The Changing Landscape of Dentistry
How trends in the economy, political landscape, and population demographics affect the profession
After 15 years walking the halls of hundreds of dental practices in the industry, I find myself reflecting on the significant changes to the models in the past several years. We can’t help but wonder what has driven these changes, and what role economy, government, and consumer have played in the evolution. What do these changes mean for a dentist looking to buy/sell/retire a practice? In this piece, I will provide data and draw correlations on how trends can and will affect different dental practice models. Let’s start by acknowledging economic, legislative, and demographic trends that are evolving the profession as we know it.
Payment for dental services is shifting from commercial dental insurance to public coverage and personal out-of-pocket payments. The implications point1 toward diminishing reimbursement for dental procedures, ultimately requiring practices to find avenues to become more efficient. The analysis on dental spending adds to this challenge, reflecting minimal growth compared with previous decades. According to the Robert Wood Johnson Foundation, more than 50% of uninsured and 30% of insured Americans skipped necessary dental visits.2 A recent research brief from the American Dental Association (ADA) on dental expenditures states, “With dental spending likely to remain sluggish, there could be increased interest for the profession to explore expanded scope of practice so they are much more active contributors, for example, to the primary healthcare network.”3
Another alarming economic trend concerns debt and income for dentists. In 2012, average annual net income was $146,040 for non-owner GPs and $202,760 for owner GPs. Adjusted for inflation, average incomes have remained about the same for GPs since 2009.4 This assessment from the ADA shows that the income hasn’t matched the rebound in the economy, and the issue is compounded by dental student debt. According to the American Dental Education Association, more than half of the students graduating from private/private state-related schools had debt of $250,000 or more, whereas approximately 23% of public school graduates had debt that high. Since 1996, the average debt for students with debt graduating from private/private state-related schools was nearly 76% higher than for students graduating from public dental schools. By 2012, this gap had narrowed substantially to 37%, indicating that public school graduates borrowed more heavily than in the past.5
The unknown implications of the Affordable Care Act (ACA) rest heavily on many dentists’shoulders. With the ACA, dental benefits will be marginalized because priority will likely be to sell medical insurance packages.6 There has been a lot of speculation about the impact on consumers, but very little regarding the affect on healthcare providers. The regulatory dialogue around mid-level providers, general anesthesia, non-covered services, and more all plays a role in the transformation of the dental practice. Uncertainty on legislation leaves the dentist with inability to make an informed decision.
The demographic inferences must be for both the consumer and the dentist. Looking at consumers, three facts emerge: the United States population is getting older, becoming more diverse, and having more children. How will population trends affect the use of dental care? The decline in use among adults is occurring among all adults younger than age 65 years; the largest decline occurred from 2003 through 2011 among the 35-to-49 year cohort and the 50-to-64 year cohort, with an increase with children.7 The impact on dental spending will directly reflect generational needs as well as the divergent mix of procedures between adults and children.
In terms of dental workforce trends, it is noteworthy that in 2012, women represented 47% of the incoming dental student class, the highest proportion in history.8 The percentage of female dentists has increased from 22% to 38% of all professionally active dentists in the past 10 years. The workforce is aging as well, with 37% of dentists older than 55 years of age. With an improving economy, there will likely be more dentists retiring (who are currently staying in practice). Perhaps the factor most subjective to interpretation is the generational divide arising in the profession. There were 5,483 enrollees in the 2012 class (the largest in history of dentistry), and most fall into the category of the “Millennial” (born after 1980). Data about this generation9 provide a glimpse at the future of the business of dentistry (Table 1). These statistics support the trends we are seeing in the industry relative to practice transitions. Let’s explore practice scenarios dentists are faced with today and what implications these trends have on them.
Practice Transitions Buying
Inventory is low, but starting to increase; however, with the statistics listed above on extended retirement ages for dentists, we are seeing limited high-value opportunities.
Challenges are acquiring access to capital but that is marginally improving; however, with debt increasing and average income flat-to-decreasing there is little room to make the note on a practice. There is only one young dentist aiming to buy a solo private practice for every four retiring solo practitioners looking to sell their practice.10
Doctors are hanging on to their offices as the age of retirement has gone up. However, brokers are recommending selling as the valuations are higher than they have been and the merger/acquisition activity is still fertile.
Many haven’t seen the returns on their practice they expected due to the losses in the economic crash. Extended retirement has left them with options to sell at lower value than they expected or walk away. Some are stepping out but into an associate position in another practice or dental support organization (DSO).
