Corporate dentistry, corporate orthodontics history, reality and strategic planning

“Those who cannot remember the past are condemned to repeat it.” George Santayana 1863–1952

In all ways dental professions continue to change rapidly. Historically dentists were, for the most part owners of their own businesses. In addition to providing dental health care the concept of “being at the helm” of one’s own professional path was appealing. The path was straight forward. Do well in undergrad and be accepted to dental school. Spend four years in dental school then either open your own practice (business) or apply for a dental specialty program, hope to be accepted and invest two to three more years in your education. After one or the other was completed the next chapter would begin. Dental school and post-graduate residencies considered basic business training unnecessary. Extremists and purists judged business and finance topics a waste of time – even unprofessional. If you were from a family of dentists you might immediately start working and practicing in the family business. Another option was to join a senior doctor with a vision of purchasing that practice after specific period of time. For those graduates with an “entrepreneurial spirit” the third option was to find the money, “hang your shingle” and open your own practice.

Personal and educational debt levels were within reason. With only rare exceptions post-educational success was nearly certain.

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%.

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Jan 9, 2020 | Posted by in Orthodontics | Comments Off on Corporate dentistry, corporate orthodontics history, reality and strategic planning
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