Focus On: Business Models

Mart T. Murphy, DDS


Mark T. Murphy, DDS

Mart T. Murphy, DDS, reflects on today’s new business models in dentistry.

Q: What is today’s changing business model for dentistry?

A: It is such a broad and deep topic steeped in history, it’s probably best to start at the beginning—when dentists and the profession set the stage for where I believe we are presently. In 1957, well-meaning dentists formed the Washington State Dental Services (later to become Delta Dental). I am sure the goal was to transfer some of the costs of dentistry to a third-party to increase utilization of services and create a preventive maintenance structure. Because the profession did not have formal or advanced training in business insurance or strategic planning, other forces, then what was best for us dentists, drove the system evolution. The dental insurance companies and employer’s actions created what is now often referred to as the “Insurance Monster” that has yet to be slain, or maybe not even be tamed.

Q: A recent news article stated that dentistry is still one of the top professions for young people to choose, so is the situation really that bad?

A: What a conundrum. Yes, it is that bad, and yes, we still have it good. In fact, unlike medicine, it is much easier for us to opt out of the reimbursement model that is called dental insurance. Make no mistake though. Indemnity (a traditional fee for service and the usual customary and reasonable fee reimbursement) insurance, once the only choice, is now only a small percentage of what is offered today. Of dental insurance, 78% of it is Preferred Provider Organization (PPO). The average US income of dentists is down some 15% during the last 10 years. And that is different than the average gross domestic product (GPD) per capita for the rest of the country, which is on the rise. Consumer spending is flat for dentistry, and the number of dental schools and graduates is climbing. Not to mention retirement has been delayed, on average 5 years according to the ADA. Dental Futurists call it the perfect storm; reimbursements are down, supply is up, demand is down, technology is expensive, educational debts is high, ergo the environment is ripe for more consolidation and the rise of more and larger days sales outstanding, or DSOs. Having said all that, the average income for a US dentist is still way above the average income for a family, thus we still have it good. Unfortunately, I believe it makes us complacent as a profession. We also tend to make business and clinical decisions that are related and may be influenced at least subconsciously by this milieu.

Q: What kind of business and clinical decisions are impacted from this situation?

A: I’ll give you a couple of examples. If a dentist nets 30% from his or her practice (admittedly not the best way to discuss overhead, but please allow this abbreviation) and is approached to take on a PPO with a 15% discount, the dentist rarely thinks through the economic impact of that decision to accept that plan. For those patients, we would be giving away half our net. In order to make the same total dollars, we would have to do twice as many cleanings, fillings, crowns, or procedures to make the same income as before. That becomes almost impossible as reimbursement drifts lower, so we try to manage cost because it feels easier than facing the real issue. We give fewer benefits, pay less, buy smarter and use materials and laboratories that decrease our dental supplies and lab fees. I’ve spent a lot of time in the laboratory profession, and I know that more than 30% of the work done by dentists today in the United States has been off-shored to a foreign lab because of cost, and the dentist is not always told. Monolithic zirconia crowns are not on the meteoric rise because of their aesthetics or strength, but rather because they are far less expensive that the alternatives.

Q: So, as a profession, do you think there is anything we can do to turn the tide?

A: There is no easy or fast solution. Start by doing these 3 following things in your dental practice:

1. Think of growing your business intentionally, instead of always cutting costs. A vision-driven strategic plan that has goals and objectives, that when met provide rewards that support your vision is the key. Decide what kind of dentistry you want to do, build a plan, and execute it. If you want to do your best stuff for a fair fee and not be drowning in fee adjustments or discounted reimbursements, you can. Not overnight, but with a plan over time…and almost anywhere!

2. Make sure that you, your staff, and your patients all understand the true role of dental insurance: it is not real insurance. It does not provide for catastrophic loss; rather maintenance. Most medical insurance deductibles are greater that dental insurance maximums. If auto insurance only paid $1,200 when you totaled you car you would go berserk. Well-intentioned but poorly designed, if dental insurance had kept up with inflation, it would cover several thousand dollars today. How did we let that happen?

3. Find others with the same kind of dreams about how they want to practice dentistry as you have. Personally, the Pankey Institute gave me that opportunity. They helped me see what I could become and helped me get there by receiving good coaching. So, surround yourself with positive, forward-looking people; ignore the naysayers.

Q: Where do you think all this will end up taking the profession and its patients?

A: Wow, let me grab my crystal ball. Seriously, there is a widening chasm between what patients need and what the reimbursement models cover or allow. Unlike medical plans, dental plans are not insurance, but simply cover maintenance activities. We have helped several practices design a path to reduce or leave the false safety of participation in PPOs and traditional indemnity plans. Dentistry will continue to see the following 3 trends for the near future: (1) increasing corporate dental delivery models, (2) providers dropping participation in PPOs and conventional coverages, and (3) the development of improved communication to patients about the value proposition that comprehensive care offers them. Dentists and their teams need to become savvier at “selling” health rather than succumbing to the sirens’ song that reimbursement plans promise. We coach teams in person and through our software to design a more balanced volume, fee-for-service, relationship-based model for helping patients who want better oral health. Does it work with every patient? No, of course not. But it helps often enough to shift the pendulum back into favor with the intentional practice of dentistry. Like so many other industries and professions that have felt these forces and undergone these kinds of changes, the middle will begin to disappear. Corporate practices will thrive based on volume and price. Fee for service will thrive based on service and quality of care. The “average,” “traditional,” or “usual customary and reasonable” practices will begin to fade away. Not over night, but over time.

To invoke the wisdom of James Dean: You cannot change the direction of the winds, but you can always set your sails and go wherever your dreams desire.

Dr. Murphy is the principal of Funktional Business Consulting and lead faculty for clinical education at MicroDental. He serves on the adjunct faculty at the University of Detroit Mercy and Michigan Schools of Dentistry and is an essentials presenter at the Pankey Institute, where he has also served on the board of directors. He practices general dentistry on a limited basis in Rochester, Mich, and lectures internationally on practice management, case acceptance, planning, occlusion, and temporomandibular disorders. He can be reached at (248) 561-9951 or

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