The economic health of dentistry: past, present, and future

_J!^D )A _ A R T IC L E S

Im p o rta n t changes in dentistry durin g the p a st tw o decades in clu d e a d eclin in g caries incidence, an increase in the n u m b er o f dentists, greater co m p etitio n fo r p atients, a n d the spread o f retail dentistry a n d alternative p la n s fo r fin a n c in g a n d delivering d en ta l services. Dire predictions a b o u t the effects o f these changes often have n o t been based on facts. T h is article uses available data to exa m in e the p rofession’s econom ic prospects.

The economic health of dentistry: past, present, and future Tryfon J. Beazoglou, P h D Albert H. Guay, D M D Dennis R. Heffley, P h D

casual review of the significance of dental care in our society could . lead to erroneous co n clu sio n s about its importance. For the most part, dental diseases are not life threatening, and the expenditure for dental care in the U nited States is only ab o u t 6% of the national expenditures for all health care. Nevertheless, dentistry is vital to society for a num ber of reasons: —dental disease affects most Americans throughout their lives; —dental disease can result in fear and anxiety and, w hen it is left untreated, a high level of discomfort and pain; —den tal care, b o th th erap eu tic and preventive, is highly effective; —dental utilization rates, though they can be improved, are relatively high; —the record of dentistry in terms of productivity, efficiency, and the control of costs is exemplary; and —dentists are generally respected and trusted in their communities. D espite th is, feelings of d o u b t and fear a b o u t the fu tu re of the d ental profession in this country are expressed

A

by those who believe th at a reduction in the incidence of caries and a prolif­ eration of the num ber of dentists actively in practice are fundam ental problems. T h e emergence of professional adver­ tising, retail dentistry, alternative delivery system s a n d fin a n c in g p la n s, and increased com petition for patients are cited as evidence of the d e terio ra tio n of the dental profession and, perhaps, harbingers of its eventual demise.1’2 W ith the exception of a reduction in the incidence of caries (for w hich the d ental profession deserves credit), the rem ain in g factors are likely symptoms of regional or national economic con­ ditions that have resulted in decreased dem and for dental services, relative to the number of practitioners. T h e reaction of the m arketplace to the perceived oversupply of dentists has been swift and significant. Brokers or purchasers of dental care have introduced one plan after another to procure pro­ fessional services at a “discount.” Dental schools have experienced a significant decline in the number of applicants and

a drastic, and co n tin u in g reduction in the size of first-year classes.2,3 Some dental schools have closed completely and others are threatened. S p e c u la tio n s a b o u t these m atters a b o u n d ,1-9 but little attem pt has been made to gather objective data to support or refute p a rtic u lar claim s. Some pre­ d ic tio n s may be based on re g io n a l patterns that do not extend to the entire dental profession; others may be extrap­ o la tio n s based on the experien ce of m edicine, w hich m ay n o t a p p ly to dentistry. T h is article considers the av ailable evidence regarding the past and present economic status of dentistry, and discusses the economic prospects for the profession. For this purpose, the gross incom e of dentists will be used. Although the gross income may not be the most appropriate measure for assessing the economic well­ being of dentists, the a ltern a tiv e —net income—is susceptible to differences in accounting practices and taxes through­ out states and over time. Given the fact th a t the ev alu atio n of the p ro fession JADA, Vol. 119, July 1989 ■ 117

A R T IC L E S will be done during an extensive period, and that tax laws, including the treatment of p en sio n fun d s, have c h an g ed d ra ­ matically during this time, gross income is a b etter overall m easure for these purposes. Some a tte n tio n also is given to the implications of this inform ation on the re la tio n sh ip betw een d en tists and the designers and adm inistrators of dental benefit plans. T he economic record of dentistry, on national and regional levels, is evaluated and contrasted with that of the medical profession, and the general economy. Dentistry in perspective T h e gross incom e of d e n tists is one measure of the total value of all dental services used on a national or regional level for a specific period. If properly ad ju ste d , th is m easure can provide in form atio n about the grow th of u til­ ization of dental services by a population. Here, the econom ic status of dentistry is assessed in terms of its performance over time. This performance is compared w ith th at of m edicine, an d w ith th a t of the economy. Performance over time Some have said that dentistry is not as rew arding now as it used to be5'10; but dentists may not be worse off now than in the past.

