By: Paul Chen, CEO at InsideDesk
At InsideDesk, we’ve spent years helping DSOs tackle the complex world of revenue cycle management (RCM).
In recent conversations, I’ve noticed a big shift in how growing DSOs think about RCM. Once seen merely as a cost center, RCM is now emerging as a strategic function for boosting revenue realization, faster cash flow, driving profitability, and managing operations at scale.
Below, I’ll share why I believe the days of overlooking RCM are numbered—and how you can leverage it for sustainable growth.
Why Profit Matters More Than Ever
When DSOs started scaling aggressively through acquisitions, the spotlight was on top-line growth. Things have changed. In 2025, I’m seeing investors focus on EBITDA and cash flow, not just production numbers. In other words, profit is king.
According to Samantha Strain, a partner at a healthcare-focused boutique investment bank, several key trends have reshaped the DSO market:
- Downward Pressure on Valuations
Previously, high-profile DSOs that were often backed by private equity aggressively pursued acquisitions and sometimes paid premiums for practices. Today, however, buyers have grown more cautious, and valuations have dipped accordingly.
- Shift in Buyer Behavior
Larger DSOs are taking a “pencils down” approach, slowing or pausing acquisitions while they reassess economic conditions and restructure internally.
- Importance of Accurate Valuations
Quality of earnings (QoE) reports have become the gold standard. A “QoE-lite” process, performed by experienced analysts, can help practices present reliable numbers and avoid unwelcome surprises during deal negotiations.
- Macroeconomic Factors
Higher interest rates, inflation concerns, and general economic uncertainty mean investors and lenders are laser-focused on reliable, profitable operations—especially in DSOs.
- Resurgence of Doctor-Led Platforms
Many investors now prefer doctor-led DSOs, which combine clinical autonomy and solid financial fundamentals, making them more appealing for long-term growth and patient care.
Together these shifts underscore an important reality: DSOs can no longer rely on top-line growth alone to secure high valuations or secure favorable buyouts.
Buyers—whether they’re strategic DSOs, family offices, or private equity firms—are drilling deeper into a practice’s true financial performance and potential.
The Rise of Quality of Revenue
As the dental industry matures, so do investor expectations. Lenders and private equity groups are now looking beyond production metrics and want a better picture of quality of revenue (QoR).
Quality of revenue analysis focuses on how reliably and sustainably your DSO generates revenue. QoR digs into what’s driving the top line, how predictable it is, and whether any accounting maneuvers are inflating returns.
This matters especially in the financial due diligence process for mergers and acquisitions. Buyers and sellers both want rigorous diligence to validate a company’s true operating potential—especially since many dental transactions base the purchase price on a multiple of EBITDA.
For DSOs, quality of revenue verifies that the revenue on paper truly makes it into your bank account. This is especially critical given the nuances of insurance claims, patient payments, and procedure-level billing.
If you’re preparing for a transaction or looking to bring on investors, quality of revenue is no longer a nice-to-have, in fact, its mission critical. They’re asking: ‘How real is your revenue?’
By ensuring accurate billing, timely follow-up, and data-driven insights, a strong RCM process highlights the credibility of QoR analyses and shows a DSO’s true financial health and long-term profitability.
RCM: Moving from Cost Center to Profit Driver
We often hear ‘RCM is just overhead.’ If you think of RCM as a line item in the budget, you’re missing a major opportunity.
RCM is the gateway for every dollar that enters your organization. Treat it right, and it turns into a growth engine. With a robust RCM strategy, you can collect revenue more efficiently, negotiate better rates with payers, and avoid preventable write-offs.
That’s not just cost management—it’s maximizing revenue realization.
What the Right RCM Technology Can Do For You
So, how does RCM technology help you stay ahead? Here’s what we see in the most successful DSOs:
- Comprehensive Analytics: You need real-time visibility: production versus collections, write-offs, aging claims, the works. This allows you to make fast, informed decisions.
- Seamless Payment Posting: Manual posting invites errors. Automating payment posting ensures every claim is properly tracked—down to the procedure level.
- Negotiation Power: Having clean, accurate data strengthens your hand in payer negotiations. If you can prove consistent underpayments, you have grounds for better fee schedules.
- Staff Efficiency: Technology that handles repetitive tasks frees up your team to focus on the real revenue drivers—resolving difficult claims, optimizing processes, or improving the patient experience.
Making RCM a Priority, Not an Afterthought
Another concern we’ve heard is the perspective of RCM solely as a cost center. However, the best DSOs often view RCM as a strategic driver. My advice is to lean into RCM early:
- Track the Right Metrics: Don’t rely on single-year net collection rates. Drill down monthly or quarterly; watch AR aging; analyze net realization, not just production.
- Invest in Solid Platforms: Your practice management system alone can’t solve all RCM challenges. Augment it with technology built specifically for claim analysis, AR reporting and payment posting.
- Arm Yourself with Data: Accurate RCM metrics help you assess growth potential, manage your finances, and even renegotiate insurance contracts.
When you pair a practice management system with an RCM platform, you get a dynamic duo that amplifies the other’s strengths.
The Bottom Line
I can’t emphasize enough how crucial RCM is becoming. For DSOs with aggressive expansion plans, every percentage point of net collection matters. You don’t want to discover a major collections gap right when you’re seeking new funding or closing an acquisition.
The bottom line is this: If you’re serious about profitability and quality of revenue, it’s time to treat RCM as a strategic driver. That means active oversight, robust processes, and the right technology. This isn’t just back-office busywork—it’s the financial lifeblood of your DSO.
By putting RCM in the spotlight, DSOs can maximize collections, bolster investor confidence, and keep their financial engines humming—all while powering the growth they set out to achieve in the first place.
