how key forces are reshaping dentistry and myth busting the trend towards group practice james l....

How Key Forces Are Reshaping Dentistry and

Myth Busting the Trend Towards Group Practice

James L. Willey DDS, MBADirector

ADA Council on Dental Practice

Division of Dental Practice and Professional Affairs

© 2012 American Dental Association, All Rights Reserved

Key Forces Affecting Dentistry

New Dental Schools

RisingStudent

Debt

MidlevelProviders

Changes inOral Health

Status

Health Care Reform Act

Corporate Practices

The Economy

Trends in InsuranceBenefits

Dentistry


The Great Recession of 2008

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

$220,000

$240,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

Real (2009) Net Income of Independent GPs Real (2009) GDP per Capita

Net

Inco

me

GDP

per C

apita

Source: Surveys of Dental Practice (various years), Bureau of Labor Statistics, and Bureau of Economic Analysis.


Drop in Dentist Income Preceded the Great Recession

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

$220,000

$240,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,00012

5,11

612

3,52

112

2,21

812

4,40

612

7,84

313

6,84

213

6,72

514

1,90

014

2,72

914

5,29

214

4,93

715

0,04

315

9,99

217

0,22

517

2,92

317

0,83

417

8,32

2 194,

563

203,

530

207,

350

209,

704

207,

883

206,

736

211,

139

217,

850

215,

915

213,

113

206,

440

192,

680

Real (2009) Net Income of Independent GPs Real (2009) GDP per Capita

Net

Inco

me

GDP

per C

apita

Source: Surveys of Dental Practice (various years), Bureau of Labor Statistics, and Bureau of Economic Analysis.


Arithmetic of Net Income

Where: C is average collection rate on gross billings E is average practice expenses per dentist

The following factors could potentially account for the reduction in average real dentist net income since 2005:

average real gross billings per visit decreased; average collection rate on gross billings decreased; average number of visits per year to a dentist among the population who saw a dentist decreased; percent of the population who visited a dentist in the last year decreased; population to dentist ratio decreased; average real practice expenses increased.

Visits per capita

Gross billings collected per

visit


Billings per Visit Up, Percent Collected Down

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

90%

91%

92%

93%

94%

95%

96%

97%

98%

99%

100%

96.0%95.4%

95.9% 95.7%94.8%

95.5% 95.6%94.9% 95.1%

94.3% 94.5%94.0% 93.7% 93.3%

131.

75

137.

27

138.

71

140.

38

145.

23

143.

50 161.

14

155.

01

161.

53

170.

35

168.

31

165.

41

169.

55

176.

72

Percent of billings collected Real (base=2009)

Gro

ss B

illin

gs p

er V

isit

Perc

ent B

illin

gs C

olle

cted

Source: Surveys of Dental Practice (various years) and BLS’ Consumer Price Index.


Percent of Population with a Dental Visit Down, Number of Visits per Patient Down

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 20090%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0.0

0.5

1.0

1.5

2.0

2.5

39.2% 38.4%39.7% 40.4%

38.6%39.7% 40.5% 41.2% 40.9% 40.6% 40.5% 40.8%

39.2% 38.6%

2.05 2.07

2.05

2.03

2.04

2.03 2.05

2.04

2.02 2

1.96

0000

0000

0001

1.95

0000

0000

0001

1.95

0000

0000

0001

1.91

Percent of population with dental visit Number of visits per patient

Perc

ent o

f Pop

ulati

on

Num

ber o

f Vis

its

Source: Medical Expenditure Panel Survey, 1996 to 2009.


Number of Dentists Up, Population to Dentist Ratio Down Slightly

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

0

500

1,000

1,500

2,000

2,500

119,

493

120,

250

123,

197

123,

625

124,

151

126,

097

126,

546

129,

096

130,

335

130,

054

132,

118

133,

688

134,

492

136,

717

2,25

4

2,26

7

2,23

9

2,25

7

2,27

3

2,26

1

2,27

4

2,24

9

2,24

8

2,27

4

2,26

0

2,25

6

2,26

3

2,24

6

Number of GPs Population/GP

Num

ber o

f GPs

Popu

latio

n to

GP

Ratio

Source: Distribution of Dentists in the United States by Region and State, various years, 1996 to 2009; and U.S. Census Bureau.


Annual Percent Changes for All Variables

Annual percent change: 1996-2005

Annual percent change: 2005-2009

Real net income 2.74% -3.02%

Real gross billings per visit 2.90% 0.92%Percent of population with a dental

visit 0.39% -1.25%

Visits per patient -0.27% -1.14%

Ratio of U.S. resident population to GP 0.10% -0.31%

Practice expenses per owner 3.73% 0.78%

Percent gross billings collected -0.20% -0.27%


Riding the Baby Boomer Wave

1950 1963 1976 1989 2002 2015 2028 20410

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Total Population (in thousands), 1950-2050

1950 1962 1974 1986 1998 2010 2022 2034 20460%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Distribution by Age, 1950-2050<2020 to 3940 to 5960 to 7980+

2010 2030

Source: http://www.census.gov/population/www/projections/downloadablefiles.html Projections based on 2000 Census

1990


All restorations per user of dental care

0

0.2

0.4

0.6

0.8

1

1.2

Age

Av

era

ge

re

sto

rati

on

s p

er

us

er

of

ca

re

1992

1997

2002

2007

Restorations Down across All Ages

Source: Eklund, S. Trends in Dental Treatment, 1992 to 2007. J Am Dent Assoc, Vol 141, No 4, 391-399.


Insurance Coverage Declining

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201052.0%

54.0%

56.0%

58.0%

60.0%

62.0%

64.0%

66.0%

68.0%

70.0%

72.0%

69.2%

67.7%66.5%

65.0%63.9% 64.0% 63.5% 63.4%

62.3%

59.4%58.6%

Employer-sponsored health insurance coverage for persons under age 65, 2000-10

Source: Kaiser Health Foundation.


