3 Trends Driving Profitability in the Dental Industry

One of the biggest challenges in the dental industry is the alignment between care delivery and profitability. In light of this challenge, for the last several years, private practice ownership has been declining.  At the same time, revenues are expected to increase for the industry, on the aggregate. Research from IBISWorld forecasts, for instance, that “increased access to dental care and greater disposable income will boost industry revenue.”

“The dental industry has benefited from advances in dental technology and improved access to care for older adults and low-income individuals,” explains the report. “Rising disposable income and a low unemployment rate have also supported the ability of individuals to afford out-of-pocket payments for care, which constitute the second-largest source of industry revenue.”

Moreover, a growing movement among large health plans and state Medicaid programs to move towards value-based pricing means that new pathways for delivering care.

“For instance, Oregon offers bonuses for plans that place sealants on a certain proportion of Medicaid child enrollees, creating an incentive for plans to pay for school-based providers that has increased the rate of sealants among children on Medicaid,” according to Pew Charitable Trusts.

The following 3 trends will help dental practice owners align their business’s financial growth opportunities with effective care delivery.

The rising demand for preventative care among children

Despite improvements in the overall oral health of Americans over the last five decades, tooth decay remains the most common chronic disease among children between the ages of 5 to 17, according to Georgetown University’s Health Policy Institute.

Meanwhile, oral health disparities persist due to inadequate insurance coverage and a limited supply of providers. As one pathway for addressing this challenge, 29 states across the U.S. have established state sponsored programs to offer preventative services to children.

“Several states, including Ohio and Wisconsin, have devoted a substantial amount of resources to school and community-based efforts that target children at high-risk for dental decay and least likely to receive care,” writes Georgetown University’s Health Policy Institute. “In Ohio, over one-third of the counties have school-based dental sealant programs.”

Treating kids at a younger age, according to numerous studies, has the potential to prevent problems down the road. There is a financial incentive for state governments to invest in children’s care.

Monitoring state legislation for preventative care can help dental practice owners align care delivery practices with financial sustainability. State-sponsored programs can help dentists expand their practices to low income communities.

Practice consolidation

The number of large dental practices—with more than 100 dentists—has more than tripled since 1992, with the number of solo practitioners experiencing a reduction, in tandem. This market trend reflects the economics of reaching a wider base of patient while still remaining profitable.

“Large practices benefit from cost efficiencies, enhanced productivity, and reduced management burdens, so experts expect their numbers to grow,” writes Pew Charitable Trusts. “These practices tend to use more dental assistants and hygienists per dentist to boost productivity.”

In addition, the “well-documented and ongoing crisis in access to dental care” has led to public health organizations calling for physicians and other providers to begin providing oral health care services. This trend is leading to the establishment of accountable care organizations (ACOs) which bring together cross-functional teams of providers.

“That means dentists will probably need to shift routine preventative and restorative work to lower cost providers in clinics or deployed to community locations such as schools and nursing homes,” Pew Charitable Trust elaborates.

To grow their practices—or establish financially sound operations off the bat—may consider integrating operations with fellow healthcare provider to expand access to customer bases and improve efficiencies.

Rising reimbursement rates in select situations

Reimbursement rates from insurance programs remain low and relatively unchanged, on the aggregate. An economic incentive exists, as a result, for dental practices to only work with private insurers rather than Medicaid.

The challenge, however, is that only a small proportion of the United States population has access to private dental insurance through their employers—35.2 percent of adults in the U.S. do not have formal dental coverage, according to the American Dental Association Health Policy Institute.

Recognizing the need to expand access to care, Michigan and New Mexico, for instance, have increased Medicaid reimbursement rates to increase the number of dental visits—particularly among populations of children.

In addition, the American Dental Association explains that a rising number of dentists are turning to negotiation and optimization vendors to help navigate the complex insurance landscape.

“A negotiation and optimization vendor was very helpful in the ever-changing dental insurance landscape,” explains Dr. Cynthia Olenwine in an article for the American Dental Association. “Using an insurance vendor reduced my time spent reviewing contracts, credentialing, reviewing fees, et cetera,” she said. “They took care of all those ancillary functions that were time-consuming and not profitable.” 

Third-party services can help dentists alleviate the strain of paperwork in their practices. With this free time, practice owners can focus on delivering care—creating a feedback loop back to profitability.

Final thoughts

By focusing on preventative care, seeking incremental opportunities for insurance reimbursement, and building efficiencies into their practice businesses, dentists can find new and sustainable pathways to generate growth in their businesses. The practices above have the potential to reverse the trend of dental practices shutting down, over time, in light of rising revenue in the industry.