Dental MSO vs. DSO: What’s the Difference?
Management Services Organizations and Dental Support Organizations serve different legal and operational roles in practice growth, affiliation, and compliance with corporate practice of dentistry rules. Understanding ownership structures, fee arrangements, clinical control boundaries, and exit options helps dentists choose the model that fits their autonomy goals, capital needs, and long-term strategy.
Evaluating MSO or DSO structures? Call (800) 499-1474 to discuss compliance frameworks, management services agreements, and affiliation terms.
Key Takeaways for Dental MSO vs. DSO Models
- MSOs provide non-clinical services under management services agreements while dentists retain clinical control and practice ownership
- DSOs typically own or control the practice entity or use affiliated professional corporations with dentist equity holders, centralizing operations, payor contracting, and capital deployment
- Management services agreement fees in MSO structures compensate for back-office functions, while DSO models integrate profit flows through equity ownership or employment arrangements
What Is a Dental MSO?
A dental Management Services Organization provides non-clinical administrative support to dentist-owned practices under a management services agreement. The MSO handles functions like revenue cycle management, human resources, IT infrastructure, marketing, and vendor negotiations, while licensed dentists retain ownership of the professional entity, clinical decision-making authority, and patient relationships.
Common MSO services include:
- Revenue Cycle Management: Billing, collections, insurance credentialing, and accounts receivable optimization
- Human Resources: Payroll processing, benefits administration, employee handbooks, and hiring support
- IT Infrastructure: Practice management systems, cybersecurity, data backup, and HIPAA compliance tools
- Marketing and Patient Acquisition: Website management, social media, SEO, and patient recall campaigns
- Vendor Contracting: Lab agreements, supply purchasing, equipment leasing, and group purchasing organization access
MSO structures comply with corporate practice of dentistry rules by separating clinical governance from business operations. The dentist or dentist-owned professional corporation employs clinical staff, maintains malpractice coverage, and holds state licenses and payor contracts. The MSO charges a management fee based on the scope and value of services provided.
What Is a Dental DSO?
A Dental Support Organization typically owns or controls the practice entity itself in states permitting corporate ownership, or establishes affiliated professional corporations where dentist shareholders hold equity. DSOs centralize clinical and non-clinical operations, payor contracting, real estate, equipment purchasing, and strategic decisions across a network of locations.
In states with strict corporate practice of dentistry laws, DSOs create professional associations or employment models where dentist equity holders maintain clinical autonomy on paper while DSO affiliates manage business functions. Governance documents, employment agreements, and professional services agreements delineate reserved clinical matters versus operational decisions controlled by the DSO.
Typical DSO affiliation deal structures include:
- Cash at Close: Immediate liquidity payment based on practice valuation (often 6x to 10x adjusted EBITDA)
- Earnout Payments: Additional compensation tied to post-close EBITDA performance over 2 to 3 years
- Rollover Equity: Ownership stake in the DSO platform with participation in future growth and exit proceeds
- Employment Agreement: Base salary plus production bonuses (typically 25% to 35% of collections after lab costs)
- Non-Compete Provisions: Geographic and temporal restrictions on post-exit practice options
Dentists transition from independent owners to employed providers or equity partners, trading autonomy for liquidity, growth capital, and reduced administrative burden.
MSO vs. DSO: Key Structural Differences
| Aspect | Dental MSO | Dental DSO |
| Ownership | Dentist owns professional entity; MSO provides services | DSO owns practice or controls affiliated P.C. with dentist equity holders |
| Clinical Control | Dentist retains full clinical decision-making | Dentist maintains clinical autonomy (on paper); DSO governs operations |
| Fee Structure | Management fee (% of collections or fixed monthly) | Profit flows through equity ownership or employment compensation |
| Compliance | Separates clinical/non-clinical functions per CPOD rules | Uses affiliated P.C. or employment models in restrictive states |
| Exit Path | Terminate MSA; retain practice ownership | Negotiate buyout, earnout, or rollover equity based on valuation multiples |
| Capital Access | Limited to debt or dentist equity injections | Private equity funding for acquisitions, expansion, and infrastructure |
How MSO and DSO Models Handle Clinical vs. Non-Clinical Functions
Corporate practice of dentistry rules in many states prohibit non-dentist ownership or control of clinical decisions, diagnosis, treatment planning, and patient care. MSOs and DSOs navigate these restrictions by clearly delineating clinical versus non-clinical functions in governing documents and service agreements.
Clinical Functions Reserved to Licensed Dentists
Professional judgment, standard of care determinations, and scope of practice decisions remain with dentist owners or employed dentists under dental board oversight.
Clinical functions that must stay under dentist control include:
- Treatment planning, diagnosis, and prescribing medications
- Performing procedures and delivering patient care
- Supervising hygienists, assistants, and auxiliary staff
- Maintaining patient records and clinical documentation
- Establishing clinical protocols and quality assurance standards
Non-Clinical Functions Delegated to MSOs or DSOs
Administrative tasks do not require dental licenses and may be delegated to management companies or centralized corporate functions without violating regulatory prohibitions on lay control of clinical practice.