Table 1 indicates that the total value of dental services utilized in the United States climbed from $2.8 billion in 1965 to $27.1 billion in 1985. T his approximate tenfold growth is substantial and is not indicativ e of a d eclin in g industry; in fact, this growth identifies dentistry as an industry of vigorous growth. Table 1 also shows that during the same period, the num ber of dentists increased by 33%, w hereas the general p o p u la tio n grew by 23% (Table 2). As the consum er to dentist ratio indicates, the effective growth of the dental work force during this 20year period was 7%, a modest increase. T he average gross income of dentists, (national expenditures for dental services per dentist) increased from $29,200 to $212,700 between 1965 and 1985, a growth of 7.28 times during this period (Table 1). Adjusting for the substantial inflation during these years (Table 2), real dollar ex p en d itu res per d en tist increased by a factor of 2.16 (Table 3). C o n sid e ra tio n of the d a ta on an individual patient basis is also interesting, particularly in view of concerns expressed about declines in the incidence of caries. T h e per capita ex p en d itu re of dental services increased from $14.47 in 1965 to $113.72 in 1985. Adjusted for inflation, the increase in per capita dental expen­ ditures was 133% during this period. T hese data re la tin g to perform ance over tim e clearly in d icate su b stan tial econom ic g row th in d entistry d u rin g the past 20 years.

Table 1

■ N atio n al h ealth e x p e n d itu re fo r d e n tis ts ’ services and o th e r related dim ensions, 1965 and 1985.

D im ension N a tio n a l h e alth e x p en d itu re for d e n tists’ services (billions) No. of dentists (thousands) E x p e n d itu res/d e n tists (thousands) C o n su m e rs/d e n tist

1985

1965

1985/1965 ratio

$27.1 127.4 $212.7 1,870.5

$2.8 96.0 $29.2 2,015.6

9.68 1.33 7.28 0.93

Sources: ADA, Health Care Financing Review 1986;8:13, and Social Security Bulletin, 1986; 49:78-80.

Table 2

■ G ross N ational Product (G N P ), population, prices, and grow th, 1965

and 1985.

D im ension G N P (billions) C iv ilia n p o p u la tio n (m illions) CPI G N P /p e r capita Source: Social Security Bulletin 1986;49:78-80.

118 ■ JADA, Vol. 119, July 1989

1985

1965

1985/1965 ratio

$3,988.1 238.3 318.5 $16,735.6

$691.1 193.5 94.5 $3,571.1

5.77 1.23 3.37 4.69

Performance compared with medicine Table 4 shows that, from 1965 to 1985, the national expenditures for physicians’ services grew at virtually the same rate as ex p en d itu res for d e n tists’ services. Considering the significance of medical diseases, and the general impression that medical expenditures escalated sharply d u rin g th is p erio d , the co m p arab le growth of dental care is impressive. T h e 85% increase in the num ber of physicians during this period (1965 to 1985) was significantly greater than the 33% increase in the num ber of dentists. T he 34% reduction in the consumer to physician ratio had a dam pening effect on their average gross income (national expenditures for physicians’ services per physician). Gross income per physician increased by a factor of 5.27, substantially less than the com parable figure (7.28) for den tists. T h e in fla tio n -a d ju ste d increase of average gross incom e was 56% for physicians, compared with 116% for dentists (Table 3). These data show that economic growth in dentistry during the past 20 years was more significant than that experienced in medicine. Performance compared with the general economy Table 2 compares data on the value of all goods and services produced in the U nited States, Gross N ational Product (GNP), in 1965 and 1985. The economy grew by a factor of 5.77 during this period. Adjusting for population growth, there was a 369% increase in the per capita GNP between 1965 and 1985. However, after ad ju stm e n t for in fla tio n , there remains only a 39% increase in real per capita G N P d u rin g this period (Table 3). Clearly, the per capita growth of the American economy lagged behind that of d e n tistry d u rin g the same 20-year period. In summary, the economic performance of dentistry during the past 20 years was excellent. After adjusting for inflation, the average gross income of dentists grew m ore ra p id ly th a n the average gross income of physicians and per capita GNP for the econom y as a w hole. T h is is particularly significant in view of the lim ited n atu re of dental diseases, the decline in the incidence of caries, the lack of dental prepayment plans during m ost of this p erio d , and the increase in dental fees that closely parallels the

