The dental economy in the 2020s: Practice profitability will be more important than ever

Dr. Chris Salierno examines the trends in the dental economy and offers his advice on how dentists can take control of their practice profitability as more dentists compete for a slice of the same size pie.

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Welcome to the 2020s. It’s the first month of the first year of a new decade. As we look back over the first two decades of the new millennium, we see a turbulent time for our profession. According to research by Marko Vujicic, PhD, there were three distinct phases of dentist supply, patient demand, and dentist earnings.1 Let’s review those phases now. 

Phase 1: Demand growing fast, supply flat, income growing—From the 1990s through 2002, we saw a healthy increase in US spending on dental services of 4% per year. Meanwhile, the supply of dentists was relatively flat. These were the good years; dentist earnings increased.

Phase 2: Demand growing slowly, supply flat, income flat—Starting in 2002, we saw the rate of growth in spending drop to 2% per year while the supply of dentists remained flat. Average dentist income began to flatten.

Phase 3: Demand flat, supply growing, income declining—With little warning, the Great Recession hit in 2008. US dental spending became flat for several years despite the eventual recovery of the general economy. Interestingly, 2008 also marked the beginning of a new trend—an increase in the supply of dentists. Unsurprisingly, with an increased supply of dentists and a flat demand for our care, dentist earnings fell.

So where are we now? The supply of dentists is expected to continue to increase through 2037.2 The latest American Dental Association research shows that demand for our services has increased slightly in 2015 and 2016,3 but it is difficult to project at this time if this uptick is a trend or a blip. Dentist earnings have been reported to have stabilized somewhat since 2014,4 but have not yet recovered to pre-2008 levels. A positive indicator is that the percentage of dentists who report they are not busy enough fell from a high of 38% in 2012 to just over 24% in 2017.4 It’s encouraging, but the fact that a quarter of dentists are still worried about inadequate patient flow is concerning. Perhaps most alarming of all these trends, however, is that the US population cites financial barriers to accessing care as significantly higher than any other obstacle (e.g., phobia or geography).5

In economics, the laws of supply and demand predict that when the supply of a good or service increases without an increase in demand, the price of that good or service should decrease. Increased competition drives down price in normal markets. One could argue that a dentist who becomes an in-network provider has effectively lowered his or her fees, yet this does little good for the roughly 25% of adults who do not have any dental benefits.6

We would do well to examine these trends and prepare our practices for the possible future of the dental economy in the 2020s: more dentists competing for a slice of the same-sized pie. Are you exclusively a fee-for-service provider, or are you in-network with third-party payers? Is your patient volume healthy, or are you one of the quarter of dentists who aren’t busy enough? Regardless of your business model, we are potentially all in for a more challenging decade if the demand for our services does not grow to meet the increasing number of dentists.

In my opinion, for dentists to weather the storm on the horizon, practice profitability must improve. We must have better overhead controls in place. We must be more scientific in setting our fees and in deciding to accept third-party fee schedules. And none of this has to be done at the expense of patient outcomes. In June of this year, I’ll be presenting creative solutions to the profitability problem at “The Profit Summit,” which is the title of the 2020 Dental Economics Principles of Practice Management Conference in Las Vegas, Nevada, June 25–26. I’ll expand on concepts from my April 2017 article, “Gross profit margin: An underutilized tool in managing profitability,” and explore how we can better track our bottom line.

The supply of dentists will go up, the demand for our services is uncertain, but our earnings are under our control.


2020 Dental Economics Principles of Practice Management Conference

Join your colleagues at "The Profit Summit" in Las Vegas, Nevada, June 25–26, 2020.
Check out the full speaker lineup and register at principlesofpracticemgmt.com.


References

1. Vujicic M. The “invisible hand” and the market for dental care. J Am Dent Assoc. 2014;145(11):1167-1169.

2. Munson B, Vujicic M. Supply of full-time equivalent dentists in the U.S. expected to increase steadily. American Dental Association website. http://www.ada.org/~/media/ADA/Science%20and%20Research/HPI/Files/HPIBrief_0718_1.pdf. Published July 2018.

3. U.S. Dental Expenditures. 2017 Update. American Dental Association website. https://www.ada.org/~/media/ADA/Science%20and%20Research/HPI/Files/HPIBrief_1217_1.pdf. Published 2017.

4. Dentist earnings and busyness in the U.S. American Dental Association website. https://www.ada.org/~/media/ADA/Science%20and%20Research/HPI/Files/HPIGraphic_1118_1.pdf.

5. Gupta N, Vujicic M. Barriers to dental care are financial among adults of all income levels. American Dental Association website. http://www.ada.org/~/media/ADA/Science%20and%20Research/HPI/Files/HPIBrief_0419_1.pdf. Published April 2019.

6. Dental benefits coverage in the U.S. American Dental Association website. https://www.ada.org/~/media/ADA/Science%20and%20Research/HPI/Files/HPIgraphic_1117_3.pdf. Published November 2017.

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