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Financial Trends in Dentistry

January 10, 2014 - 3:15pm
Dental Practice

As suspected, the US economy continues to effect the micro economy of the profession of dentistry.  Trends that we have been observing since prior to the official start of the recession continue to concern us and effect the bottom line of practices.  We do continue to see an uptick in usage of dental services by our older populations and those under 20 years of age.  Most of those kids are under some type of government financed care (Medicaid, etc.).  Practices need to look at these two population cohorts in an effort to see how they would contribute to the overall success of the practice and the busyness challenge.  Adaption, under these challenging times of change, is essential to your long term success.  We will continue to monitor these financial trends.
 
“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”
 Charles Darwin

Terry Dickinson, D.D.S.
Executive Director, VDA

U.S. National Dental Spending Remains Flat Through 2012
 
‘The ADA's Health Policy Resources Center (HPRC) has analyzed new data that was released on Monday from CMS on national health spending through 2012. Total national dental care expenditure reached $111 billion in 2012, roughly the same as the previous year when adjusted for inflation. Taking into account both inflation and population growth, there was no change in national dental expenditure from 2011 to 2012, continuing a trend that began in 2008.
The analysis provides convincing evidence that dental spending has not rebounded since the end of the Great Recession and a further indication that the dental economy is likely entering a 'new normal' — something identified in the ADA's recent environmental scan, A Profession in Transition. Analyzing separate data on patient spending, HPRC researchers found that there were also no significant changes in inflation-adjusted per-patient dental expenditure from 2010 to 2011, continuing the flat trajectory that began in 2009. The elderly (65 years and up) continue to have the highest level of per-patient dental expenditures.’
 

Dental Service Organizations: A Private-Sector Solution to a Public Health Problem

October 10, 2013 - 2:00pm
Dental Practice
Source: http://news.heartland.org/print/133717

Across the country today, Medicaid requires states to provide dental coverage for children. Yet Medicaid’s reimbursement rates have been, and continue to be, too low to adequately compensate traditional dental practices. This leads to significant health problems, where simple cavities become severe infections which can even prove fatal in extreme circumstances.

Because the federal government cannot legislate away economic reality, it’s time for the private sector to consider an alternate approach to providing dental care.

Dangers of Poor Dental Care

Poor dental care is linked to poor nutrition. It is also linked to higher risks of cardiovascular disease and increased incidence of infections, and it makes managing diabetes (a growing chronic problem in the United States) even more difficult.

Yet despite the importance of good dental care, lower income children have appallingly low access to it. A 2010 Pew Center study estimated “17 million low-income children in America go without dental care each year. This represents one out of every five children between the ages of 1 and 18 in the United States.”

Lack of access to dental services is associated with lower overall oral health. According to the Kaiser Family Foundation, tooth decay still remains one of the most common chronic diseases among children aged 6-18, especially children from lower-income families. The broader consequences can be significant.

Today as many as 11 percent of two-year-olds and 44 percent of five-year-olds have cavities, according to a 2011 study published in the journal Pediatrics. The health problems created by these cavities are particularly concentrated in low income households. They can impact school attendance, make finding a job more difficult when these children grow up, and even lead to serious health problems.

Practices Lose Money on Medicaid

A major part of the problem is government reimbursement which falls far short of market prices. According to a 2010 Pew Research Center study, Medicaid pays dentists around 60 cents on the dollar in 26 states. Just one state paid dentists 100 percent of their normal fees, while 14 paid less than half.

When coupled with the high administrative costs associated with doing business with Medicaid, traditional dental practices lose money if they attempt to serve Medicaid patients. And, due to continuity of care regulations, those dentists that try to serve Medicaid patients will be obligated to continue caring for them even if they are losing money doing so.

The results are predictable. Only a third of dentists treat Medicaid patients—the financial risks from doing so are just too great. A Government Accountability Office (GAO) report found in many states most dentists "treat few or no Medicaid patients."

Time to Band Together

Enter the Dental Service Organization (DSO). Started in the late 1990s, DSOs are, essentially, individual practices banded together to create greater efficiencies. Through greater scale, DSOs reduce capital costs (through bulk purchases and greater negotiating power) and create efficiencies in administration and accounting, which is particularly important when dealing with state Medicaid programs. DSOs also bring marketing expertise and other business skill sets that are not part of traditional dentist training programs.

