Trends shaping the future of dental practices
How are dental practices meeting the challenges of a changing marketplace despite decreasing reimbursements and increasing competition for patients?
The landscape for the dental industry continues to change, presenting new opportunities and challenges as the number of dentists increase. Demographics shift and the business structure of dental practices continue to evolve.
While there had been some concern about an aging dental workforce and whether there will be enough dentists to meet current and future patient needs, statistics show that the number of dentists in the United States continues to grow. The American Dental Association Health Policy Institute (HPI) predicts that, despite fears of a looming dentist supply cliff, the dentist workforce in the United States will increase through 2035 due to an influx of younger and more diverse dentists.
In Illinois alone, the HPI reports that by 2035, there will be 77.8 dentists per 100,000 of population and almost half of dentists (45.5 percent) will be female. It’s a gender shift that’s taking hold across the U.S. According to Dentist’s Money Digest, female dentists represented 28 percent of the industry at the start of 2016, up from a mere 3.3 percent in the 1970s. However, as enrollment in dental schools reflects a near-even 50-50 split between the genders, it’s a trend that could continue for years to come.
The rise of Dental Service Organizations (DSOs)
In addition to changing demographics, the business structure of dental practices has also been in transition, with the number of solo practitioners decreasing while participation in DSOs continues to grow. According to Modern Dental Network, solo practices are shrinking at about 7 percent per year, while the American Dental Association (ADA) reports that 7.4 percent of dentists are currently part of a DSO. The number more than doubles to 16.3 percent for new dentists ages 21-34. As many solo practitioners look to transition the details of running a business, the Modern Dental Network notes that a report by William Blair estimates that DSOs will continue to grab a greater share of the dental marketplace. The report predicts a 15 percent annual growth rate over the next five years, estimating that “U.S. penetration of DSOs could reach 30 percent by 2021.”
Why the push towards DSOs? Given their economies of scale, DSOs have many benefits including managing costs, decreasing expenses, enhancing access, negotiating with third parties and vendors, securing and retaining associates, providing strong benefit packages for staff and providing dentists with a solid exit strategy. There’s no generational divide on the appeal of DSOs, with both millennial and boomer dentists finding them attractive.
For example, Dentist’s Money Digest reports that today’s dental school graduates amass an average of $300,000 in debt. Coupled with a business investment of $500,000 to $1 million needed to start a practice, it’s no wonder that young dentists find corporate dentistry to be an alluring alternative simply from a bottom-line perspective. On the other end of the spectrum, boomers like the DSO concept because they can work reduced schedules without the headaches of running a business as they transition towards retirement.
Private equity’s impact
Private equity firms are playing a key role in the consolidation of the dental industry as they continue to buy up practices across the country, looking to take advantage of economies of scale. Bloomberg reports that the overall market for dental services is huge ($73 billion in 2017), but since less than 10 percent of dentists are affiliated with corporate-backed practices, advocates expect that a lot more consolidation and private investment will follow. According to Mergers & Acquisitions, the main draw for investors has been the strength and consistent growth of dental practices, since the industry is not affected by economic changes. In turn, private equity firms can help provide small practice owners with the liquidity they need to optimize their practices.
Additional options for solo dentists
Although there’s no denying that consolidation is taking place in the dental marketplace, there will also always be a demand for those who wish to be solo practitioners. But those who don’t want to join the move toward DSOs may need to use a new practice model. One option from Dental Products Report may be for independent practices to share space with other practitioners who can benefit from teaming up to invest in technology or to streamline rent. Other options may include running a cutting-edge specialty practice focused on new treatment options or bringing general dentists and specialists to work together in a team-based approach under the same roof.
Regardless of how a practice is structured, all dentists are facing challenging trends in today’s marketplace, including reduced reimbursement allowances that put pressure on profits and increased competition to attract new patients.
Reimbursement challenges increasing
In response to corporate pressure to reduce the cost of dental coverage, some insurance companies have cut back on reimbursement rates, often resulting in reduced profit margins for dental practices. According to the ADA, the average dentist participates in about six dental benefit plans. Today, 80 percent of the market is made up of preferred provider organizations (PPOs) and there’s an increased emphasis on directing plan beneficiaries to in-network dentists.
Inside Dental Technology suggests that while the third-party reimbursement model will continue to dominate, large corporations may find it cheaper to partner with DSOs directly to provide company employees with dental care than to contract with a dental insurance company.
Private practices are also finding new ways to compete, such as offering patients practice memberships that include a certain number of procedures or an across-the-board percentage discount for restorative services.
As reimbursement challenges continue in 2018, competition for patients will take on even greater importance for the success of dental practices.
Attracting new patients in a tech-driven world
With more dentists in the workforce than ever before and more financial pressure from reduced reimbursements, a solid marketing plan is important for attracting new patients.
Patient News Dental Marketing estimates that a solo dentist should be seeing 24 to 50 new patients per month for a practice to grow. To achieve that goal, practitioners should consider using both traditional and online marketing techniques.
To attract today’s tech-savvy patient, Dentistry IQ provides the following internet marketing tips to consider:
- Creating a website with a targeted conversion rate of 3 percent
- Ranking higher in Google listings through search engine optimization—a way of maximizing the number of visitors to the practice’s website to ensure that the site appears high on the list of results returned by a search engine
- Using “Pay-Per-Click” advertising where the advertiser pays only for the number of people who click the ad on Google
- Using “cookies” for visitors to the dentist’s website to retarget their practice’s ads when the visitors move on to other sites such as Facebook
- Running an active social media campaign by posting often
- Using “word of mouth” advertising through customer reviews on Google+ and Yelp, soliciting testimonials for the dentist’s website and using software to better manage patient reminders.
While more traditional, the use of patient referral bonuses, providing offers which beat the competition, or becoming a more visible presence in the community can be effective tried-and-true methods of increasing a dentist’s patient base.
Marketing can be the lifeblood of any business and using digital techniques to attract new customers is key to taking a dental practice to the next level in the digital age.
Outstanding patient care is still the bottom line
While there’s no denying that the dental industry is evolving, one thing hasn’t changed—providing excellent patient care is still at the core of a successful practice. According to Efficiency in Group Practice, whether dentists are expanding their practice to include multispecialty providers under one roof, acquiring additional practices to form a larger group, or joining a large national corporate dental group, patient-driven care is vital to the profitability and sustainability of the business model. Regardless of size, the practice should focus on two questions:
- Do we love what we do?
- Did we make our patients feel they made the right choice in a provider?
With all the challenges that dental practices are facing today, a focus on building trust and developing patient relationships still forms the basis of long-term success.