The future of Dentistry: How Will The Level of Competition Change?

Historically, the goal of most dentists was to form a solo practice. In recent years, this trend has shifted with more partnerships being formed than in years’ past. Coupled with the fact that many recent graduates prefer not to practice alone, the opportunities for partnerships as a career choice are definitely on the rise.

What does the future of dentistry hold? In our first installment, we examine how the level of competition will be affected by the growing number of dental school graduates, longer dental careers, increased dental productivity, changing scope

John McGill, CPA, MBA, JD

of dental services, introduction of paraprofessionals and changes in workforce laws and demand for dental services.

Dr. Charles Blair

According to the ADA, the mean real (adjusted for inflation) net income of

dentists has risen dramatically over the past 30 years. The average practice net income increased almost 68 percent from $140,000 in 1981 to $235,000 at its peak in 2007, before dropping to approximately $220,000 in 2009, the last year reported by

the ADA, due to the economic recession.

Number of Dental School Graduates Increasing

The dramatic increase in dental net profits and the poor economic outlook in

John McGill, CPA, MBA, JD

and Dr. Charles Blair

medicine were the biggest factors behind the significant increase in the number of dental school applicants. From 19902009, the number of individual applicants rose by 138 percent, or approximately 6 percent a year. Of the12,210 individuals who applied to dental school in 2009, the

last year reported by the ADA, 4,871 were enrolled for a 2.5:1 ratio. Applications may be peaking now, due to the high cost of dental education. Costs for some dental school programs (including living expenses) now exceed $450,000, which could require over $60,000 annually in student

loan repayments.

The quality of dental

The number of dental school graduates had previously declined from a peak of 5,756 in 1982 to a low of 3,778 in 1993, for a 34 percent drop. Since 1993, the number of dental school graduates has rebounded to 4,171 in 2000, 4,443 in 2003, and 4,873 in 2010, the last year reported by the 61 dental schools operating in the U.S. and Puerto Rico. With five new dental schools opening since 2000 and 12 more on the drawing board, it’s highly likely that the number of dental school graduates will once again top 5,000 within the next few years.

school graduates and

their productivity is

substantially higher than in the 1970s and

80s.

workforce by 2020.

A much higher percentage (30 percent) of female dentists were working on a parttime basis (less than 30 hours per week) in 1999, compared to only 14.7 percent of male dentists. This trend has changed somewhat in recent years due to economic conditions. We’ve seen an increasing number of female dentists now electing to convert from part-time to full-time to increase their family’s income. Yet, we remain convinced that a higher percentage of women will elect to work only parttime in the future, which will reduce the competition level.

Number of Dentists Practicing Increasing

Meanwhile, doctors are practicing longer, delaying retirement due to economic and lifestyle factors. Seventy is the new 65 in dentistry, as the number of doctors retiring at age 65 dropped dramatically following the 2008 stock market and real estate decline.

With more dental students graduating each year and doctors working longer, the number of professionally active dentists (actively licensed) has soared from 166,383 in 2000 to 184,578 in 2010, for an increase of 18,195, or 10.94 percent, over this decade. In comparison, the U.S. population has been expanding at a slightly slower pace than the number of dentists. Accordingly, the U.S. population per den-

Dental Productivity Increasing

Aided by new technology, improved systems and treatment techniques, and a higher caliber of dental school graduates, dental productivity per doctor is increasing, adding to the effective level of competition. A decade or so ago, a dental practice grossing $1,000,000 or more was an elite status, achieved by only a handful of practices. Now, it is not uncommon to find solo general dental practices producing $1,000,000 - $1,500,000 per year or more. Even after adjusting for inflation, the increased productivity is very impressive.

tist has declined from 2,254 in 1996 to 2,246 in 2009. According to the 2010 ADA Workforce Model, the number of professionally active dentists is projected to increase to 195,267 in 2020 and 202,330 in 2030. However, since this growth is projected to be slightly lower than the overall population growth, the ratio of dentists per 1,000 U.S. residents is projected to decline from .59 in 2010 to .54 in 2030. Another factor affecting the level of competition is the number of female dentists in the profession. According to the ADA, female dentists made up 21.56 per-

Certainly, new technologies have boosted the level of dental productivity. However, another little-noticed trend has yet to be recognized. The quality of dental school graduates and their productivity is substantially higher than in the 1970s and 80s. Back then, many dental school graduates were happy to produce $200,000 - $300,000 in their first year. Now, it is not uncommon for newly graduated dentists to be producing $500,000 - $1,000,000 annually within three years following graduation.

cent of total dentists in 2009, up from 14.4 percent in 1999. Moreover, 47 percent of first year dental school classes are female now, up from 35.3 percent in 1999 and 15.6 percent in 1982. As a result, the percentage of female dentists is projected increase significantly to 29.2 percent of the dental

Changing Scope of Dental Services

The future competition level will also be affected by the nature and scope of services provided and who provides them. Historically, all dental services have been provided in the dental office either by or under the direct supervision of a licensed dentist. That’s changed recently, and even greater changes are expected in the future.

Tooth whitening services have been “peeled off” from the scope of services

provided exclusively by a licensed dentist, or under his supervision. Efforts by state dental boards to prohibit tooth whitening (bleaching) centers operated by nondentists were struck down by the Federal Trade Commission (FTC) in December of 2011, on antitrust grounds.

