Is dentistry inflation-proof?
Dentistry is an essential health care service.
Even in recessions, people still will get care. It’s relatively recession-proof.
But is it inflation-proof?
When it becomes exceptionally expensive for people just to live, dentistry can be one of the things that takes a hit.
According to the ADA Health Policy Institute’s “Economic Outlook and Emerging Issues in Dentistry” report, dentists’ confidence in the economic recovery of their practice — and dentistry as a whole — went down a bit recently.
The question “how full is your practice’s schedule?” is often a good indicator of a practice’s perceived economic health. We’ve held steady around 85% for the past several months.
The ADA then asked, “Why aren’t your schedules full?” The top answer, over 80%, is that patients are no-showing or canceling within the last 24 hours. That’s always a problem in dentistry, but it’s significantly high right now and could indicate an issue. Approximately 40% of dentists note that not enough patients are making appointments in the first place.
It’s early, and we don’t have months of data on this yet, but I believe these are the leading indicators to watch as we consider a potential decrease in demand for dental services.
Another problem: Increasing operational costs
Dental practices’ costs go up with inflation. Staff members need more money, supply costs go up for all of their vendors — operational costs all increase at the same time.
Many non-healthcare businesses deal with that by just raising prices (which, of course, can further contribute to inflation all around). But in healthcare, increasing fees is less of an option with third-party payers.
I can’t go to MetLife or Delta and say, “Hey, raise my fees.” They’re gonna laugh at me. Maybe they’ll do a slight correction, but nothing substantial.
Last time we had double-digit inflation was in the 70s and 80s (and if you’d like a brief review of how dentists dealt with it 40 years ago, check out this Dental Economics article by Dr. Richard Toland.) Back then, dentists were way less dependent on third-party payers. They could weather the storm by just increasing fees. But that’s much harder to do now.
Perhaps the solution is to decrease dependency on third-party payers. Get rid of some of these lower-paying PPOs. That way, practices can do the same amount of dentistry, but get paid better for it. In the ADA’s Economics Outlook report referenced above, over one third of surveyed dentists reported that they would drop out of some insurance networks this year.
But of course, if dentists just start raising fees, they may be exacerbating problem number one — the fact that some patients are avoiding the dentist because they deem it too expensive. If we really are seeing a trend in softening patient demand tied to inflation, then raising our fees may result in further reductions in scheduling capacity and revenue.
Even prior to this inflationary period, the number one reason adults did not seek dental care, by a very large margin, was because they believed they could not afford the cost (Source: ADA Research, 2019). Now that everything is getting more expensive for our patients — not just their dental care — we should not be shocked when raising our fees or dropping PPOs further softens demand for our services.
So what do we do?
The answer to the inflation issue is the same as the one for dentistry’s recent hiring issues. Whether you’re looking to hire a hygienist in a challenging labor market, or trying to attract (and keep) patients during inflation, you need to double down on your value proposition and perfect it.
There needs to be something special about you. It starts with personal, friendly service — not just being nice to people, but knowing about them and their lives. Hygienists are a huge help in building this sense of community.
Hours of operation, efficiency of care, team culture, quality of clinical outcomes, and amenities — these are some of the other areas where practices can differentiate themselves. (These are some of the areas we’re focusing on at Tend).
If a practice doesn’t set itself apart, then it’s easier for it to be treated as a commodity by the patient. And as folks across the country continue to tighten up their belts in the months ahead, it’s vital that practices continue to deliver value to their patients.