Because DSOs can operate more efficiently than a single dentist office, they can cope with Medicaid's low reimbursement rates and heavy paperwork requirements, providing care for the poor without losing money on each patient they see.

Today there are more than 3,500 DSOs in operation, according to the Dental Group Practice Association. And according to a 2012 study by Laffer Associates, the cost per patient among DSOs operating in Texas was almost half that of traditional dental offices—$484 versus $712. At one DSO, Kool Smiles, the per-patient cost was just $345.

Taxpayer Burden Could Decrease

Whereas many advocates concerned about the dental health of low-income children advocate spending more taxpayer money, DSOs are able to provide the same benefit without the requirement that more government funds be allocated, an important benefit in light of the budget crises afflicting many states. Ultimately, the taxpayer burden could even decrease.

As the Children's Dental Health Project explains, when the poor go without routine dental care, they often end up in emergency rooms. A three-year comparison found treating dental problems in emergency rooms cost 10 times more than preventive treatment provided in a dentist's office.

The benefits are not simply in theory; DSOs are starting to make an impact on children’s health. The Children's Dental Health Project has found that over the past decade the share of poor children who've seen a dentist has climbed, and it attributed 20 percent of that increase to the expansion of DSOs.

The benefits created by DSOs are no small feat. And these benefits are created without any new government fiats or regulations. Instead, DSOs exemplify the right way to reform healthcare—through private sector innovations that create greater efficiencies, lower costs, and better service.

Wayne Winegarden, Ph.D. (wayne@arduinlaffermoore.com ) is a senior fellow with the Pacific Research Institute, a contributor to EconoSTATS at George Mason University, and a partner in the economic consulting firm Arduin, Laffer & Moore Econometrics.

 

Internet Resources:

Laffer Associates: Dental Service Organizations: A Comparative Review, September 2012: http://heartland.org/policy-documents/dental-service-organizations-comparative-review

Wayne Winegarden
Across the country today, Medicaid requires states to provide dental coverage for children. Yet Medicaid’s reimbursement rates have been, and continue to be, too low to adequately compensate traditional dental practices. This leads to significant health problems, where simple cavities become severe infections which can even prove fatal in extreme circumstances.

Because the federal government cannot legislate away economic reality, it’s time for the private sector to consider an alternate approach to providing dental care.

Dangers of Poor Dental Care

Poor dental care is linked to poor nutrition. It is also linked to higher risks of cardiovascular disease and increased incidence of infections, and it makes managing diabetes (a growing chronic problem in the United States) even more difficult.

Yet despite the importance of good dental care, lower income children have appallingly low access to it. A 2010 Pew Center study estimated “17 million low-income children in America go without dental care each year. This represents one out of every five children between the ages of 1 and 18 in the United States.”

Lack of access to dental services is associated with lower overall oral health. According to the Kaiser Family Foundation, tooth decay still remains one of the most common chronic diseases among children aged 6-18, especially children from lower-income families. The broader consequences can be significant.

Today as many as 11 percent of two-year-olds and 44 percent of five-year-olds have cavities, according to a 2011 study published in the journal Pediatrics. The health problems created by these cavities are particularly concentrated in low income households. They can impact school attendance, make finding a job more difficult when these children grow up, and even lead to serious health problems.

Practices Lose Money on Medicaid

A major part of the problem is government reimbursement which falls far short of market prices. According to a 2010 Pew Research Center study, Medicaid pays dentists around 60 cents on the dollar in 26 states. Just one state paid dentists 100 percent of their normal fees, while 14 paid less than half.

When coupled with the high administrative costs associated with doing business with Medicaid, traditional dental practices lose money if they attempt to serve Medicaid patients. And, due to continuity of care regulations, those dentists that try to serve Medicaid patients will be obligated to continue caring for them even if they are losing money doing so.

The results are predictable. Only a third of dentists treat Medicaid patients—the financial risks from doing so are just too great. A Government Accountability Office (GAO) report found in many states most dentists "treat few or no Medicaid patients."

