Change for the Better

As the business of dentistry rapidly transforms, practices that adjust strategically can capitalize on future opportunities for success

Roger P. Levin, DDS

During the last few years, the business of dentistry has undergone notable change, and it will continue to do so. The modern business world is characterized by continual changes and dentistry is a part of that dynamic. The days of slow changes, long-term appreciative staff, acceptable dental insurance reimbursement, simple practice models, occasionally released new materials and technologies, and stable economic growth have been replaced by those that are characterized by rapid changes, a staffing crisis, declining reimbursement rates, seemingly endless new practice models, regularly emerging advances in materials and technology, and uncertainty regarding profitability. Fortunately, practices that take the time to understand the ways in which the business of dentistry is changing and stay abreast of these changes so that they can be proactive and strategic about handling them can still be extraordinarily successful.

The Staffing Crisis

Dental practice staffing has truly reached a crisis level. Although there may only have been a perceived shortage in the availability of dental staff in certain regions in recent years, it is now a national crisis. Practices were unprepared for this sudden shortage as opportunities for higher compensation quickly emerged during the COVID-19 pandemic, and many team members changed practices or left the profession for other occupations. According to data from the Levin Group, 10% of all US dental hygienists left the profession during the pandemic. This left practices struggling to find hygiene coverage, and some were forced to reduce their hours available for hygiene appointments. Furthermore, the staffing shortage has affected all positions in dental practices, including administrative staff and dental assistants, which has further impacted efficiency and productivity.

Today, practices should already have a complete program in place in the event that they need to replace a lost team member. Mastering the stages of recruiting, interviewing, and hiring, including identifying proper compensation, onboarding, training, and even retraining, is essential to the current and future success of practices.

Stagnating Reimbursement

The profession of dentistry has always had a love-hate relationship with insurance. Oftentimes, the dentists who participate in dental insurance programs resent the control that the insurance companies exert over reimbursement rates and the rarity of increases in those rates. The Levin Group has identified numerous insurance plans throughout the United States that actually lowered reimbursements during the pandemic despite the presence of inflation and higher staffing compensation costs.

We are often approached by dentists who ask us what they should do regarding dental insurance, and I have personally participated in many panels, webinars, and seminars on this topic. The Levin Group recommends that practices conduct a strict analysis whenever they are considering enrolling in or exiting a dental insurance plan. How many current patients are in a plan, how many new patients may potentially come to the practice because of a plan, the revenue per plan, the revenue per patient per plan, the number of insured patients versus total active patients in the practice, the revenue from insured patients versus total practice revenue, and other key factors must be analyzed and understood before making any decisions. If a practice's revenue from a specific plan represents a very small percentage of its overall revenue, exiting that plan will not have as much of an effect as exiting a plan that generates 20% to 25% or more of its revenue. Dentists can easily make a number of mistakes that affect their practices' bottom lines by jumping into or out of insurance plans based on gut instinct rather than sound analysis.

Alternative Practice Models

The choice used to be as simple as owning your own practice or becoming an associate of another's private practice; however, this has rapidly changed with the introduction of many alternative practice models, such as dental support organizations (DSOs) and other group practice options. What does this mean for the future of dentistry? DSOs are now a major part of the landscape of dentistry. Simply stated, they represent a different type of service delivery model in which economies of scale are leveraged to increase efficiency and provide centralized support for nonclinical operations to the affiliated practices. The presence of DSOs will continue to grow, and there is no accurate projection as to what percentage of all practices that they will ultimately represent. From a competitive standpoint, they will have strong advertising power and strong branding while operating at lower costs and with more convenient hours. The decision to join a DSO or practice privately is one that is based on many factors, both professional and personal, and dentists and dental consultants have expressed a wide range of opinions and advice regarding this issue. Nonetheless, DSOs are here to stay and will continue to evolve to offer alternative practice models to meet the needs of dentists and patients in the future.

Rapidly Advancing Technology

Technology is playing an increasing role in the practice of dentistry. As technologies continue to improve, they will provide numerous opportunities to advance the accuracy, predictability, and efficiency of clinical care, particularly in the area of same-day treatment. They will also contribute to the efficiency of administrative functions, including engaging in patient communication, contacting overdue patients, and tracking a variety of statistics to facilitate practice improvement. Every practice should evaluate its current position regarding technology and identify companies that it trusts to help create a technology plan for the future. Having a plan allows for excellent budgeting, which permits practices to add desired technologies without creating a financial burden or adding to overhead. Beyond the delivery of improved patient outcomes, the return on investment realized from the implementation of excellent clinical technologies, along with excellent practice systems, can help to create continuity in the development and maintenance of a highly successful practice.

Rising Overhead

Although the staffing crisis has been with us since the pandemic, rising overhead is a more recent factor that began to become significant in 2022. Until that time, dentistry had enjoyed 10 to 12 years of a positive economy that lent itself to patients accepting treatment and enabled practices to increase fees while keeping costs relatively low. Much of this was due to that fact that interest rates were near zero, which kept general inflation at a very low level. In 2022, according to Levin Group data, overhead increased by approximately 8.6% in dental practices. This means that practices are now spending $8.60 more for every $100 of revenue. The best antidote for this situation is to focus heavily on increasing your practice's production in order to counter the rising overhead. If the right operational strategies are put in place, there is no limit to the production that can be achieved.

Increasing Production

As changes occur in the business of dentistry, practices need to change with them. One goal that we have always recommended to practices is to increase production every year. This can be considered to be part of the definition of a healthy practice, and any practice that increases its production annually will gradually become successful, provide an excellent return on investment to the doctors/owners, and be able to maintain that performance for the long term. Unfortunately, increasing production can be more challenging now than it was in the past. The reasons for this range from stable or declining insurance reimbursements to increased competition from different service delivery models and more. However, we still believe that almost any practice can increase production and performance by implementing the right systems, leadership, and customer service model. There are many ways for practices to increase their production, but to do so, dentists need to become more familiar with these opportunities and implement the appropriate strategies at the right times. Some of these strategies focus on reactivating all patients who are not scheduled for their next appointment, enhancing hygiene revenue, adding to services, and implementing new technologies that increase efficiency without contributing to fatigue or burnout.

Plan Appropriately

Although some of these changes in the business of dentistry can appear to be negative, change almost always creates opportunities for the future. A practice may decide to remain private and independent, sell to a DSO, add new services, or make improvements in systems or technologies.

One practice that we worked with identified that their geographic area was becoming more competitive. To establish a larger presence, they purchased two additional practices and opened another new one in specific locations. Prior to making these purchases, they implemented specific systems to create a model for the next three practices so that they would all operate similarly and at the highest level. These offices now all achieve levels of production that are in the top 10% of dental practices, and they have protected their position in their local area while providing excellent income and retirement savings for the owner doctors and the associates. Implementing systems to maximize efficiency, adding specific technologies to increase clinical quality, and improving staff performance were all part of the strategic planning at these practices. They were able to accomplish this in 4 years and made it a strategic decision to maintain the practices rather than selling them to another entity.

A critical aspect of leadership is being able to identify and understand specific changes in the business of dentistry and appropriately plan to take advantage of the opportunities that these changes might provide. Ultimately, some changes may not be favorable, but understanding the positive and negative aspects of changes allows practices to create specific strategic plans to meet them going forward.