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Final Impressions

Things ain’t as bad as you think

by Walter Lamacki, DDS

If you’ve been reading the business section of your favorite newspaper, you may be aware of the rush of physicians tripping over themselves to sell their practices to hospitals and other medical entities. Self-appointed “futurists” intone, “As medicine goes, so goes dentistry.”

Maybe not.

The rapid rise of large multi-establishment corporate dental practices has caused hand-wringing among many in the profession who fear that they and their practices will be swallowed up by these entities. There is no doubt that the practice of dentistry is undergoing consolidation and transformation, mirroring – to a limited extent – the consolidation in the medical profession.

On April 15, the American Dental Association Health Policy Institute released a research brief, Considering Large Group Dental Practices as a Vehicle for Consolidation in Dentistry, authored by Albert Guay, chief policy advisor emeritus, and Thomas Wall, ADA manager of statistical research, that shows the growth of large practices (those with at least 20 employees) increased their market share, while those with fewer than five employees saw their market share decline.It all sounds ominous for traditional practices. But is it?

There is a chink appearing in the armor of the mega-practices that share similarities with a Ponzi scheme that crumbles under its own weight. During the Great Recession of 2007 through 2009, the number of firms continued to grow. However, the period from 2010 to 2012 saw a decrease in the number of large group practices. The authors of the survey said this phenomenon might be due to difficulty finding new markets and the potential emergence of diseconomies of scale as they grow.What interested me most were the conclusions drawn by Dr. Guay and Mr. Wall from their research. They said dentistry has unique aspects that preclude the kind of consolidations occurring in medicine. The principal reason is that small dental offices usually correlate with the location of dental patients, facilitating strong dentist-patient relationships. Dentistry is the foster child in the Affordable Care Act and government has little incentive to regulate the dental care industry through consolidation.

No doubt mega-practices have economic advantages due to economies of scale. They can buy technology and hire specialized personnel. They can employ recent dental graduates by offering an immediate paycheck and perks a small practice cannot.

However, large practices experience higher overhead such as high rents, real estate taxes, employee and advertising costs. They have a high turnover rate of new dentists, who seek their own practice as soon as it’s economically feasible. The sheer size of mega-practices works against them. When they reach a critical mass of patients, they must find ways to keep the turnstiles continually rotating.Today’s traditional-practice dentists do have some advantages. They often are a part of the community and many times are the neighbors of their patients. They often grew up and went to the schools in the area in which they practice; they’re local folks.

Traditional-practice dentists are trusted in their communities and frequently serve as leaders on school boards, not-for-profit service organizations and religious institutions.

Yes, I know that some of these endeavors are common to those who practice in mega-practices, too. But I suspect staff turnover at mega-practices precludes the forming of lasting patient-doctor relationships, which is inherent to the traditional practice.

You see, I think that things ain’t as bad as they seem. The rumor of the death of traditional dental practice is greatly exaggerated.

Write Dr. Lamacki at wlamacki@gmail.com.
Illustration: istockphoto.com
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