Time to Band Together

Enter the Dental Service Organization (DSO). Started in the late 1990s, DSOs are, essentially, individual practices banded together to create greater efficiencies. Through greater scale, DSOs reduce capital costs (through bulk purchases and greater negotiating power) and create efficiencies in administration and accounting, which is particularly important when dealing with state Medicaid programs. DSOs also bring marketing expertise and other business skill sets that are not part of traditional dentist training programs.

Because DSOs can operate more efficiently than a single dentist office, they can cope with Medicaid's low reimbursement rates and heavy paperwork requirements, providing care for the poor without losing money on each patient they see.

Today there are more than 3,500 DSOs in operation, according to the Dental Group Practice Association. And according to a 2012 study by Laffer Associates, the cost per patient among DSOs operating in Texas was almost half that of traditional dental offices—$484 versus $712. At one DSO, Kool Smiles, the per-patient cost was just $345.

Taxpayer Burden Could Decrease

Whereas many advocates concerned about the dental health of low-income children advocate spending more taxpayer money, DSOs are able to provide the same benefit without the requirement that more government funds be allocated, an important benefit in light of the budget crises afflicting many states. Ultimately, the taxpayer burden could even decrease.

As the Children's Dental Health Project explains, when the poor go without routine dental care, they often end up in emergency rooms. A three-year comparison found treating dental problems in emergency rooms cost 10 times more than preventive treatment provided in a dentist's office.

The benefits are not simply in theory; DSOs are starting to make an impact on children’s health. The Children's Dental Health Project has found that over the past decade the share of poor children who've seen a dentist has climbed, and it attributed 20 percent of that increase to the expansion of DSOs.

The benefits created by DSOs are no small feat. And these benefits are created without any new government fiats or regulations. Instead, DSOs exemplify the right way to reform healthcare—through private sector innovations that create greater efficiencies, lower costs, and better service.

Wayne Winegarden, Ph.D. (wayne@arduinlaffermoore.com ) is a senior fellow with the Pacific Research Institute, a contributor to EconoSTATS at George Mason University, and a partner in the economic consulting firm Arduin, Laffer & Moore Econometrics.

Internet Resources:

Laffer Associates: Dental Service Organizations: A Comparative Review, September 2012: http://heartland.org/policy-documents/dental-service-organizations-comparative-review

Wayne Winegarden

Coordinated Care Organizations - How might it affect you in your practice?

August 29, 2013 - 12:30pm
Dental Practice, Story

"Oregon has tried to tackle rising costs by focusing on Medicaid which serves 550.000 people in the state and is expected to grow by 200.000 under the Affordable Care Act’s Medicaid expansion that starts next year.  Governor John Kitzhaber last year spearheaded a new model of delivering services under Medicaid.  His initiative led to a state law that created ‘coordinated care organizations,’ which attempt to integrate mental, physical and dental care  as they improve the way chronic conditions are managed.  These organizations are required to manage their costs within a fixed rate of growth.”  AP-RTD, 8-29-13
 
I mention this because I see it becoming more prevalent in the future- that is, the CCO model.  We are seeing it already in medicine and now we are beginning to see the beginnings of it in dentistry.  How might it affect you in your practices?  It may not, depending on where you practice and whether you see Medicaid patients or not.  This is a global way to manage the financial side of taking care of large groups of patients.  In short, a CCO would be given a certain amount of money to take care of a certain group of patients over a length of time- say a year.  That finite amount of money is to be used to take care of the medical, mental and dental needs of that particular group of patients over that time period.  If there is money left over at the end of the year, it is proportioned out to the provider base as a ‘bonus’.  On the other hand, If you run out of money during the year, it is on your dime- not the funders.  The goal is to use the model to create healthier populations in an effort to control/decrease the cost of health care.  So, you are ‘incentivized’ to create healthier populations and punished if you don’t.  I will follow this model in Oregon closely to see how the dental fares over the first year or two.  Another disruptive ‘innovation’ for us to think about!    
 

Insurance Alternative...

