Inventory Management
Procurement
Method Pay
Analytics & Reporting
The DSO market is on track to nearly double by 2035, growing from $155.65 billion in 2025 to a projected $302.54 billion. That's the headline every operator, investor, and lender is working from.
The footnote is uglier. At the Dykema DSO Conference, industry insiders reported that 23 DSOs entered receivership in the preceding 12 months. Moreover, a growing number of organizations across the sector are being described as "zombie DSOs," over-leveraged operators unable to recapitalize and running operations too inefficient to service their debt.
The comforting story is that most of these failures were about bad deals, bad markets, or bad luck.
The more honest story is that they share a pattern, and the pattern is operational. Acquisition pace outran the operational platform, and procurement was the first place it showed—and could have been slowed.
A zombie DSO isn't defined by size. Some of them are still adding locations to get into the black up until the last minute. Instead, it’s defined by the gap between how fast the portfolio grew and how fast the back-end infrastructure grew with it.
According to industry reports, there was a consistent pattern of acquisitions moving faster than integration. New practices were brought in as revenue additions rather than operational obligations.
Centralized procurement, inventory management, and AP automation got pushed down the priority list because they didn't feel urgent compared to closing the next deal. And leadership assumed buying power would show up automatically once the location count crossed some threshold.
In most cases, overambition isn’t to blame. Poor sequences of events that compound quietly is right up until margin runs out.
The core mistake wasn't about procurement volume so much as strategy.
Zombie DSOs operated on the assumption that scale alone creates leverage, that 50 locations would automatically command better pricing than five, and that volume would do the work of discipline.
Spoiler alert: It doesn't.
A group of 20 practices spending a combined $2M annually on dental supplies should command dramatically better pricing than 20 independent practices spending $100K each.
But if those 20 practices are ordering different products from different suppliers in different quantities, they receive 20 separate pricing agreements instead of one consolidated arrangement. The leverage disappears into fragmentation.
Savings come from organized competitive processes, not from volume.
That means:
None of that requires dozens of locations. All of it requires discipline which the zombie DSOs deferred.
That discipline in the long run is cheaper than the acquisitions that were supposed to pay for it.
Every dollar saved in procurement is equivalent to roughly $3 to $4 in production value, because production dollars have to cover all the costs of generating them.
A DSO that recovers $500K in supply spend has done the equivalent of adding $1.5M to $2M in new production, without hiring a single provider or running a single marketing campaign.
The DSOs that came out of 2025 compounding margin instead of bleeding it share three operational choices.
They built the processes before they needed it. Centralized procurement, inventory management, and AP automation went in during the growing phase.
That is, when they still had 15 or 20 locations, rather than retroactively after the portfolio hit 50 and the wheels started coming off. Every manual process that works at 10 locations breaks at 50. The ones who walked out of 2025 in the black didn't wait for things to break, they proactively built processes that enabled them to scale.
They tracked supply spend at the network level. A healthy supply spend benchmark sits at 4–6% of collections, and anything north of 6.5% is a flashing indicator that something in procurement is broken.
Successful DSOs watch that number monthly, at the network level, and treat a spike in any single location as a signal to investigate rather than a rounding error. Zombie DSOs reviewed it quarterly—if at all—and by the time the trend was visible, the money was already gone.
They ran private label as a strategy, not a line item. Top-performing DSOs target 30–40% of total spend on private label, which delivers 30–50% cost savings versus branded equivalents. Most DSOs sit closer to 20%. The gap between 20% and 40% represents hundreds of thousands to millions of dollars annually for an elite DSO.
The zombies left it on the table because nobody owned it at the network level.
They integrated acquisitions in days, not months. The window between closing an acquisition and fully integrating its procurement is a leakage window.
The acquired practice keeps ordering what it's always ordered, from the suppliers it's always used, at prices the DSO never negotiated.
Zombies ran parallel systems for months, sometimes years, inheriting every legacy habit they acquired. With the right inventory management platform, you can shorten that window to under a week by running acquisitions through a standardized procurement system immediately.
The $3-to-$4 ratio deserves a second look, because it's the single most useful framing for why procurement is the fastest lever available to a distressed DSO.
Production dollars are hard. They require providers, chair time, patients, marketing, insurance negotiation, and supply consumption.
Procurement dollars are discipline. They require a system, a formulary, and the willingness to run competitive processes against your suppliers on a predictable cadence.
For a zombie DSO trying to service debt, that ratio is the difference between recovery and receivership. For a healthy DSO, it's the difference between a 5% EBITDA margin and a 7%.
The math doesn't care how you got into distress. What matters is whether you can pull the right levers to rightsize it.
If the market doubles again by 2035, the next wave of distressed DSOs will likely look a lot like this one: running a procurement on spreadsheets, phone calls, and goodwill.
The operational debt they're accumulating today is the margin compression they'll be explaining to lenders in 2028.
The test is simple: How fast can you integrate your next acquisition into a single procurement system?
If the answer is more than a week, the gap between your growth plan and your operational platform is already widening. And if you're adding locations faster than you can standardize them, you're not scaling a DSO — you're building the next zombie.
The DSOs that have built a scalable, profitable business didn't win because they grew slower. Their operational platform grew alongside their footprint, with procurement as the first system that had to scale and the first lever leadership could pull when conditions tightened.
It's the cleanest margin protection available to growing and elite DSOs right now, and it's the one most zombie DSOs ran out of time to build.
