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2016 Survey Reveals Improved Practice Results Despite Managed Care Growth

Practice Profitability Year-to-Year Comparison (click to open)

Survey Overview

We received 180 responses to our annual Practice Profitability and Economic Survey for 2016. Of these, 80 were from general dental practices, 53 were from orthodontic practices, 17 from oral surgery practices, 14 from pediatric dental practices, 9 from periodontal practices, 6 from endodontic practices, and 1 from a prosthodontic practice.

Understanding and responding to the latest trends in the dental profession is critical to operating a profitable practice. Below we discuss our survey results, so that you can compare with your practice and make needed changes.

Group Practice Surging

Our survey revealed the dramatic growth in the number of group practices. The fewest doctors ever (56%) reported being in solo practice, down from 72% in 2011. 28% of doctors were operating two doctor practices, while 9% were in three doctor groups, and 7% were practicing in groups of four or more doctors.

Group practices allow doctors to better compete against corporate dentistry through offering expanded hours (early mornings and evenings) and days (Fridays and some Saturdays) for added patient convenience and increased production. This has improved facility and labor utilization, helping to reduce overhead costs and offset the impact of increased managed care on profit margins.

Group practice has also allowed general dentists to better compete against corporate dentistry by expanding the scope of procedures offered, particularly endodontic, orthodontic, and periodontal procedures. This has boosted revenue from their existing patient base with little additional overhead, but has significantly reduced referrals to specialists.

Growth in New Patients Slowing

The survey also revealed that new patients were harder to come by in 2016. The number of practices reporting an increase in new patients dropped slightly from 50% in 2015 to 45% in 2016. For those practices reporting an increase, the average increase in new patients was 10%, down from 14% in 2015. While 20% of practices saw no change in their number of new patients, 35% reported a decline in new patients, reflecting the impact of increased competition.

Improved Treatment Acceptance Rates

Fortunately, doctors benefited from higher treatment acceptance rates in 2016. An improving economy, more flexible payment arrangements, and better training all contributed to this improvement. 20% of practices saw increased treatment acceptance rates, while 67% reported no change, and only 13% reported a decline. 26% of doctors said that patients accepted 90-99% of recommended treatment, the highest percentage in that category since we began tracking this statistic back in 2008.

Managed Care Penetration Rising

The chart below illustrates that only 34% of practices reported that none of their production came from discounted fee managed care plans (including Delta Dental) in 2016. While this figure was down slightly from 2015, it was well below the 44% of doctors who were free from managed care back in 2008.

The chart below also reveals an even more disturbing trend. For those participating in managed care, a greater percentage of their production came from discounted fee managed care plans than in the past. In fact, 35% of doctors reported that 40% or more of their production came from discounted fee managed care plans.

Percentage of Production from Managed Care Plans Percentage of Doctors
None 34.4%
1-9% 8.3%
10-19% 6.7%
20-29% 8.3%
30-39% 7.2%
40-49% 10.0%
50-59% 8.9%
60% or more 16.2%
Total 100.0%


Managed care penetration continues to be highest among pediatric dental practices (93% participating) and oral surgery practices (82% participating). In contrast, it remains lowest among endodontists (33% participating) and orthodontists (43% participating).

Below we discuss the current trends for each segment of dentistry in detail.

General Dentistry (80 practices analyzed)

Production increased for 66% of general dentists, with an average gain of 7%, triggered largely by higher treatment acceptance rates and growth in new patients. Meanwhile, collections grew for 64% of practices, with an average gain of 7.6%.

Despite these gains, the threat from increased managed care penetration looms large in general dentistry. Only 26% of practices are now free of managed care, compared to 40% in 2008. 20% of practices recorded an increase in managed care last year, while only 12% reported decreased managed care participation. Making matters worse, 38.8% of practices reported that they generated more than 40% of their production from managed care plans.

The shift from solo to group practice has been more dramatic in general dentistry than any other segment of dentistry. The percentage of doctors in solo practices declined from 66.8% in 2008 to 53.8% last year, and will likely cross the 50% threshold within the next five years. This trend helped general dentists control overhead, as profit margins rose from 38.8% in 2015 to 42.1% in 2016. Group practices offering expanded procedures and hours/days has resulted in increased production and improved facility and staff utilization. As a result, occupancy costs decreased from 8.9% in 2011 to only 7.6% last year. Furthermore, staff costs also declined to 26.6% in 2016, down from 27.9% in 2015.