August 22, 2013 - 2:30pm
Dental Practice

Crawford County dentists offer alternative to insurance (Click HERE to read this article)

My Comments: 'As we discussed during my talk, this will be one of the disruptive innovations we will see going forward.  This office will compete head to head with the third party payers over those in his practice with and without dental insurance.  If a patient is in good dental health with no expected major procedures needed, the office plan probably would be my choice.  Most insurance companies charge around $35-40 per patient per month for the standard plans.  A single person would pay around $450/year for dental insurance with a maximum of around $1200 in benefits (one crown) so if all you need is a cleaning every 6 or 9 months, the office plan might be the best choice.  Most insurance plans give you 20% off on ‘major’ services (crowns, fixed and removable pros.), which their office is matching.  Statistics show that only around 4-5% of patients use all their benefits annually so guess where the profit goes?  Not to you- but to their admin salaries and profit.

Fee-for-service vs. insurance. What should I do?

June 11, 2013 - 8:30am
Dental Practice

“One of the major decisions you will be making during your career is ‘do I take these plans or not’ and ‘which ones should I take?’.  Linda Miles has a good ‘take’ on this subject and this is worth 15 minutes of your time.


Also, in the near future, the ADA will be offering a service that will allow you to evaluate the different plans and their effect on your bottom line.  This is another good reason why you should be a VDA and ADA member.

Click this link to read the article: http://www.drbicuspid.com/index.aspx?sec=sup&sub=pmt&pag=dis&ItemID=313490&wf=1539

A Rapid Transformation...

May 24, 2013 - 11:45am
Dental Practice

As we discussed, even locally in Richmond and in the state, we are seeing a fairly rapid transition from small physician owned practices to a multi-specialty ‘group’ type practice being owned by large hospital chains.  My guess is around 70% of the existing physicians are working for a corporate entity in some form or fashion.  As the author suggests (see article link below), one day they may be on salary, instead of being paid by procedure codes.  Are there implications for dentistry?  I would think so, albeit at a much slower pace, due to the difference in business models and lack of affiliation with hospitals.  However, as noted in my talk to you, where there is a vacuum,  someone will step in and dominate the market.  In dentistry’s case, a number of DSMO’s (dental service management organizations) have stepped in to do some plucking.  It is most interesting that Canadian pension funds are very interested in those models to their south and have demonstrated that interest by spending considerable sums of money to purchase some of those models.  Oh how the marketplace is changing!

READ THE ARTICLE: http://online.wsj.com/article/SB10001424127887323628804578346614033833092.html

Discount Programs

May 2, 2013 - 1:45pm
Dental Practice

As we discussed, we are seeing more of these type programs for self-employed folks, those without dental insurance at their work place and small companies that would like to offer some type of dental program.
Would they bring more patients to your office?  Probably so – but at a cost to your bottom line.  As with all discount programs (and that includes the traditional benefit plans which ask you to discount your fees also), you have to look carefully at these programs and how they will affect your bottom line.
 
LOS ANGELES (KABC) -- For Steve Less, a self-employed father of three, the price of traditional dental insurance was tough to swallow.  "The cost was excessive on a monthly basis," he said. "When you added it up, it just didn't make any sense."  According to the National Association of Dental Plans, 97 percent of dental insurance benefits are offered through employers. For the self-employed and unemployed, that leaves few options.  Now, an increasing number of consumers are signing up for discount dental plans. That discount rate can range anywhere from 10 percent to 60 percent.  "With the economic downturn, discount dental plans are one of the only products that have been available to individuals to purchase on their own," said Evelyn Ireland.  The plans are marketed on sites like DentalPlans.com, Brighter.com and DentalSave.com. They operate similar to warehouse clubs. Customers pay a yearly membership, typically between $75 and $200.  "The dental plan negotiates the discounts with the dentist, but the dentist gets the full fee, or their payment at the negotiated discounted rate from the consumer at the time of service," Ireland said.  Jenn Stoll is with DentalPlans.com, which lets customers compare the cost of more than 30 different dental savings plans.  "Dental savings plans allow people to save on typical procedures, such as cleanings and X-rays, root canals, crowns and even dental implants," Stoll said.  Many also offer discounts on cosmetic procedures and orthodontics.  "Through DentalPlans.com we actually hooked up with a terrific orthodontist. It came in a little under $3,000," said Less, adding that he was originally quoted around $6,000 for his son's braces.  Is a discount dental plan for you? Think about the coverage you need.  While there are no co-pays, deductibles or annual limits, only about 3 percent of the population that has dental benefits reaches that annual maximum, Ireland said.
 

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