A R T I C L E S

increase seen in the Consumer Price Index (CPI) during this same period. T his evidence supports the notion that organized dentistry has been a productive and vigorously growing industry rather than a declining one, as some believe.6 Regional variations P ersonal incom e an d the presence of dental benefit plans are im portant deter­ m inants of dental utilization.11,12 These factors are related to the conditions of the region al an d n a tio n a l econom ies. As the economy grows, workers’ incomes and benefit packages im prove, leading to increased dem an d for d e n ta l care. C onversely, an econom ic c o n tra c tio n reduces dem and for d en tal care, even if the population size does not change. Studying regional variations in dental care utilization over time demonstrates this re la tio n s h ip . T h e state of the economy varies significantly in different areas. These variations have a differential effect on the dental behavior of the people in these areas an d , therefore, on the income of dentists. T ab le 5 p rovides estim ates of the grow th in gross incom e of dentists in various regions. T h e rates of g ro w th in different regions vary substantially. For example, from 1978 to 1981, the gross incom e of d en tists in New E n g la n d increased by 36.89%, in the West North Central area by 11.56%, and in the entire nation by 19.52%. T he variation was even greater for 1981 to 1984. When the entire co m p ariso n p e rio d (1978 to 1984) is considered, regional growth rates range from 51% to 133%. D u rin g sh o rt in te rv a ls, n e ith e r the dental needs of the population nor the num ber of dentists changes substantially. However, the state of the economy can change drastically and this can affect d en tal u tiliz a tio n , as show n by the doubling of the general growth rate of den tal u tiliz a tio n d u rin g the 1978-81 period (19.52%) and the 1981-84 period (41.37%). This, in turn, will be reflected in the rate of growth of real income for dentists. S im ilarly , re g io n a l econom ies can change significantly, as shown in Table 5. From 1978 to 1984, the gross income of dentists in New E ngland increased by 133.25%, but that of the dentists of the East North Central region increased by only 51.42%. T his is a good approx­ im ation of the differential increase in the utilization of dental services. T his is significant when considering that the

Table 3

■ Adjusted by the CPI, Gross National Product per capita and d en tis ts ’ and physicians’ gross income, 1965 and 1985.

D im ension N atio n al d en tists’ real e x p en d itu re p er dentist N atio n al p h y sician s’ real ex p en d itu re p er physician Real G N P per capita

1985

1965

1985/1965 ratio

$66,787

$30,865

2.16

$48,592 $5,255

$31,156 $3,780

1.56 1.39

Table 4

■ National health expenditure for physicians’ services and o th e r related dim ensions, 1965 and 1985.

D im ension N atio n al h ealth e xpenditure for p h y sicians’ services (billions) No. o i p h y sicians (thousands) E x p e n d itu res/p h y sician s (thousands) C o n su m ers/p hysician

1985

1965

1985/1965 ratio

$82.8 535.0 $154.8 445.4

$8.5 288.7 $29.4 670.2

9.74 1.85 5.27 0.66

Source: AMA, Health Care Financing Review 1986:8:13.

co n su m er to d e n tist ra tio for New England is 1,530:1 compared with 1,874:1 for the East North Central area13—22.48% more people per dentist in the East North Central area than in New England. T h e differences in g ro w th of gross incom e and u tiliz a tio n are neith er unusual nor unexpected in light of the economic status of each region. Relative to other regions, the New England area was b o o m in g econom ically, w ith low unemployment and rising wages, whereas the Midwest experienced losses in heavy industries and agriculture, resulting in u n em p lo y m en t and a general decline in econom ic activity. D espite a h ig h c o n s u m e r/d e n tist ra tio , den tal care slipped down the list of spending prior­ ities for many families in the Midwest, spreading the effects of economic reces­ sion to dentists in that part of the country. Table 6 summarizes the growth of the entire economy, as measured by changes in the GNP, the gross income of dentists, and the CPI for the same periods. Dentists did not do well between 1978 and 1981, as th e ir gross incom e increased only 19.52%, well below the increase in the CPI of 39.43% and the 35.69% grow th of the GNP. They regained these losses between 1981 and 1984, and for the entire 1978-84 p erio d , the gross incom e of dentists rose somewhat faster than either the GNP or the CPI. T h e data in T able 6 are significant co n sid e rin g th a t the p erio d for this co m p ariso n includes the severest eco­ n o m ic recession since the G reat

