Skip to main content

2014 ODA Economic Report Takeaways

By January 10, 2015June 27th, 2023Michael's Operatory

Each year, R.K. House & Associates Ltd. issues an economic report for the dental industry. The most recently one is dated November 2014. It paints the most grim picture to date of the state of dentistry in Ontario: a falling population/dentist ratio (from 1052 in 2001 to 675 in 2014 to 551 by 2024) and less busy/profitable practices.

We’ve heard this before

We’ve heard these warnings before: too many dentists in major urban areas (more graduating, more internationally trained, enhanced labour mobility, etc.), too few patients, and no one (e.g. RCDSO, the provincial government, etc.) can really do much to curtail either very easily. It’s like a play that we’re all watching and we know something bad is going to happen in the last scene (we can predict it) but no one can stop it…

Won’t More Dentists Increase Access to Health Care?

One would think that increased number of dentists would drive up competition, lower fees, and make dental care more accessible. But there are a few challenges to this line of thinking. First, in the Improving Access to Oral Health Care report, only 17.3% of the whole population reported avoiding a dentist last year due to costs. So the majority of the population didn’t believe that cost was an impediment to going to the dentist. Second, as discussed below, lowering fees might actually cause more harm than good to a dental office. Finally, the cost-structure of running a dental practice is unlike other types of business (which experience cost savings through economies of scale); a dental practice that gets busier and bills more will see its expenses increase by the same proportion.

Let’s Talk About Hygiene

The demand on hygiene is going to increase and scaling costs are going to decrease over the next decade. This is all good, as a robust hygiene program (i.e. roughly 40% of overall production) feeds dentistry. Now here’s the challenge: for a dental practice to maintain profitability, labour costs will need to decrease. What hygienists are paid today is largely a result of a lack of hygienists years ago. But that won’t be the case much longer, as the marketplace gets filled (as with dentists) with a growing supply of hygienists.

Is Charging Lower Fees the Answer?

I was particularly drawn to the section about fees dentists were charging. Here, the report noted that if dentists lowered their fees, this wouldn’t necessarily make them busier; indeed, the opposite might just happen because patients might perceive them as offering sub-par treatment (“Low fees may be seen as low quality”).

An interesting observation: the more a practice charges for crowns, the more crowns they do. And that generalization could permeate with other treatments.

Patients have no prior expectation of what a treatment might cost, or what care they require, or the quality of care they will be receiving. How many patients have access to the suggested fee guide? My guess is: not many. It is difficult for patients to shop around and even the internet won’t provide a lot of guidance on a particular treatment’s costs. As such, lowering fees may have little impact on a practice’s busy-ness. Simply seeing more patients at reduces fees does not leverage economies of scale for the dentist: the variable costs would remain the same.

Is Spending More on Advertising the Answer?

As per previous ODA Economic Reports, this report notes that, in the face of increased competition, dentists have and will continue to spend more on advertising and promotion. This wasn’t always the case: 20-30 years ago, a dentist could set up shop in their preferred neighbourhood and take out a yellowpages ad. That would be the extent of their advertising. They would get most of their patients through word-of-mouth referrals.

But today, it’s different: practices need to spend money on advertising simply because other dentists are doing it and because of the fear (real or perceived) that if they don’t do it, they’ll lose patients to their competitors. The report notes that while total expenses over the past 15 years or so have increased by 76.5%, advertising and promotion expenses over the same period have increased by a whopping 205% (that’s 2.7 times faster than the growth of total expenses!). Ouch! The report goes on to say that advertising and promotion among general practitioners and specialists is climbing towards $100,000 a year – which lowers a dentist’s bottom line and requires them to charge more (just to keep up).

The Content of this post is provided for informational purposes only. It is not intended to be legal, financial, tax, or other professional advice of any kind. You are advised to contact DMC (or other counsel) to seek specific legal advice concerning your individual situation.