COVID-driven cost pressures are drilling into the roots of dentistry.
Sidelined by the coronavirus for a couple of months, dentists in Illinois are eager to resume nonemergency procedures. But volumes—and revenues—could remain low as dentists stagger appointments and some patients further delay care.
At the same time, operating costs are rising as dentists invest in high-quality air filters and battle other health care workers for personal protective equipment in short supply. Precautions are necessary as dentists' offices are among the most high-risk settings for exposure, with some procedures producing tiny airborne particles that could transmit the virus.
"It's been a major shock to the dental profession," says Dr. Mark Cannon, who expects to spend more than $20,000 getting his 18-chair pediatric practice in north suburban Long Grove back up and running. "These expenditures have not ended and will not end," he says, predicting dentists could end up spending an additional $40,000 to $60,000 a year on equipment.
As more independent practitioners find themselves in need of deeper pockets, the pandemic could present an opportunity for consolidators seeking acquisition targets.
"For many reasons, COVID will accelerate the consolidation of dental practices," says Marko Vujicic, chief economist and vice president of the American Dental Association's Health Policy Institute. COVID-19 is going to "reduce the number of patients you can see in a day, so there's an additional margin squeeze, and the larger practices are better suited to weather that storm."
Groups that acquire or contract with dental practices and integrate administrative support services have grown quickly over the years. Still, so-called dental service organizations, or DSOs—many of which are backed by private-equity firms—represent a relatively small portion of the industry.
Just 5% of Illinois dentists and 9 percent of dentists nationwide were affiliated with DSOs in 2017, according to the Health Policy Institute. By contrast, some 44% of U.S. physicians worked for hospitals in 2018, according to a report from consulting firm Avalere Health and the Physicians Advocacy Institute. Proponents say consolidation promotes economies of scale, improves patient care and increases bargaining power with insurers.
"There's a possibility coming out of this (pandemic) that dentists will be in larger group practices as co-owners," says Dr. Clark Stanford, dean of the University of Illinois at Chicago College of Dentistry. "That provides scale, that provides efficiency, that provides distributed overhead—especially if we're going to have to get into very costly mitigations for aerosols."
In mid-March, state officials asked dentists to postpone routine care to reduce potential virus exposures and conserve personal protective equipment for front-line medical workers. Many dentists furloughed employees and borrowed money to cover shortfalls.
Forty-six percent of more than 6,000 dentists in private practice said they would "consider closing, selling or filing for bankruptcy" if restrictions continued through August, according to an April survey by the Health Policy Institute.
But this month, dentists in Illinois and many other states got the green light to resume routine procedures if they follow guidance for minimizing the risk of COVID-19 infection.
According to the Illinois Department of Public Health, dentists should mitigate the potential for aerosols, or airborne particles, by using high-efficiency particulate air filters and ultraviolet systems. Ideally, suspected or confirmed COVID-19 patients would be treated in negative pressure isolation rooms. Few dental offices have such rooms.
A solo dentist might struggle with those costs, but multiple practitioners across several offices could invest heavily in one facility to treat high-risk cases, Vujicic says, noting that DSOs had slightly larger stockpiles of personal protective equipment and saw less significant drops in patient volume than solo practitioners.
Plymouth Meeting, Pa.-based Mid-Atlantic Dental Partners, which has more than 240 practices nationwide—including 15 in the Chicago area—had more than 100,000 emergency cases from mid-March to mid-May.
"After the pandemic there may be more people who view the DSO model as a positive place to practice," says Mid-Atlantic CEO Mitch Goldman. "We tend to be larger-scale, so in these situations we tend to get access to (personal protective equipment). We have a little better capital base, so if we had to be out of business for some period of time, we could survive."
Another reason DSOs are well positioned amid COVID-19 is their robust virtual offerings, which enabled them to treat—and bill—patients while offices were closed to nonemergency care.
Aspen Dental supported its nearly 700 independently owned and operated practices across 38 states—including 20 in the Chicago area—with a new virtual care offering for $69 a visit, in addition to sourcing personal protective equipment and other support services.
Consolidation was gaining momentum even before COVID-19 started spreading stateside. Late last year, the practice Cannon founded nearly 40 years ago, Associated Dental Specialists of Long Grove, joined a DSO.
"To continue doing everything that we really wanted to do and having state-of-the art technology, it made sense to work with other individuals as a group," Cannon says, noting that buying power was a factor as dental suppliers consolidated.
And as many dentists near retirement, they'll have to decide whether they want to make sizable investments in their practices post-COVID. Even after a vaccine is widely available, the dental industry—like many industries—can't simply go back to the way it was.
COVID-19 "is just one virus," Cannon says. "There are other viruses. There will be another pandemic. Being prepared for the future is what this is all about."
This article originally appeared in Crain's Chicago Business.