The Business of Oral Health Care: a Look Into the Corporatization of American Dentistry
Posted Aug 29, 2013 in Industry News
Written by Erik K. Curtis, DDS, MA, MAGD and reprinted with permission from AGD Impact, October 2012. (c)Academy of General Dentistry. All rights reserved. On the Web at www.agd.org. License #37166
America loves big business. Never mind the warnings of philosophers and other naysayers. For every Occupy Wall Street curmudgeon huddling under a leaky tent to protest stratospheric CEO incomes, a million of his compatriots get in line at the local Apple store to purchase the company's latest and greatest products. For every crusader decrying the ethics of the bottom line, an army of analysts crisply counters that an entrepreneurial, creative private sector is what makes this country great. For every science fiction movie featuring an evil corporation bent on taking over the world, there is a corporate cinema screening that very film. Big Oil, Big Pharma, Big Media, even Big Chocolate: For most of us, big organizations mean the security of efficiency, reliability, consistency, and cost control.
And now, medicine has gotten in line. In an Aug. 13, 2012, New Yorker piece titled "Big Med," American surgeon and Harvard public health professor Atul Gawande, MD, discusses U.S. Bureau of Labor Statistics data, which reveal that, in a single decade, most physicians have gone from practice owners to employees. Dr. Gawande does not decry the shift. In fact, he argues, medicine should become even more conglomerated, more systematized, and more standardized—in short, more like the restaurant chain The Cheesecake Factory. Dr. Gawande asks his readers not to scoff.
"Big chains thrive," he writes, "because they provide goods and services of greater variety, better quality, and lower cost than would otherwise be available. Size is the key. It gives them buying power, lets them centralize common functions, and allows them to adopt and diffuse innovations faster than they could if they were a bunch of small, independent operations."
While many other industries have followed this thinking—often with profitable outcomes—health care has only recently began to follow suit, albeit cautiously. Dentistry is one of the last health care fields to venture into the world of corporately driven professional services. Though big business has thrived throughout America, its success in dentistry has yet to be determined by both its patients/consumers and dentists alike.
The Rise of 'Big Dentistry'
Dentistry is experiencing a big-box trend of its own. According to the ADA's Health Policy Resources Center and an April 9, 2012, article from the ADA News, "ADA Explores Growth of Large Group Practices," 76% of dentists in 2006 were solo practitioners; by 2010, the number had fallen to 69%. Additionally, since 2010, the number of large dental group practices has jumped 25%, from 2,000 to 2,500. A May 2012 Bloomberg financial news article by Sydney Freeberg ("Dental Abuse Seen Driven by Private Equity Investments") reports the emergence in the last 10 years of at least 25 dental management services companies bankrolled by private-equity firms—which together account for the management or employment of approximately 8% of all U.S. dentists.
In some instances, dentists contract with the companies—known as dental management organizations (DMOs) or dental service organizations (DSOs)—for business support. In others, where local laws permit, the corporations own the practices and hire their own dentists. Freeberg notes that dental practices have become "a favored investment of the private equity industry," and even quotes one dental management CEO who calls dentistry "a fragmented cottage industry ripe for outside management."
"The corporate view is that dentistry is ripe for takeover," explains North Carolina AGD President Jerry W. Caudill, DMD, MAGD, of Fayetteville, NC, who is a former national dental director of a 120-office, multi-state dental management group. He explains, "Outside investors and dental corporations are interested in dentistry because our margins are much better than those of medical group practices, which have been severely reined in."
Corporate dentistry doesn't just appeal to the large corporations moving in on this health care service; it also appeals to the health care providers it employs.
Corporate Dentistry's Appeal
Management companies can offer dentists potentially impressive advantages, including staff recruitment, patient scheduling, and marketing. Corporations enjoy deep-pocket capital, media clout, and the size to vertically integrate supplies, equipment, and technology. They can negotiate deals with dental laboratories and third-party payers that solo practitioners can't begin to match. They can organize convenient in-house specialist consultations and referrals. Employees boast about generous salaries, benefits, and bonus incentives. And, although a treating dentist still must answer to the dental board for a patient complaint, the company assumes financial responsibility for malpractice cases.