Supply and lab costs dropped from 13.5% of collections in 2006 to only 12.5% last year, largely due to an increase in periodontic and endodontic procedures performed in-house, which require little if any lab fees. The expanding procedure mix has also increased the revenue generated from the same patient base, resulting in lower marketing costs for general dentists. Accordingly, non-operating expenses, including marketing costs, declined from 12.2% in 2014 to 11.2% in 2016.

Orthodontics (53 practices analyzed)

Orthodontics has been largely unaffected by the trend toward group practice, with 72% of doctors still practicing solo, the highest percentage in dentistry. And managed care represents only a minor threat, as 57% of orthodontists don’t participate at all.

Unfortunately, there are other problems. Competition is rising at an alarming rate, both from doctors practicing longer and the stunning increase in the number of new residents graduating annually. While residency programs pumped out approximately 200 new graduates a year back in 2000, they are on track to double the number of graduates to 400 a year, as a result of new programs coming online and expansion of existing programs.

Dramatic gains in treatment efficiency are also compounding the competition problem. On average, orthodontists are treating roughly the same number of patients per year. However, the actual number of patient visits has declined by 30% over the past five years due to the tremendous gains in treatment efficiency. Cases that previously required 24 to 30 months to treat five years ago, are now being treated in 18 to 22 months. While this has significantly increased the income generated per patient visit from $150 to $200, it has left most orthodontists with gaping holes in their schedule.

Competition has also intensified due to a decline in doctor referrals. A decade ago, general dentists and pediatric dentists typically referred 60% of new patients for orthodontists, and now this has dropped to less than 40%.

As a result of these factors, 2016 was a watershed year in orthodontics. For the first time since The Great Recession ended, more practices reported that they had a decline in the number of new patients (45.3%), rather than an increase (43.4%).

Fortunately, orthodontists have offset this by improving their conversion rates. More doctors are tracking and recording new patient phone calls and improving staff training to help boost the percentage of prospective patients showing up for exams. Furthermore, more are investing in training for their treatment coordinators to boost conversion rates from exams into starts through better presentation techniques and offering more flexible payment options to boost affordability.

These improvements allowed orthodontists to record modest gains in production and collections last year, despite problems in attracting new patients. Unfortunately, rising overhead costs resulted in lower profit margins. Occupancy costs remain the highest in dentistry, as most orthodontists are forced to satellite in multiple locations to achieve their desired patient volume. Also, despite impressive gains in treatment efficiency, less than 10% of orthodontists have reduced their clinical labor cost in response to the declining number of patient visits. Accordingly, they are paying their clinical staff more money to do less work. Does that make sense? As a result, profit margins declined from 40.2% in 2015 to 39.7% in 2016, the lowest of any segment of dentistry.

Pediatric Dentistry (14 practices analyzed)

Pediatric dentistry faces a totally different set of challenges than orthodontics. Pediatric dental care is one of the 10 essential benefits that must be provided under Obamacare-approved medical/dental insurance policies. This has stoked demand for pediatric dental services. As a result, the number of new patients increased for 57% of practices surveyed in 2016, the highest percentage ever. The average practice reporting an increase saw an 8.8% gain in new patients.

Meanwhile, treatment acceptance rates for this high-volume/low-fee specialty were superb, with 75% of practices reporting 90-99% acceptance rates, the highest of any segment of dentistry except endodontics. As a result, busyness increased or stayed the same for 93% of pediatric dental practices. 14.3% of doctors responding were operating at full (100%) capacity, and another 42.9% at 90-99% of capacity, the highest of any segment of dentistry. This busyness translated into increased production for 86% of practices surveyed, which were up an average of 9.2%.

