Finance32: Dental School’s Missing Curriculum

Great clinical skills simply are not enough for dentists to achieve financial success. Let Focus Partners Wealth's Practice Integration Advisors share what else you need to know to realize your lifetime goals and obtain financial peace of mind.

Blog By:
Focus Partners Wealth

By Practice Integration Advisor Thomas Bodin, CFA, CFP®?? 

The dental industry faces significant challenges, as highlighted by the ADA Health Policy Institute’s (HPI) emerging issues poll. Practice owners are navigating staffing shortages and rising costs, stagnant insurance reimbursements, and increasing overhead expenses. While these trends create pressures, they also present opportunities for proactive leadership and strategic decision making. Here's a breakdown and update of the key trends and actionable strategies to help practice owners adapt and thrive. 

Staffing costs and shortages. 

The challenge: Staffing, particularly in roles requiring formal education and training such as hygienists and dental assistants, has been a persistent pain point for practice owners. Wage growth for hygienists surged by 26.6% between 2018 and 2023, driven by labor shortages exacerbated during the pandemic. While hiring challenges have begun to ease slightly, wage pressures remain, and turnover continues to strain practices. In a 2024 Q2 economic outlook update by the ADA’s HPI, of the 52% of respondents who identified adding staff heading into 2024, 38.4% had done so thus far.  

Actionable strategies: 

With thoughtful management, practices can mitigate staffing challenges while maintaining patient satisfaction and profitability. 

Low insurance reimbursement rates. 

The challenge: Stagnant and declining insurance reimbursements continue to squeeze practice profitability. Collections loss can reach as high as 25% to 35% of production, making it one of the largest hidden costs for dentists. Many practices are exploring whether to drop low-reimbursement networks entirely. In the 2024 Q2 economic outlook update by the ADA’s HPI, of the 42.5% of respondents who identified dropping out of some insurance networks in 2024, 24.8% had done so in their practice.   

Actionable strategies: 

Strategic planning and excellent patient communication are vital when managing the risks and opportunities of insurance network changes. 

Rising overhead costs. 

The challenge: Overhead costs, which had been relatively stable, increased in all major cost categories over the past few years. The “State of the Dental Economy - Q3 2022 Update” indicated practices saw an increase in major cost categories: 91% reported higher staff costs, 82% saw lab costs rise, 95% experienced increased supply costs, 77% noted higher equipment expenses, and 35% faced growing facility-related expenses. As inflation moderates, the impact of these higher costs still lingers, indicated practices saw an increase in major cost categories: 91% reported higher staff costs, 82% saw lab costs rise, 95% experienced increased supply costs, 77% noted higher equipment expenses, and 35% faced growing facility-related expenses. As inflation moderates, the impact of these higher costs still lingers. 

Actionable strategies: 

Proactive financial management and strategic investment decisions are crucial to navigating today’s elevated cost environment. 

While the challenges of staffing shortages, insurance reimbursement rates, and overhead costs may seem daunting, practice owners have the tools to navigate these trends. By fostering strong team cultures, building patient loyalty, and maintaining financial discipline, owners can not only overcome current challenges but also position their practices for long-term success. 

Dentistry remains a rewarding profession with the potential for both personal and financial fulfillment. By staying informed and strategic, practice owners can chart a path to growth and profitability in a changing landscape. 

For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based on third party data and may become outdated or otherwise superseded without notice. Third party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this information.  

About the author?? 

As a practice integration advisor, Thomas provides comprehensive financial advisory services to dental and medical offices, including tax, pension and retirement planning. He is motivated by a passion to help medical professionals connect the hard work they put into their practices with their most deeply held values and goals, all through Buckingham’s evidence-based approach to true wealth management.??