Not If Dentistry Follows The Path Of Pharmacy
Many fear that DSOs (corporate dental practices) are on a growth path that will lead to the eventual end of dentist-owned private practices.
Before we conclude the demise of private practice, let’s look at pharmacy. In the 1950s and 1960s pharmacy chains did exist but independently owned pharmacies were very commonplace. Now, as we see CVS, Walgreens, and Walmart pharmacies everywhere we turn, it might be easy to conclude that the growth in pharmacy chains has destroyed independent pharmacy ownership and made it a thing of the past. That is not the case.
- As of 2019, of 62,145 pharmacies in the U.S., 23,061 (approximately 37% were independently owned.
- Between 2010 and 2019 the number of independent pharmacy stores increased by 2,600 stores, while pharmacy chains saw a slight decline in their total number of stores.
What we see is that, while over the years pharmacy chains have grown dramatically, independent pharmacies have not been irradicated and in fact are holding on to a little over 1/3rd of pharmacy locations. To do that they must be either serving areas that are not well served by the chains, or they are providing a type of service that is preferred by a significant segment of the population.
The Growth In DSOs / Corporate Dentistry
As DSOs have grown, the percentage of practices owned by dentists has declined and younger dentists are turning to DSOs for employment in increasing numbers. An article online at ADA.org, December 3rd, 2021, entitled “Shifts In Practice Patterns”(2) tells us that:
- In 2005 -- 85% of dentists owned all or part of their practices.
- By 2019 the percentage had fallen to 76%.
- In 2015 -- 16.3% of dentists under the age of 34 were affiliated with DSOs.
- By 2019 the percentage had grown to 20.4%.
As more and more young dentists turn to DSOs for employment, it increases the number of dentists available to DSOs, thereby making their continued growth possible.
Employment Instead Of Ownership – Likely to Decrease Income Potential
Available at dentaleconomics.com, in January of 2022 Dental Economics published its Annual Dental Professional Salary Survey(3). From it we find the following figures.
- The median practice owner’s annual income was ------- $298,020
- The median employed dentist’s annual income was ---- $191,790
This income disparity between practice owners and employed dentists is likely attributable to two primary factors:
- Unlike owners, employed dentists derive income only from the dental procedures that they personally perform, and they do not receive the profit from hygiene departments as do practice owners; and,
- In regard to dental work performed personally by dentists, the percentage of their collections that owners realize as profit may often be 4% to 10% greater than the percentage of employed dentists’ collections that is paid to them as salary.
What Should We Expect In The Future?
No one can predict the future. However, looking at what happened in pharmacy and how dentists’ incomes are affected by employment as opposed to practice income, three things are likely:
Income Effect. Over time, as the percentage of dentists that are non-owner employees grows, when adjusted for inflation, the average annual income for all dentists is likely to decline.
DSO Growth. The growth in DSO owned practices does not seem to be tapering off, in fact it appears to be accelerating. In the coming years, barring any unforeseen economic changes or changes within dentistry itself, it would not surprise us to see DSOs grow to operate plus or minus 2/3rds of dental practices in this Country. Much of this growth will come from DSOs purchasing existing practices from their owners. We anticipate that patients preferring DSO practices are likely to be those who are price sensitive and who are content being treated in the cookie-cutter climate of corporate dentistry.
Privately Owned Practices. We expect that numbers of private practices will survive and thrive. Those survivors are likely to be practices that:
- Attract a portion of the population that is highly interested in its dental health, wants personalized services, and has the economic means to pay for the level and type of dental care that it wants; and,
- Are owned and operated by dentists that have a combination of excellent clinical skills, personal interaction skills, and management skills -- and are independent, self-reliant, and entrepreneurial in their approach to life.
(2) “HPI Shifting Practice Patterns.” HPI Shifting Practice Patterns | American Dental Association, 3 Dec. 2021, www.ada.org/publications/new-dentist-news/2021/december/hpi-shifting-practice-patterns.
(3) Lanthier, Tonya. “The Annual Dental Professional Salary Survey | Dental Economics.” Dental Economics, 11 Jan. 2022, www.dentaleconomics.com/macro-op-ed/industry-news/article/14214663/the-annual-dental-professional-salary-survey.