Dental News - Health reform expected to polish dental industry

Dental Tribune International

Tue. 25 October 2011

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NEW YORK, NY, USA: Through 2016, the dental industry will benefit from positive demographic trends, an improving economic environment and greater access to dental insurance, according to the latest research findings from IBISWorld, a publisher of industry research. Over the five-year period, revenue is forecast to increase at an average annualized rate of 3.5 percent, to $130 billion.

Although growth from 2011 to 2012 will remain relatively low at 2.1 percent, sales are projected to pick up in 2013 as healthcare reform boosts the number of insured Americans. To meet demand, the number of dental offices is projected to grow at an average rate of 0.7 percent annually to 175,789 practices through 2016. The dominance of dental practice management companies, however, will continue to hamper the expansion of new offices as more dentists recognize the benefits of consolidating in order to spread costs across several practices.

The federal healthcare reform approved in 2010 includes several provisions related to dental and oral health that will likely increase the number of patients who can receive treatment, thereby boosting industry revenue. Some of the provisions of reform were implemented in 2010 and 2011; however funding is yet to be secured and many significant changes are not scheduled to take effect until 2012 through 2018.

The Patient Protection and Affordable Care Act (PPACA) states that pediatric dental care must be included as part of the minimum essential coverage for individuals through the state-run health exchanges. Pediatric Medicaid expansion plans also provide growth opportunities for the dental industry because this market segment has an unmet need. Increased government funding from the PPACA will likely lead to profit-margin expansion opportunities given the anticipated higher demand in pediatric practices for surgical and anesthesia-related procedures and lower demand for lower-margin dental lab work.

According to IBISWorld senior analyst Sophia Snyder, the $109.5 billion dental industry has been resilient and performed well during the economic recession, benefiting from favorable demographic trends, improvements in technology and mounting awareness of the importance of oral hygiene.

“Revenue increased about 2.2 percent per year on average during the five years to 2011,” Snyder said. “Revenue is expected to rise 1.8 percent from 2010 to 2011.”

This steady growth illustrates the resilience of the industry, which is partly attributable to growing public appreciation for dental care.

In contrast, the cost of dental education has soared, weighing down dental graduates with debt that has hindered them from starting practices. Rapid advancements in technology are also making it overly expensive to outfit a dental office. These factors have led to the growth of dental practice management companies, which are large companies that provide services for multiple dentist offices. Since these companies also buy independent practices, their growing dominance is leading to industry consolidation. During the five years to 2011, the number of companies is expected to decline 0.8 percent per year on average to 154,032 operators. Consolidation is forecast to persist through 2016; this will be one of several factors that boosts operating profit margin to 17.7 percent during the next five years, up from 17.3 percent in 2011.

The five-year outlook for dentists is positive, with favorable demographic trends, an improving economic environment and growing access to dental insurance, which has boosted revenue over the period. IBISWorld forecasts that revenue will increase at an average annualized rate of 3.5 percent to $130.0 billion by 2016. Revenue growth is expected to pick up in 2013 as healthcare reform boosts the number of insured Americans. DPMCs will continue to penetrate the industry and grow in size as more dentists recognize the benefits of spreading costs across practices.

(Source: PRWEB)

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