Maintaining Current Status
Unfortunately, usage and debt/income trends don’t favor the independent private practice—especially those that are not seeing yearly growth. More than one fifth of doctors now practice fewer than 4 days a week; from 2009 to 2013 there was a 9% increase in doctors working 5 or more days per week.11 The market of buyers could decline over time if the acquisition/purchase of an independent private practice doesn’t make financial sense. Mergers may make more sense as the currently fragmented markets begin to consolidate; as a result, we see many group practices establishing. Those with more than 10 years to retirement may be faced with the difficult decision to either join a corporate dental group or transform their business into a boutique practice that can garner patient loyalty.6
Increased government regulations, rising supply costs and competitive labor markets have made practice overhead difficult to contain.6 Dr. Curtis points out that corporations generally can help maximize efficiency by offering valuable resources for staff management, marketing, laboratory and dental supply purchasing power and practice administration.12 As a result, some groups are incorporating new technologies while independent private practitioners are forced to abandon them. It is becoming increasing difficult to attract patients that deferred treatment/visits while building efficiencies to provide that treatment at a reasonable cost. Hence the rise in the consolidation of practices to a group model that capitalizes on the economies of scale and placement in urban, suburban, and rural markets to acquire patients creating density and access to care. Many smaller groups are emerging in industry; however, are facing significant barriers to expansion beyond several offices due to access to capital, achieving economies of scale, acquiring/retaining talent, regulatory issues, and more. Replication of a successful practice proves to be difficult for most. DSO/DMOs (dental management organizations) have built a model that allows for associateship, ownership, and different forms of equity for dentists. As a result, we have seen the population of dentists joining this model increase significantly over the past several years.
Although there isn’t a consensus that there is one practice model of choice, the evidence shows that the dentist in independent private practice is facing challenges that parallel what were seen in past decades with medicine and pharmacy. Certain practice models may leverage the trends to play in their favor. However, that doesn’t guarantee any individual dentist, practice, or model long-term sustainability or success. Those elements are determined by many more factors, including their ability to attract, retain, and grow their relationships with patient communities. That being said, dentistry is rated the #1 career of choice, expecting to add 23,300 dentists by 2022, according to U.S. News & World Report.13 That trend alone identifies that the opportunity in this industry far exceeds the challenges.
1. Diringer J, Phipps, K, Carsel B. Critical trends affecting the future of dentistry: assessing the shifting landscape. Diringer and Associates. www.ada.org/~/media/ADA/Member%20Center/FIles/Escan2013_Diringer_ES.ashx. May 2013. Accessed July 1, 2014.
2. Pryor C, Prottas J, Lottero B, et al. The costs of dental care and the impact of dental insurance coverage. Robert Wood Johnson Foundation website. www.rwjf.org/en/research-publications/find-rwjf-research/2009/04/the-costs-of-dental-care-and-the-impact-of-dental-insurance-cove.html. 2009. Accessed July 1, 2014.
3. Nasseh K, Vujicic M. Dental expenditure expected to grow at a much lower rate in coming years. American Dental Association website. www.ada.org/~/media/ADA/Science%20and%20Research/HPI/Files/HPIBrief_0813_1.ashx. August 2013. Accessed July 1, 2014.
4. Vujicic M, Munson B, Nasseh K. Despite economic recovery, dentist earnings remain flat. American Dental Association website. http://dev.ada.org/sections/professionalResources/pdfs/HPRCBrief_1013_4.pdf. October 2013. Accessed July 1, 2014.
5. American Dental Education Association. Annual ADEA Survey of Seniors: 2012 Graduating Class. Washington, DC: American Dental Education Association; 2014.
6. Kao RT. Controversies in dentistry: dentistry at the crossroads. California Dental Association Journal. 2014;42(2):88-95.
7. Vujicic M, Nasseh K. Dental care utilization continues to decline among working-age adults, increase among elderly, stable among children. American Dental Association website. www.ada.org/~/media/ADA/Science%20and%20Research/HPI/Files/HPIBrief_1013_2.ashx October 2013. Accessed July 1, 2014.
8. American Dental Education Association. U.S. Dental School Applicants and Enrollees 2000-2012. Washington, DC: American Dental Education Association; 2014.
9. Pew Research Center. Millennials: confident, connected, and open to change. Pew Research Social & Demographic Trends website. http://pewsocialtrends.org/files/2010/10/millennials-confident-connected-open-to-change.pdf. February 2010. Accessed July 1, 2014.
10. Levin R. Practice Transitions. Levin Group Data Center.
11. Levin Group Inc/Dental Economics. 7th Annual Practice Research Report. Dental Economics. November 2013:70.
12. Curtis EK. The business of oral health care: a look into the corporatization of American dentistry. AGD Impact. 2012;10.
13. Graves, J. The 25 best jobs of 2013. U.S. News and World Report website. http://money.usnews.com/money/careers/slideshows/the-25-best-jobs-of-2013. December 2013. Accessed July 1, 2014.
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Pacific Dental Services