Depression. The performance of dentistry in New E n g la n d d u rin g the sam e perio d is perhaps more indicative of what dentistry can expect when the economy is more ro b u st. T h e statu s of the econom y, nationally and regionally, will be im por­ tant in determ ining the future economic health of dentistry. Outlook for the future T hree m ain factors w ill influence the future economic health of dentistry: the dental needs of the population, the state of the econom y, an d the n u m b er of practicing dentists. Predictions about the future of dentistry involve drawing inferences from the past performance of these three major factors. Dental needs of the population Som e factors a b o u t the fu tu re den tal needs of the US population are certain. The dem ographic characteristics of the p o pulation are changing as life expec­ tancy increases. A functional dentition will be necessary for a longer period. In addition, the nature of dental needs is ch a n g in g . A lth o u g h the d e c lin in g incidence of caries im plies a decreased dem and for treatm ent, it also im plies an increase in the num ber of teeth at risk for other dental diseases for the life span of the individual. M oreover, a d ­ vances in dental technology (for example, sealants an d esthetic resto ratio n ) and

Beazoglou-Guay-Heffley : ECONOMIC HEALTH OF DENTISTRY ■ 119

A R T IC L E S an increased desire for a healthy dentition should exp an d the dem and for dental services. 10 T h e d ifferen tial betw een the dental needs of the population and their u til­ iz a tio n of services w ill becom e m ore critical in the future, as the severity of d e n ta l diseases lessens. T h e average utilization rate of somewhat more than 55% can be improved, but this will require a d d itio n a l efforts to educate p atien ts and dentists. The dental needs of the US population may not follow the direction of caries, and m any signs p o in t in the opposite direction. It is clear that the future mix of services provided to the public will be different from the current mix. State of the economy T he dental needs of the US population are but one of the determ inants of the demand for dental care. T he state of the economy, which influences the incomes and dental insurance coverage of in d i­ viduals, also is im portant in determining the dem and for dental services. In the long ru n , the econom y is expected to perform as it has in the past 10 or 20 years, a period th a t can n o t be charac­ terized as one of e x tra o rd in a ry real economic growth.

Tem porary national economic dow n­ turn s, like those th at occurred in the early 1970s and 1980s, and reg io n a l v a ria tio n s in econom ic gro w th w ill co n tin u e to influence the dem and for d ental services and the gross incom es of dentists. However, there is little reason to expect that future fluctuations in the national economy or in specific regional economies will be more frequent than in the last 2 decades. Number of practicing dentists T he outlook for growth of dentists’ gross income, from the point of view of the num ber of practicing dentists, appears even brighter than the anticipated steady dem and for dental services. First, the d e n ta l w ork force has n o t increased significantly in the last 20 years, especially w hen the grow th of the general p o p ­ ulation is considered. More importantly, the grow th in the num ber of dentists is expected to decrease. First-year dental school class enrollm ent has been reduced from a peak of 6,300 students in 1978, to 4,500 students in 1986. In 1987, 4,300 first-year students were admitted, fewer than in the first-year class size in 1970. T his decline is expected to continue.14 T he reduction in the size of the dental school applicant pool is more dramatic

Table 5

■ Regional gro w th rates of gross incom e from private practice, during selected periods. P ercent increase between R egion New E n g lan d M id A tlantic S o u th A tlantic East N o rth C entral East S outh C entral W est N o rth C entral W est S o u th C entral M o u n tain Pacific U n ited States

1978-81

1981-84

1978-84

36.89 25.45 17.49 12.24 18.39 11.56 19.13 15.92 22.00 19.52

70.39 47.02 45.71 34.91 28.56 40.55 42.97 30.63 39.07 41.37

133.25 82.96 71.19 51.42 52.20 56.79 70.33 51.42 69.66 68.95

Source: ADA surveys of dental practices of 1979, 1982, and 1985.

Table

6 ■ Rates o f change in GNP, d en tis ts ’ gross income, and CPI for selected periods. D im ensions C h an g e in G N P (%) C hange in gross incom e per de n tist (%) C hange in C P I (%) Source: Social Security B u lle tin 1986;49:78-80.