Corporations promise relief from many of the traditional burdens of solo practice. "Solo practitioners have to be available to patients 24/7," says AGD Vice President W. Carter Brown, DMD, FAGD, of Greenville, SC. He continues, "Solo practitioners also have to create their own retirement, which means they must produce extra income. They have to own the building and equipment and pay the taxes. They must cover insurance costs and their employees' expenses. A corporate model has a structure to deal with all of that."
Corporations also may act as a de facto private dental society, providing a broad range of benefits and perks to dentist partners and associates and promoting the group's interests in community and political arenas. "As a DSO, we were even able to arrange and offer continuing education courses," says Dr. Caudill. Some believe corporate dentistry also offers patients the comfort of a "brand." "Patients might view a dental chain as the big-box store of dentistry," Dr. Brown explains. "A patient might think, 'I am dealing with a corporation, so therefore, it must be able to offer me the same product for less money.'"
Dr. Brown notes that, because money is a powerful motivator, patients often do not give dentistry the same priority as they do for medical care. "Most Americans view medical care as something that is paid for by someone else—insurance, government, or other programs," he says. "In dentistry, there is a significantly larger percentage of out-of-pocket expense than you see for typical medical care."
In fact, Dr. Brown notes, dentistry receives very little government or other external support, dental insurance is woefully underfunded, and patients see dental care as expensive. (Ironically, according to Dr. Brown, the nationwide per-capita cost for dental care last year was only a little over a dollar per day.) "The reality is that, for many, dental care is not a health priority," he says.
Operating in such a fiscally sensitive environment, corporate marketers sometimes send artfully contradictory messages to patients and dentists when it comes to costs and salaries, respectively. Patients hear, "You will get the best/easiest/most convenient care for less money." Potential client or employee dentists hear, "You'll make more money with less responsibility."
Corporate dentistry knows the challenges that private practitioners face. Marketing messages are tailored around those challenges—and how corporate dentistry doesn't have them. "Corporations do a really good job of making their services sound very appealing to doctors," says Dr. Caudill. "For example, we would say something like, 'Doctor, you're trained to be a great dentist. Let us handle the staff, the bookwork, and the tax preparations. We'll order supplies, equipment, and maintenance. You can go home at five and relax. Go have a great life with your spouse and children.'"
For dentists who are bogged down with all of the business aspects of dentistry that they have to do on their own, a corporation that says it will handle all of those responsibilities can be very enticing. "It's a good draw," he says.
Corporate Dentistry's Growing Labor Force
Many dentists view corporate dentistry as a good draw, indeed. Corporations go nowhere without willing labor, and there seems to be no shortage of dentists willing to take the corporate plunge. Dr. Brown believes that the rise of corporations is due in part to the financial pressures that new graduates and young dentists face.
One must consider the increasing cost of dental education: "The cost of dental education is one of the highest among medical professions," Dr. Brown says. "With no vigorous scholarship mechanism in place, students rely on loans and personal funds, which often lead to $200,000 and $300,000 of debt."
On top of the student loan debt, new dentists incur even more debt as they begin practicing—and they don't have many places to turn for help these days. Previous generations of young dentists could count on bank loans or associateships with established practitioners to help them with these costs. But the current recession is squeezing traditional practice entry points and bank support has dwindled.
"Doctors are coming out of school $200,000 in debt into a bad economy, in which long-time dentists are going bankrupt and banks are balking at making loans. It's much harder now to come up with the money to buy or set up a private practice, which could cost $500,000 to $1 million," says Dr. Caudill. It's not surprising that many young dentists are looking to other options, including corporate dentistry.
Even if young dentists had the funding to buy a practice, Dr. Brown notes, fewer practices are available for purchase, because many older dentists are practicing longer. (Interestingly, as mature dentists approach retirement, many of them are finding that fewer younger practitioners can afford to buy them out—but corporations can.)