Non-clinical functions include:
- Billing, collections, and revenue cycle management
- Insurance credentialing and payor contract negotiations
- Payroll, benefits administration, and HR compliance
- IT systems, cybersecurity, and practice management software
- Marketing, patient acquisition, and brand development
- Vendor contracting, lease negotiations, and equipment purchasing
Management services agreements and professional services agreements document these boundaries, specifying which decisions require dentist approval, how fees are calculated and justified at fair market value, and governance mechanisms that preserve clinical independence while enabling operational scale.
Pros and Cons: MSO vs. DSO for Dental Practice Owners
Choosing between MSO affiliation and DSO partnership depends on your priorities around ownership control, liquidity needs, growth capital, and operational autonomy.
MSO Affiliation: Preserving Ownership and Flexibility
Advantages of dental MSO structures:
- Dentists retain practice equity and long-term ownership upside
- Strategic decisions remain under dentist control (associate hiring, expansion timing, service mix)
- Termination rights allow exit from management services agreements if performance or costs disappoint
- Ideal for solo practitioners or small groups seeking administrative relief without relinquishing ownership
Limitations of MSO models:
- Limited growth capital requires reliance on debt financing or retained earnings for expansion
- Less purchasing power and payor leverage compared to larger DSO networks
- Dentist remains responsible for major capital investments and operational risk
DSO Affiliation: Liquidity, Scale, and Infrastructure
Advantages of DSO partnership:
- Immediate liquidity through cash at close, reducing concentration risk and funding retirement or diversification
- Rollover equity participation in future platform appreciation and exit proceeds
- Infrastructure for multi-location expansion, payor contracting muscle, and technology integration
- Exit opportunities to larger buyers at premium valuation multiples
Trade-offs in DSO structures:
- Loss of operational control over vendor selection, clinical staffing, and strategic pivots
- Performance metrics and productivity expectations tied to employment agreements
- Potential cultural misalignment with corporate management practices
- Governance constraints limit autonomy on day-to-day decisions
Private Equity Involvement in MSO and DSO Models
Private equity firms deploy capital through both MSO and DSO structures, depending on state regulatory environments and deal thesis.
Corporate Practice States
In corporate practice of dentistry states, PE investors establish MSOs partnered with dentist operators who maintain clinical ownership while the MSO scales back-office operations and pursues add-on acquisitions.
PE-backed MSOs monetize through service fee growth, operational efficiency gains, and eventual platform sale to larger buyers.
Permissive States
In permissive states, PE investors acquire majority stakes in DSO platforms, consolidating practices through roll-up strategies that drive EBITDA growth and multiple arbitrage.
DSO platforms backed by PE capital access acquisition financing, recruit high-performing operators, and build enterprise value through centralized management, technology integration, and brand development.
Exit strategies include secondary buyouts to larger PE firms, strategic sales to public dental chains, or SPAC mergers and IPOs in favorable capital markets.
How Dental Transaction Attorneys Support MSO and DSO Structuring
Wood & Delgado guides dentists, practice owners, and investors through MSO setup, DSO affiliation negotiations, and regulatory compliance frameworks. The process begins with evaluating practice goals—growth capital, administrative relief, liquidity, or exit planning—and assessing state corporate practice of dentistry constraints that dictate permissible ownership and control structures.
Legal support for MSO and DSO transactions includes:
- MSO Structuring and Compliance: Drafting management services agreements with defensible fair market value fee formulas, governance provisions preserving clinical independence, and termination rights protecting practice owners
- DSO Affiliation Counsel: Letter of intent review, purchase price negotiation, earnout mechanics, rollover equity terms, employment agreement analysis, and non-compete provision review
- Private Equity Partnerships: Entity formation, regulatory compliance opinions, management services agreement templates, add-on acquisition playbooks, and exit preparation, including quality of earnings reviews and buyer negotiations
- Regulatory Compliance: Corporate practice of dentistry opinions, fee-splitting analysis, clinical independence documentation, and dental board coordination
Coordination with CPAs addresses tax elections, related-party transaction documentation, and transfer pricing support during audits or regulatory inquiries.
FAQ for Dental MSO vs. DSO
How Do MSOs Comply with State Corporate Practice of Dentistry Rules?
MSOs separate clinical governance from business operations, with dentists retaining ownership of professional entities, clinical decision-making authority, and payor contracts. MSOs charge fair market value fees for non-clinical services, like billing, HR, IT, and marketing.
Can a Non-Dentist Own an MSO or DSO?
Non-dentists may own MSOs providing non-clinical services, and may own DSOs in states permitting corporate practice, but must structure affiliated professional corporations with dentist equity holders and clinical autonomy protections in restrictive corporate practice of dentistry states.
How Do Buy-Ins, Buy-Outs, and Equity Work Under Each Model?
MSO-affiliated dentists retain practice ownership and may terminate service agreements. DSO-affiliated dentists negotiate buyout terms, earnouts tied to EBITDA performance, and rollover equity in the DSO platform with exit proceeds based on enterprise valuation multiples.
Choose the Structure That Fits Your Goals
MSO and DSO models offer distinct paths for growth, affiliation, and exit planning, each with regulatory, financial, and operational trade-offs. Call (800) 499-1474 to discuss compliance frameworks, management services agreements, and deal structures that align with your autonomy priorities and capital objectives.