Strategies
Dentists are the key to formulary success. Overcome resistance through:
- Clinical Evidence: Show peer-reviewed data supporting formulary choices
- Peer Influence: Have respected dentists champion standardization
- Product Trials: Allow hands-on evaluation before committing
- Cost Transparency: Show cost differences and impact on practice profitability
- Flexibility: Allow exceptions for legitimate clinical needs
- Shared Savings: Some DSOs share supply savings with practices
IMAGE PLACEHOLDER: Practice onboarding timeline showing 6-month transition process with key milestones
6. Measuring Success & Continuous Improvement
Key Performance Indicators
| Metric | Target | Measurement |
|---|---|---|
| Supply Cost per Procedure | Within 10% of benchmark | Monthly by procedure type |
| Formulary Compliance | ≥ 90% | Monthly by practice |
| Contract Compliance | ≥ 85% | Monthly across DSO |
| Cost Savings vs. Baseline | 18-25% | Quarterly |
| Supplier Fill Rate | ≥ 98% | Monthly |
| Emergency Order Rate | < 3% | Monthly by practice |
Continuous Improvement Process
- Monthly Procurement Meetings: Review KPIs, address issues, identify opportunities
- Quarterly Clinical Advisory Council: Evaluate new products, refine formulary
- Annual Strategic Review: Assess overall program, benchmark against peers, set next year's goals
🎯 12-Month Implementation Roadmap
Months 1-3: Foundation
- Establish governance structure
- Aggregate and analyze spend data
- Develop initial formulary
- Select primary distributor
Months 4-6: Rollout
- Implement e-procurement platform
- Transition first 10-15 practices
- Achieve 50% of savings target
Months 7-12: Scale & Optimize
- Transition remaining practices
- Refine formulary based on feedback
- Achieve full savings target (18-25%)
Partner with LAC Health for DSO Success
LAC Health provides comprehensive dental supply chain solutions for DSOs and dental groups:
🦷 Comprehensive Dental Portfolio
- Full range of dental supplies and equipment
- All major brands plus cost-effective alternatives
- Specialty items and hard-to-find products
- Competitive pricing with volume discounts
📊 DSO-Specific Services
- Centralized contract management
- Customized formulary development
- E-procurement platform with practice-specific catalogs
- Spend analytics and benchmarking
- Practice onboarding support
🚚 Multi-Location Delivery
- Reliable delivery to all practice locations
- Flexible delivery schedules
- Emergency same-day delivery available
- Consolidated billing and reporting
📞 Request Your DSO Procurement Assessment
Contact LAC Health for a complimentary DSO procurement assessment:
- Phone: +1 (844) 794-6091
- Email: [email protected]
- Web: lac.us