Associateships also are more difficult to secure. For one thing, there may not be enough established practices to take the graduates that are churned out by dental schools each year. "As long as we continue to graduate more dentists than the marketplace can absorb," Richard Dycus, DDS, MAGD, of Cookeville, TN, says, "corporate dentistry will scoop up the new graduates who need a job."
What's more, traditional solo practitioners, strapped by lower patient traffic and less production, may be less willing to take on the burden of supporting the financial needs of younger dentists. "Many new grads need a sizeable income just to cover their loans," says Dr. Brown. "They may not be able to wait while helping to grow the practice."
Only scant employment opportunities exist otherwise for dentists who want to practice. Positions in public health clinics are relatively rare and the potential for hospital positions are slim.
There is another, less obvious dynamic that also may make corporate dentistry appealing to new dentists. "People are less oriented to coming out of school and starting their own practices," Dr. Caudill says. "They are losing the desire for entrepreneurship."
Dr. Brown agrees that the desire for private practice has changed over the years. "Different life and career expectations come into play among the generations," he says. "The model for a lifelong, successful career has many looks now, and each generation wants different mixes of ownership, time with family, professional growth, and community involvement."
Young dentists may not want to ever own a practice. Many new dentists are more interested in having a balanced work-home life. According to a 2011 American Dental Education Association report, "Reasons Why Students Pursue a Dental Career," 64% cite "control of time" as the reason why they enter the profession. And, while it still is a high percentage, only 55% cite "self-employed" as the reason for becoming a dentist.
This could be related to the fact that education today focuses on more group work, social interactions, and constant communication via technology, which affects the way in which younger people work and interact after they graduate.
According to a 2005 article from the EDUCAUSE Network, "Learning, Learners & Technology," "Interaction and social networks are essential. Young people prefer group work and online contact with others (e.g., Facebook)." Further, the new generation of young people, who are referred to as Generation C, or the "Connected Generation," are constantly connecting with their peers.
A white paper and accompanying video, "Who Are the Class of 2015?" from the social media agency Mr. Youth, reports that 59% of college students update their Facebook status while sitting in class. More than half of students are on Twitter, and more than 75% send more than 20 text messages per day—they are constantly connecting with others.
Dr. Caudill says, "The new generation of dentists also is growing up with social media. With the likes of Facebook and Twitter, this is a much more social group than the lone wolves of yesteryear. They thrive in a group environment." For this reason, solo practices may no longer be very appealing to younger dentists.
Criticisms of Dental Corporations
In spite of their appeal to segments of patient and dentist populations alike, some dental service organizations have generated serious operational and ethical complaints. Amid well-publicized accusations of patient abuse, unlicensed practice of dentistry, and fraud, six states currently are reviewing or auditing dental corporation business practices.
Additionally, these management companies also are the subject of a U.S. Senate inquiry launched earlier this year by Sens. Max Baucus (D-Mont.) and Charles Grassley (R-Iowa). This inquiry is looking into allegations of overtreatment and low-quality care delivered with "assembly-line service" by a number of American dental corporations.
Further, in recent years, Dr. Caudill describes seeing what he calls the "big-boxification" of dentistry, in which dental corporations set up shop in a given area, bombard the local media outlets with advertising, cut service prices, run mom-and-pop practices out of business, and then raise fees. "Corporate dental groups come in and saturate an area, opening multiple offices, and hiring specialists who rotate among locations and cut out outsiders," Dr. Caudill says.
Dr. Brown worries that these insider-only referrals are not in patients' best interest. "Mega-groups that include specialists may seem like a benefit to patients who want to only go to one location for care," he says, "but do the dentists in these groups have the option to refer to the specialist who they think would be best for that patient, whether inside or outside of the group?"
Once established, Dr. Caudill says, some corporations may put doctors on production quotas, which are often strictly enforced. Under pressure to perform and produce—or risk termination—dentists may become motivated to prescribe the most expensive treatments available. "They may be encouraged to up-sell the patient," he says.