Introduction of Dental Paraprofessionals

The Surgeon General’s 2000 Report on Oral Health cited a pressing need for access to dental care for 17 million lowincome children. In response, two charitable organizations, the Pew Charitable Trust and the W.K. Kellogg Foundation, have funded projects recommending three new mid-level dental providers (dental therapists, community dental health coordinators, and advanced dental hygiene practitioners), similar to Physician Assistants (P.A.s) and Nurse Practitioners (N.P.s) in medicine, to attempt to address the unmet dental needs.

Alaska was the first state to allow licensed dental therapists. Alaska’s Native Dental Health Aide Therapists (DHATs) are providing dental services – including restorations, extractions and other surgical dental procedures – in remote tribal villages following two years of technical training and work under the direct supervision of dentists. Minnesota next approved the licensing of dental therapists in 2009 and at least six other states (New Mexico, Kansas, Vermont, Ohio, Washington, and California) are either considering such legislation or studying the issue.

While the ADA and state dental boards have universally opposed licensing dental therapists, it’s too early to determine how far and how fast this trend will spread.

Changing Workforce Laws

While the current economic recovery is

A change in workforce laws affecting dental hygienists and dental assistants will also affect the future competition level for dentists. Professional dental hygienist organizations are lobbying state legislators to expand their allowable duties to include administering nitrous oxide, local anesthesia, and providing laser therapy, as well as to practice without direct supervision of a dentist, or even independently, as Colorado now allows.

benefiting practices

nationwide, the declining role of dental

insurance represents a

huge negative effect.

Likewise, expanding duties for dental assistants and expanded function assistants promise to increase the number of procedures which can be delegated to these staff members who perform them under the doctor’s direct supervision. That will allow doctors to increase production using the same staff and facility. This increased efficiency is essential to maintain acceptable profitability in the face of increasing managed care penetration.

Unfortunately, the introduction of dental paraprofessionals and expanded delegation of procedures to other dental staff will decrease the need for licensed dentists. Accordingly, these factors will increase the

effective level of competition in the future.

Demand for Dental Services

The decline in profits for the average dentist in recent years shows that dentistry is no longer “recession-proof.” In evaluating the causes of the decline, the ADA found that while the gross billings (production) per patient visit had risen from $131.75 in 1996 to $176.72 in 2009, patients were delaying visits and treatment.

The percentage of the U.S. population visiting the dentist during the past 12 months had dropped from 41.2 percent in 2003 to 38.6 percent in 2009. Meanwhile, the average visits per patient per year had dropped from 2.05 in 1996 to 1.91 in 2009.

Also, dental services purchased during those visits also changed with fewer biggerticket, restorative procedures and more lowercost, preventative and diagnostic procedures. As a result, dental spending declined for the

for patients 41-50 years old.

first time ever in 2009, before increasing by 2.3 percent to $104.8 billion in 2010. While the current economic recovery is benefiting practices nationwide, the declining role of dental insurance represents a

The economic recovery and the growing senior population will increase demand for dental services in the future. However, affordability will be the key issue limiting growth, since real income increases will be nominal, out-of-pocket costs will increase, interest rates will rise as the economy improves, and taxes are slated to increase.

The significant increase in the percentage of female dentists, who are more apt to work only part-time, will help the competition level. However, increased dental productivity, more limited scope of dental services, introduction of paraprofessionals, more expansive workforce laws, growth of managed care plans and corporate practices, and restricted demand for dental services, leads us to believe competition in dentistry will increase slightly over the next five years.

huge negative effect. Fewer patients have dental insurance coverage than in the past, and the coverage they have is paying for a small portion of the dental bills these days. As a result, the average out-of-pocket payment for dental costs rose from $264 a year in 1996 to $325 in 2008. Higher out-ofpocket costs and declining real income levels for middle class patients have resulted in a dramatic increase in the percentage of patients with unmet dental needs due to affordability problems, from 8 percent in 1997 to 13 percent in 2010. In the future, dentistry will benefit from the increased demand from a growing, aging population. The 65-and-older age demographic will grow from 12 percent of the total population currently to a peak of 20 percent in 2035. As patients age, they tend to spend more on dentistry. Seniors were forecasted to purchase 23 percent of total dental expenditures in 2006, rising to 28 percent in 2018, and 32 percent by 2030. Unfortunately, most dental insurance coverage is employer-based, and basic Medicare does not cover dental benefits. Since most seniors do not have employerbased coverage, they pay a much higher percentage of dental costs out-of-pocket (68 percent), compared to only 45 percent

“The above article was reprinted with permission from The McGill Advisory, a monthly newsletter devoted to tax, financial planning, investment, and practice management matters exclusively for the dental profession, available for $227 a year from John K. McGill & Company, Inc. Visit www.mcgillhillgroup.com or call 888.249.7537 for further information.” ■

been providing customized tax and business planning services exclusively for the dental profession for over 30 years.

Dr. Charles Blair offers strategic planning, coaching to new dentists regarding training on proper fee alignment, correct insurance coding, and analyzing practices, existing or recently purchased. His newly updated insurance coding handbook, “Coding with Confidence: The Go-To Guide for CDT 2009/2010” is available on his website at www.drcharlesblair.com. For more details, email him at charles@drcharlesblair.com or call 866.858.7596.

Political factors will also affect dental demand. Pediatric dental demand will increase once pediatric coverage is required in 2014 under health care reform. Unfortunately, demand for big-ticket procedures will decline in 2013, once health care reform slices the maximum flexible spending account (FSA) limit from $5,000 to $2,500 annually.

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