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Why Are Dentists’ Incomes Declining?
- 1. Why Are Dentists’ Incomes Declining?
September 18, 2017
Dentists’ incomes are on the decline. In 9 out of the last 10 years, dentists have seen a drop in their
earnings and the American Dental Association has forecasted that 2017 will be another down year for
dentists’ incomes. Though the economy has rebounded from the Great Recession, dentists’ incomes
have not bounced back. What is behind dentists’ declining incomes? And what can dentists do about
it?
Supply and Demand
The most basic principles of economics tell us that when supply is high and demand is low, prices will
fall. This is what has happened in the field of dentistry.
Since the mid-2000’s the demand for dental services has decreased. This could be, in part at least, due
to the economic recession. However, even as the economy has improved, demand for dental treatment
procedures has remained low. The dental industry is unique among most medical fields as the clear
majority of dental work is discretionary. Patients can go years…even a lifetime without suffering
complications from a missing tooth. For example, there are 174 million American’s currently missing at
least one tooth. Certainly, we all know friends or family members who have less than perfect teeth.
However, the cost and fear of discomfort has been a sufficient deterrent to keep patients from seeking
cosmetic or orthodontic treatment.
Things are not good on the supply side either. Despite the relatively weak demand for dental services
there is an increasing number of dentists. This trend is expected to continue in the coming years, driving
down prices further.
Hopefully, the demand for dental services will pick up again eventually. With unemployment falling,
more adults should begin seeking dental care. However, there are other factors unrelated to the current
state of the economy that are responsible for dentists’ declining incomes.
Corporate Dental Chains
One cause of dentists’ declining incomes is the rise of large corporate dental chains. Again, the basic
economics come into play. Big corporate dental chains have the advantage of economies of scale. By
sharing resources among many different locations, these chains lower their operating costs.
In addition, most of these large dental clinics provide specialty services as well. This allows patients to
receive comprehensive dental care under one roof. The inconvenience that patients experience when a
private practice dentist refers patients to local specialist is significant. Studies have shown that as many
as 30-42% of patients never follow up on specialty dental treatments when they are referred outside the
dental practice. Corporate dental chains do not have that issue and are rapidly acquiring new patients at
the cost of the traditional private practice dentist.
Thanks to their lower cost of business, corporate dental chains can offer services at a discount. While
they may not be able to provide the individualized care as a private dentist, they still draw in customers
- 2. with their low prices. To compete, other dentists in the area are forced to drop their own prices or lose
customers.
Decreasing Insurance Reimbursements
Further affecting dentists’ declining incomes is a decrease in insurance reimbursements. In the past
decade, the fees that most dentists charge for procedures have gone up. However, the amount that
dentists are reimbursed by insurance companies has gone down.
The root of the cause stems from businesses demanding lower premiums for their employee benefit
plans. This has forced dental insurance companies like Delta Dental to reduce reimbursements to
dentists for dental treatments. In addition, insurance companies have created new “lower benefit” plans
which are being rapidly adopted by businesses. Dentists are then forced to accept the new plans with
the lower treatment costs and fees. If dentists refuse, they run the risk of losing a significant number of
patients because that dentist is now “out-of-network”.
Payments from private insurance companies make up a large chunk of a dentists’ income. When
reimbursement rates fall, despite rising costs, dentists are left hurting financially.
Rising Cost of Business
In addition to the low demand for dental service, competition with big corporate dental chains, and
decreasing insurance reimbursements, dentists must also deal with the rising cost of business. Staff
salaries, crushing taxes and regulatory fees, equipment, and facilities are all costs that add up quickly.
New expenses are constantly emerging for dentists. Dental practices are always investing in new
technologies. The switch to electronic health records has also been costly for dentists. Strict privacy and
legal requirements make implementing any electronic health record system expensive.
New Sources of Income
To combat dentists’ declining incomes, many dentists are looking for new revenue sources such as
offering expanded dental treatment services. This is a difficult task for dentists who have been in the
general dentistry practice for their entire career. The prospect of moving into offering more lucrative
specialty services may be tempting, but most dentists do not have the time, training, money or desire to
make such a switch.
Instead, many dentists are partnering up with dental specialists to bring in additional income. Every
year, dentists refer out billions of dollars’ worth of specialty dental services to local dental specialists
such as oral surgeons, periodontists, endodontists and orthodontists. By keeping those services in
house, dentists can add as much as 30% or more production revenue to their practice.
Hiring a full-time specialist is not in the budget for your average dentist. However, working with an
itinerant dental specialist allows dentists to offer the services of a specialist without the high cost.
Itinerant dental specialists travel to the offices of general dentists and perform services for their clients.
The dentist and the specialist then agree upon a treatment sharing financial structure where procedure
revenue and expenses are split.