Dr. Caudill explains that he was informed by a colleague from a dental corporation about incentivized up-selling procedures. If a doctor prescribes a filling, for example, and the hygienist or treatment plan coordinator can convince the patient to accept a crown, they all may receive bonuses.
Dr. Caudill also describes supply quotas that result in shortages. After a previous slow month, for example, a practice can run out of supplies in the third week of a busy month. The dental corporation may refuse to send more, and the practice can't order again until the next month. This may cause disruptions in, or changes to, treatments. "I've seen doctors tempted to put in the wrong color composite because that's all they have left," Dr. Caudill says.
Different Approaches to Care
In addition to supply issues, DSOs and private practice dentists differ in other areas, including practice management and approaches to care. Dr. Caudill says he has encountered a variety of corner-cutting techniques in corporate dentistry, such as delaying and postponing care of capitation patients. "The goal of some DSOs may be, in theory, to not see the capitation patient at all, while continuing to collect capitation fees," he says.
Additionally, Dr. Caudill says, corporate doctors often are instructed to use only a company-approved lab, which typically would be the lowest bidder, and not always the one that offers the highest quality. And even if the lab's quality is not good, doctors often are not allowed to change labs.
Speed and a one-size-fits-all mentality limit a dentist's ability to treat every patient as an individual. "Some DSOs may tend to run the patients through like cattle to maximize profits," Dr. Caudill says.
DSOs may win out over solo practitioners on the cost of treatment, according to some observers, but on such specific benefits as detailed, thorough, easy-to-understand descriptions of treatment plans and such broad intangibles as human connection and trust—not to mention a stable, low-turnover employee base—they inevitably come up short.
Corporations, of course, have other axes to grind, constituencies outside the office to please. They must fund the checking accounts and 401(k)s of layers of people beyond just the dental team itself—particularly corporate employees and executives. They must generate a return on their investment that satisfies stockholders. So DSOs constantly struggle to find the cost savings that allow them to remain competitive.
"There are companies that do it right," Dr. Caudill says. "But, there are also some very bad actors who want ROI [return on investment] so badly they will do anything to reach it. These corporations will cut everything to squeeze more profit because of the extra layers of people to feed. Once you have the pressures of stockholders to satisfy, dental practice takes on a whole new character."
As a result of their broader focuses, corporations may lose sight of the needs of the people closest to the action. Dr. Caudill says, "In many DSOs, the doctors are always fighting the bean counters. Some corporations are good at making promises to both patients and dentists that they don't or can't keep. The doctors want to provide quality care, but often feel they aren't given enough time, staff, or supplies to do so."
This struggle to provide intangibles like caring, thoughtful treatment and building long-standing, personal relationships with patients are reasons some argue that corporate dentistry offerings cannot compare to what private practices provide.
Conflicts of Interest
Treatment philosophies also come into play for all dentists—corporate and private alike. Dentists, like all doctors, always have walked a philosophical tightrope. They must balance their own best interests with those of their patients. "The best basis for creating good oral health is a solid patient-doctor relationship," Dr. Brown says. "This means that the patient and the doctor collaborate to decide the best course of treatment. The doctor informs the patient of any conditions and concerns and presents the solutions for the patient. The patient expresses his or her wishes, and a dialogue determines the best mix of solutions and potential outcomes. The patient trusts the doctor to present what is in the best interest of the patient, not the best interest of the doctor."
But, for some corporations, only one bottom line exists. Above all, corporations must make a profit. "Profit-seeking corporations are not directly required by licensing laws or patient-care interest to meet a dentist's ethical responsibilities," says Gary D. Oyster, DDS, of Raleigh, NC, legislative chair of the North Carolina Dental Society.
Dr. Brown is concerned that corporate dentistry encourages a commodity mind-set. "Production quotas, whether directly stated or implied, ruin the patient-doctor continuum. They can, even if subconsciously, drive doctor decision-making and abrogate patient responsibility," he says.