Unfortunately, most Obamacare patients are covered under managed care medical/dental insurance policies, or Medicaid (CHIPS). That’s why managed care penetration in pediatric dentistry is the highest of any segment of dentistry, and getting worse. 93% of practices now participate in one or more discounted fee managed care plans. Worse yet, a huge percentage of total production is coming from these discounted managed care plans. 50% of practices reported that 60% or more of their production is from managed care plans, while another 14% generated 50-59% of their production from these plans and 21% recorded 40-49% of their production from these plans. And the trend is not favorable, as 39% of practices reported that managed care penetration increased in 2016, while the remaining 61% saw managed care penetration remaining constant.

In response to this disturbing trend, 71.4% of pediatric dentists have moved into group practice, up from only 43.7% in 2008. This has resulted in improved facility utilization through expanded hours and days, dropping occupancy costs from 10.6% in 2006 to 8.1% last year, as practices produced more while facility costs stayed flat.

Furthermore, over 90% pediatric practices now offer orthodontic services to their patients. These higher-fee/lower-volume procedures involve virtually no managed care or marketing expenses, since they are treating their existing patient base. This has helped offset some of the negative impact of managed care on practice profit margins.

Oral Surgery (17 practices analyzed)

The number of new patients increased for most oral surgeons (53%) last year, who reported a gain of almost 8%. With treatment acceptance rates remaining high, oral surgeons remain busy with 82% of doctors reporting operating at 80-89% of capacity or higher. Accordingly, production increased for 82% of doctors, who reported an average increase of almost 11%.

Unfortunately, managed care penetration is a huge problem in oral surgery, ranking only behind pediatric dentistry. 82% of practices are participating in one or more discounted fee managed care plans. Moreover, 59% of practices are generating 40% or more of their production from these discounted fee plans. And the trend is not favorable, with 43% of practices reporting that managed care penetration increased in 2016.

Despite growing managed care problems, most practices (82%), still managed to increase collections, with average growth of almost 9%. Profit margins rose from 47.3% in 2015 to 50.1% in 2016, primarily due to two factors. First, more oral surgeons are practicing in a group format now (59%), allowing improved facility utilization through expanded hours and days. This has helped oral surgeons cut their occupancy cost from 10.6% of collections to 7.8% of collections. Furthermore, oral surgery practices have significantly increased production of higher-fee implant and cosmetic cases. While these cases involve greater supply and lab costs, the higher fees have helped lift collections and improve the bottom line.

Endodontics (6 practices analyzed)

The practice of endodontics has changed dramatically over the last 10 years, becoming increasingly competitive. Referrals from general dental practices have declined dramatically. Moreover, the number of group practices has grown, most of which are retaining endodontic services in-house.

In response, endodontists have had to dramatically increase their time, energy and money spent on marketing to remain busy. As a result, non-operating supplies and expenses (which includes marketing) has grown from 10.1% of collections in 2015 to 13.1% in 2016. Furthermore, labor costs have risen as practices have had to add marketing duties and personnel.

Fortunately, these marketing efforts paid off in 2016 as 25% of doctors reported an increase in new patients, while 75% saw no change. With treatment acceptance rates near 100%, busyness grew with 67% of doctors operating at 90-99% of capacity. As result, 83% of endodontists responded that their practice production and collections increased in 2016, with practices showing an average increase of almost 8%. While overhead costs rose due to higher marketing costs, endodontics still remains the highest profit percentage segment of dentistry, with a 55% profit margin.

Periodontics (9 practices analyzed)

This specialty rebounded in 2016, after several tough years. Increased marketing efforts paid off, as 67% of periodontists reported an increase in new patients in 2016, with an average gain of over 11%. Along with rising treatment acceptance rates, this led 56% of doctors to report increased levels of busyness last year. This translated into a stunning 89% of doctors reporting an increase in both production and collections last year, with the average collection gain of over 10%.

Occupancy costs dropped from 9.3% in 2015 to 8.5% of collections due to the growing number of periodontists operating in a group practice format. Expanding the number of hours and days in the practice has maximized facility utilization. Practices also benefit from a growing number of implant and other surgery cases. While these cases bumped up lab and supply costs, these higher-fee procedures helped improve labor efficiency and increased profitability, as profit margins rose from 38.2% in 2015 to 40.2% in 2016.


Compare historical overhead averages by specialty with accompanying Five Year Comparison chart:

Practice Profitability Year-to-Year Comparison (click to open)

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