Murphy’s Law: External Forces Affecting Laboratories Today
Understanding and reacting to trends in clinical dentistry
By Mark T. Murphy, DDS, FAGD
Strategic planning often starts with a SWOT analysis: strengths, weaknesses, opportunities, and threats. A discussion usually occurs regarding both internal and external forces that impact these considerations. This article will explore three major forces shaping our future. It will be up to you to put that information to good use in your business planning. Remember, knowing is not doing.
The ADA Health Policy Institute recently released research that was quite telling in regard to the near future of our profession. With spending flat, the supply of dentists growing, and incomes dropping, dentistry's perfect storm may have arrived. The implications of this are important for the dental laboratory profession. Changing relationships, larger dental practices, and treatment decisions determined with a greater sensitivity to the financial impact are all occurring already. I don’t have a crystal ball, so the future is uncertain. However, the forces acting upon dentistry, and ergo the laboratory profession, are clear.
Three major external forces shaping our future are history, insurance, and debt.
History repeats itself. For the most part, changes in dentistry eventually follow medicine: fragmented practices, higher costs and debt, technological advances, regulation, and changing reimbursement models are among the factors driving consolidation. Approximately 15% of dentists currently practice in the larger corporate models, and 85% are owner-operators. That is what medicine looked like 20 years ago, and it is exactly the opposite today.
Insurance isn’t really insurance. Insurance is often defined as when a third party takes the risk for a catastrophic loss. There is nothing catastrophic about $1,200 for most people. Medical, home, and automobile coverage are real insurance by that definition; dental maintenance plans are not. It gets worse, as Preferred Provider Organizations (PPOs) make up more than 80% of the insurance offerings to patients and require the dentist to take 15-25% lower fees for in-network patients. Dentists must reduce their costs if they want to keep their income near the traditional levels. This has, of course, driven the rise of monolithic zirconia as a restorative choice, as well as the popularity of offshore solutions that are less expensive.
Debt is out of control. The average dental school graduate in 2012 had more than $212,000 in educational debt. That makes it difficult to start a practice, take a traditional associateship, or be patient and “pay your dues.” Large groups are gobbling up more of these dentists, and young dentists do not always want the hassle of managing a practice.
Adjusting to Change
So what does a dental laboratory do with all this information? As I always say, that depends. It depends on what your vision is for your laboratory. When the winds change, sailors have the option of setting the sails differently to accommodate and sail on. When someone continues doing what they have always done and expects a different result, that was Einstein's definition of insanity. Large laboratories will survive and boutique laboratories will survive, not because they are large or boutique, but because they adjusted to the environmental changes and created a preferred future. Keep these forces in mind and go through your strategic planning process. These will continue to have a large effect on our profession for some time to come.
Mark T. Murphy, DDS, FAGD, is the Principal of FunktionalTracker.com and Lead Faculty for Clinical Education at MicroDental Laboratories.