Some believe the commoditization of dentistry also may distort patient values. "Commodity patients see dental care the same as buying tires. They want top-drawer results without cost or commitment to the personal responsibility that is the key to good oral health," Dr. Brown says. "The public health iron triangle of access to dental care says that you cannot have high-quality oral health care from a committed, caring professional and still receive all treatments at a fraction of the cost. You can't minimize cost without negatively affecting quality or availability of care."
Dr. Caudill notes that, despite this, dental corporations like to position themselves as patient advocates. DSOs argue that only they have the capital to reach out to patients in rural or underserved areas. But Dr. Caudill says his experience contradicts this. "You are not going to put a fast food restaurant in an area with insufficient traffic," he explains. "DSOs make their decisions in the same way. They use population density ratios, demographic studies of socioeconomic levels, and traffic count surveys to determine where to put a new office. They are not going to open in an area unless they see a very good opportunity for corporate profits."
A Test of Power
One such area where dental corporations were part of a heated debate is North Carolina. Dentistry in that state was thrust into the news recently with its legal debate over dental corporations.
For some years, the North Carolina State Board of Dental Examiners had been pursuing expensive and strongly contested litigation against corporate violations, such as illegal ownership, fee-splitting, and false bookkeeping. In 2010, a 62-year-old dentist sold his practice to the Illinois-based corporation Heartland Dental Care Inc. However, the North Carolina Dental Practice Act ownership provision prohibited this sale as it allows only licensed dentists to own or otherwise control, manage, or supervise a practice.
The dental board took legal action against Heartland Dental and the dentist. In lieu of a formal administrative hearing, the dental board settled the complaint with consent orders for both the dentist and Heartland Dental, and the parties' agreement was terminated eventually—a huge setback for corporate dentistry in North Carolina.
Still, corporations continue to flex their power, and their money, too. In 2011, legislation was introduced to improve the North Carolina dental board's capacity to enforce the state's broad laws against corporate practice. The bill came to be seen as a test case on dental corporation power. A consortium of mostly out-of-state, investor-owned companies raised more than $1.1 million to fight the bill with political advertisements. The companies also hired 14 lobbyists and delivered significant campaign contributions to legislators.
Organized dentistry pushed back; the North Carolina Dental Society website declared that some DSOs "have crossed the line from providing business support services to exerting control over the dental practice."
By summer 2012, the legislation passed, reinforcing dental corporation statutory restrictions as valid state law and calling for further work to improve board regulation. According to Dr. Oyster, this new law demonstrated that "corporate-run—owned, supervised, or controlled—clinics are against the law and are bad for the profession." For now, at least in North Carolina, organized dentistry seems to be winning the battle against corporatization.
Perceptions of Corporate Dentistry
While the battle continues and becomes more of an issue for the profession, many dentists have been and will continue to form opinions about corporate dentistry. Trying to compete with and challenge corporations can be tough for solo practitioners and private practice dentists, mainly because corporations are extremely powerful—and rich.
"The corporations are making huge bucks. They are not going away. They have the money and lawyers to stay the course," Dr. Caudill says. Many expect the corporate dentistry trend to continue growing at its current, accelerated rate, increasing the influence of standardized, The Cheesecake Factory-esque big business on something that many dentists feel should stay small and personal.
There are dentists who vehemently oppose DSOs, and there are some who feel there can be a middle ground or practical alternative to DSOs. "I think small, space-sharing groups are a much better answer than large corporations," Dr. Brown says. "Then, you could keep the private-practice advantages for patients, while maximizing expense coverage and enjoying the built-in professional collaboration."
There is also the group who feels that DSOs remain a good option for some dentists, including those just graduating from dental school.
All dentists—whether they favor corporate models or not—will agree that the patient must remain the No. 1 priority. As is the case with all health care professions, transparency remains the key. "Patients have a right to know who is driving the bus, who is really calling the shots regarding their care—the doctor or the corporation," Dr. Caudill says.
About the Author: Erik K. Curtis, DDS, MA, MAGD, is an adjunct associate professor at the University of the Pacific. Dr. Curtis holds a certificate in professional writing from the University of Arizona and is certified by the Board of Editors in the Life Sciences. He maintains a private general dental practice in Safford, AZ.
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