Enter the new normal

Within the “dental business industry” many believe that dentistry has followed medicine, trailing by fifteen or more years. Beginning with managed medical groups and hospitals all of us have experienced “corporate medical consolidation”. Today, approximately 85% of all physicians are part of a large group (hospital or independent). Throughout the 1970′s and 1980′s U.S. dentists were thriving. During those years dentists succeeded at keeping their services outside of Medicaid essentially refusing to join “In-Network” dental insurance. Achieving high earnings while managing the number of hours worked in a given week many continue to refer to those years as the “golden age of dentistry”. During the 1990′s and accelerating into the 2000′s changes in the dental delivery model were becoming evident. Medical insurance was changing from indemnity plans to Preferred Provider Organizations (PPO) plans and Health Maintenance Organizations (HMO’s). Consumers encountered higher deductibles. In the wake of these changes dentists experienced an influx of patients now holding dental insurance plans. These patients were better informed and more discerning, paying closer attention to “In-Network and Out-of-Network” providers. Delta Dental became the dominant dental insurance provider to employers. Beginning in 1995 and until 2001 when the U.S. economy took a hit in the dot com bust, dentists saw their production decreasing. As a result increasing numbers of dentists chose to participate in crafting deals with insurance companies. While this helped maintain or grow their production, practitioners soon realized they were working harder, seeing more patients for the same bottom line profit. The average dental PPO insurance reimbursement was around 60% of the usual and customary (UCR) fees. Those offices serving the Medicaid population report reimbursements around 33% (or lower) of UCR fees.

During the 1990′s a few visionary dentists began controlling overhead by negotiating with vendors and insurance companies. In an attempt to level the overhead playing field, they banded together. These combined dental groups found negotiating power resulting in attractive cost management. Dental supply vendors had the size and power to exert market control. Insurance companies were able to hold down fees making their products more valuable to employer and private practice dentists felt the squeeze. Costs were rising and fees were being compressed. Not good. Dentists like Dr. Rick Workman started what we now call a DSO (Dental Support Organization). Early in his career Dr. Workman founded Heartland Dental. As Heartland grew they were capable of negotiating favorable fees from the insurance companies and lower costs from vendors. As the industry moved into the late 2000′s, more DSO’s were formed and approximately 10% of dentists worked in a DSO or large group by 2010.

Today, approximately 15–18% of dentists are part of a DSO or “large group”. Year over year DSO’s are growing at a rate of 25%. Compare that to solo or small dental office growth rates of 0–3%.