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Industry Ripe for Transformation
An interview with Gordon Christensen DDS, MSD, PhD
Q What is the current state of the dental economy? Some believe dental spending will continue to be flat for coming decades. What economic factors or indicators are and will continue to impact the dental economy?
A The world economy has not recovered from the great recession. In my many CE courses, I usually ask questions about the economy so I can orient my course to the apparent needs of the community to which I am speaking. Seldom do I see more than a few dentists in a typical group of several hundred who say that their gross revenue is equal to or higher than before the recession started.
ADA statistics show that net dentist income is at about the 1997 level and stagnant. Among the factors that are making dentist income flat are:
Slow recovery from the recession
• Benefit plans that are paying significantly less
• Increase in corporate dentistry (DSOs)
• Dentists who are practicing longer
• Patients who are hesitating to spend
• New dental schools continuing to open
• Enormous education debt of new dentists
• Saturation of dentists in many geographic areas
The impact of some of these factors will decrease as the recession continues to be overcome, but some factors, such as the increase in DSOs, are becoming significantly more impactful. Overall, I do not foresee a major positive change in the economic lull for dentists. Therefore, this will require dentists to participate in proactive patient education in order to overcome the economic down time.
Q A shift appears to be occurring in the pattern of patient dental care utilization. Recent statistics would indicate that the average Aspen Dental office sees 473 patient visits per month, versus the average solo practice, which is seeing on average only 260. Where is the practice of dentistry going?
A Currently, most private general dental practitioners have fewer patients coming in for treatment than before the recession. There is still a major hesitation to spend discretionary money on the part of patients. Patients are now “shopping around” more and are not opting for elective esthetic upgrades as much as before. It has been estimated that before the recession 8 of 10 crowns were singles, while now the ratio is about 9 of 10. What does that mean? Fewer large multi-unit rehabilitations. Many patients are looking for bargains in oral care. Numerous dental care organizations have been started with fees as low as one-half of the normal national fee average.
In addition, there is a rapid movement of patients from private practitioners to corporate practices, because the fees are somewhat lower than those of private practices.
Q Multi-group practices also seem to be on the rise. What factors are influencing this shift and what will this mean for the structure of dentistry and the business side of the dental laboratory industry?
A The observable fact is that corporate dentistry, including many small corporates, will soon be the majority instead of the minority mode of practice. At this time, the ADA estimates that about 60% of general dentists in the USA are in solo practice. It has been estimated that in a few years this percentage will drop to 40%. Why are patients going to corporate dental organizations? Many of the better corporates are more patient friendly than private practitioners, and there are almost always dentists to see a new patient in most of these organizations. Additionally, fees are usually lower in corporate practices, where overhead is lower due to group purchases of instruments and supplies and contracts with distributors.
Many young dentists are attracted to corporates because of their oppressive school debt. They are looking for a guaranteed salary, time off, predictability in their practice days, and retirement plans. It is very obvious that they want a more normal life than the life of many private practitioners. Some dentists like the corporate dental life, while others use it as a stepping-stone to their own private practices.
Dental laboratories, both small and large, are finding that contracts with corporates are mandatory for survival. That trend will continue. In my considered opinion, the trend to corporate dentistry is both good and bad for both the profession and for patients.
Q What are you seeing on the dental insurance side? Are there new emerging business models that are challenging the conventional PPO model?
A Third-party payment organizations are the most major problem reported by dentists. In surveys we have conducted and published at Clinicians Report, this concept is the singular most disagreeable aspect in all of dental practice. The challenge is only getting worse with frequent reductions in payments for oral procedures. Third parties are now dictating fees, treatment plans, and fees for treatment they do not even fund.
The profession is ready to rise up with a major anti-third-party payment revolution. All that is needed is a leader of that revolution, and that will happen. The profession needs to abolish the current dental payment concept and form a new system that is equitable for patients, dentists, and any business company that will be involved. Some form of direct reimbursement should be planned and implemented.
The dentists should be the leaders of this revolution. They know the profession and its needs. The business people should be the “providers” to facilitate payment, which is the exact antithesis of the current payment concept.
Q If you were a laboratory owner, where would you be positioning your business today to ensure viability for the next decade and beyond? Are there new or emerging profit centers that laboratories should watch closely?
A If I were a laboratory owner, I would immediately seek out both large and small corporate practices and solicit their business. Of course, laboratory fees for the corporates will have to be negotiated, and they will undoubtedly be lower. That has certainly happened over the past 10 years as average laboratory fees have reduced by about one-third.
Laboratory owners will need to develop ways to make their products faster, easier, better, and definitely at lower cost. This should not be a major problem with in-lab scanning and milling, additive technologies such as 3D printing, and many other computer-aided laboratory tasks.
Emerging areas of dentistry that relate to laboratories are already growing. Among them, probably the most important one is the zirconia revolution, which has changed fixed prosthodontics markedly. This will not stop, and several esthetically oriented zirconia iterations undoubtedly will gradually become the major material used in fixed prosthodontics. Demand for sleep medicine is also increasing rapidly and will continue to grow into a major part of the dental laboratory revenue stream.
Q Considering all the economic pressures and developments that we have discussed, what is your outlook for the future of dentistry?
A Overall, I am very optimistic about the future for the profession, in spite of my relatively negative observations. The dental profession is a very positive example for all professions. It exhibits preventive characteristics, moderate fees, altruism, progressiveness, and research to become better. I would choose dentistry again without any hesitation. Two of our sons are dentists, as are several others in the family at large.