Patients Paying More Out of Pocket

Source: National Health Expenditure (NHE) Amounts by Type of Expenditure and Source of Funds: Calendar Years 1997-2009.

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

$200

$220

$240

$260

$280

$300

$320

$340

$360

$380

$400$2

64

$269 $2

89

$284 $2

96

$298 $3

04

$295 $3

07

$306

$311 $3

19 $325


What Have We Learned Thus Far?

• The recent economic downturn does not fully explain the decrease in dentists’ income.

• Most concerning is a steady decline in utilization of dental care that began several years prior to the start of the Great Recession

• The decline is related to a variety of factors• The decline is not disproportionately among the

poor (These slides were not included in this presentation)


The Evolving Trend Towards Group Practice

92%

3% 2% 3%

Group Practice Organizations - Size Estimates

Solo/cooperative (1-4 dds)

Large Group practice (5-9 dds)

Larger group practice (10-19 dds)

Very large group practice (20+ dds)

Source: American Dental Association, Health Policy Resources Center, Large Group Practices, Sampling Frame, Unpublished Data, July 2009.


The Geographical / Multi-Specialty Model

1. There are fewer locations generally focused in the same geographic area

2. Each location can have a revolving mix of dentists, which may include GPs and specialists

3. Some dentists may split time between different locations

4. Individual locations may be open or closed based on unique coverage requirements

Location 1

Location 2

Location 3

Location 4


The Franchise Model

1. Numerous offices, typically each with one dentist

2. This GPO may be composed of two business units

• Practice Management Group

• Equity Group (Equity may also be shared with the owner dentists)

3. Growth occurs through acquisitions and new locations

4. Examples of this model include the Heartland and Midwest Dental Groups

Locations

Group Practice Organization

1 2

…n4

3

5


The Dental Services Model (DSO)

1. The DSO model is composed of:• Professional Practice Associations• Shared Administrator

2. The professional practice associations are composed only of dentists

3. The shared administrator provides all the administrative, financial, marketing and information services to the practices

4. The DSO owns the buildings, technology and employs the staff

5. An example of this model is American Dental Partners, Inc.

Group Practice Association

Dental Management Services Organization - Administrator

Professional Association 1

Professional Association …

nProfessional Association 3

Professional Association 2


Estimated Growth of the Largest Groups

2009 2010 2011 2012 2013 2014 2015

2.9%3.6%

4.5%

5.7%

7.1%

8.9%

11.2%

Hypothetical Market Share of the Largest Groups Among Private Practitioners



Myth: Only New Dentists Join Large Groups

30-39 Years

40-49 Years

50-59 Years

60-64 Years

65-69 Years

70-79 Years

12.7

7.8

6.1

6.8

6.7

5.1

Percent of Each Age Cohort Practicing in Large Groups



Myth: Dentists in Group Practice Don’t Join ADA

71.9182.19 81.32

65.88

28.09 17.81 18.6834.12

Percent ADA Members by Practice Size

Member Non Member



Myth: Dentists in Group Practice Don’t Value the ADA

Source: American Dental Association, Health Policy Resources Center, Survey of Dentists in Large Group Practices, Unpublished Data, July 2009.


Myth: Solo Practice Has Become Undesirable

Source: American Dental Association, Health Policy Resources Center, Survey of Dentists in Large Group Practices, Unpublished Data, July 2009.


Myth: There Is No Premium for Ownership

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$89,

724

$113

,117

$98,

538

$125

,842

$103

,438

$110

,133

$128

,807

$141

,617

$149

,151

$120

,254

$141

,478

$126

,589

$127

,445

$121

,660

$17

0,83

4

$17

8,32

2

$19

4,56

3

$20

3,53

0

$20

7,35

0

$20

9,70

4

$20

7,88

3

$20

6,73

6

$21

1,13

9

$21

7,85

0

$21

5,91

5

$21

3,11

3

$20

6,44

0

$19

2,68

0

Net Income by Ownership

real ($2009) nonowner GP net income real ($2009) owner GP net income

After controlling for age, gender, region, the average income differential is :

$71 $36K

Source: Health Policy Resources Center, Survey of Dental Practice, various years.


Myth: A Dental Education Isn’t Worth the Investment

1982 1984 1986 1988 1990 1992 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

0%

10%

20%

30%

40%

50%

60%

70%

80%

Average Education Debt is Approaching Average Net Incomes

Avg Debt - All Schools Ratio of Educational Debt to Average Dental Earnings

Source: HPRC Calculations based on ADA Survey of Dental Practice and ADA Survey of Dental Graduates, selected years.


The Access to Care PowerPoint Slide

Total Population281,000,000

Institutionalized4,000,000 (1.4%)

Community Living277,000,000 (98.6%)

Severe MedicalCo-morbidities

24,500,000 (8.7%)

Generally Healthy252,500,000 (89.9%)

EconomicallyDisadvantaged

43,000,000 (15.3%)

Not EconomicallyDisadvantaged

209,500,000 (74.6%)

Remote3,000,000 (1.1%)

Non-remote40,000,000 (14.2%)

Remote10,500,000 (3.7%)

Non-remote199,000,000 (70.8%)

“Healthy, Wealthy, Walking, and Non-

Remote” patients have access to the best dental care in the world. Access solutions are needed on

the left.


Determinants of Health

•10% Access •20% Genetics•20% Environment

50% Behavior!

how key forces are reshaping dentistry and myth busting the trend towards group practice james l....

Documents

american dental association

dental visit

dental treatment

rights reserved billings

visit slide

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rights reserved restorations

percent gross billings