120 ■ JADA, Vol. 119, July 1989

1978-81

1981-84

1978-84

35.69

23.34

67.36

19.52 39.43

41.37 12.96

68.96 57.50

than the reduction in the size of the firstyear classes. T here were about 15,000 applicants to dental schools in 1976 and 5,500 applicants in 1986.5 It is expected that this decrease will continue. Implications for the dental benefit plan industry Some of the tax incentives for employees to receive compensation in the form of medical and dental benefit plans, rather than wages, have been reduced. Unless previous tax incentives are restored or new ones are introduced, it is unlikely that conventional dental insurance will continue to grow as rapidly as it has in the past. Alternative delivery systems and financing arrangem ents may con­ tinue to grow, but only where they can successfully compete with fee-for-service plans. It appears that these plans have made the greatest inroads in economically distressed areas. Lower work force costs, com bined w ith the a b ility to restrain utilization and substitute low-cost for hig h -co st services has allow ed these systems to respond to the cost-cutting desires of employers in these areas.15 If the demand for dental care continues to grow and the num ber of practicing dentists declines, or even remains stable, there will be lim ited opportunities for designers and adm inistrators of dental benefit plans to exert m arket pressure on dentists and for alternative delivery systems to compete with fee-for-service plans. Prom oters of alternative benefit plans will have difficulty in recruiting adequate numbers of qualified dentists for p la n s th a t req u ire the dentists to make economic compromises in exchange for patient referrals. Retail and franchise dental clinics will have to offer better compensation to the dentists they employ, or accept less qualified dentists. Even newly graduated dentists w ill be better able to resist d iffic u lt c o n tra c tu a l arrangements. In regions w here the econom y is depressed, opportunities for the devel­ opm ent of alternative delivery systems and financing arrangements may persist. It would be a mistake, however, to assume th at these altern ativ e systems w ill be able to compete as successfully in other parts of the country. Conclusions It probably is not comforting to a dentist in a distressed regional economy to hear th a t c o u n te rp arts in o th er regions of

A R T IC L E S

the country are enjoying high earnings and relatively full employment; nor is it co m fo rtin g for such in d iv id u als to know that regional economies fluctuate over time and that conditions are likely to improve at some point in the future. Yet, in fo rm u la tin g p rofessional or national public policies, it is essential that some attem pt be made to distinguish between regional and national patterns of econom ic perform ance. U sing data from ADA surveys of practicing dentists and from o th e r sta n d a rd sources, a glim pse of the econom ic perform ance of the dental profession over tim e has been provided, in relatio n to the p e r­ formance of physicians and the general economy, and by region of the country. T he evidence suggests that dentistry is d o ing better now than in the past, and the future looks brighter. In addition, it shows that, although dentists in some regions have experienced m uch slower rates of growth in real gross income than in other regions, the overall economic p erform an ce of the d en tal profession has been significantly better than that of physicians or the economy as a whole. In short, generalizations about the decline of dentistry as a viable and rew arding profession are not supported by available economic facts. Moreover, given certain foreseeable events on both the supply and demand sides of the dental services

market, it seems likely that dentists will have am ple o p p o rtu n itie s to practice their profession and will be well rewarded for their skills. ----------------------JiAOA ---------------------T h e a u th o rs th a n k Ms. L isa Strelez for research assistance an d Dr. Kent N ash, director, ADA Bureau of E co n o m ic an d B ehavioral R esearch, for helpful com m ents. T h is research w as s u p p o rte d by g ra n t no. 9031 from th e R o b ert W ood Jo h n so n F oundation.

Dr. B eazoglou is a ssistan t professor, d e p artm e n t of b e h a v io ra l sc ie n c e s a n d c o m m u n ity h e a lth , U n iv e rsity o f C o n n e c tic u t H e a lth C en ter, S chool o f D e n ta l M ed ic in e , F a rm in g to n , C T 06032. D r. G uay is form er c h airm a n , C ouncil o n D ental Care Program s, A m erican D ental A ssociation, and assistant professor, d e p a rtm e n t of o rth o d o n tics, T u fts U n i­ v e rs ity . D r. H e ffle y is p ro f e s s o r , d e p a r tm e n t of econom ics a t the U niversity of C onnecticut. Address requests for re p rin ts to Dr. Beazoglou.

1. G re e n e R. W h a t’s g o o d fo r A m e ric a is n ’t necessarily good for the dentists. Forbes 1984; 8:7984. 2. H e in JW . In m y o p in io n . T h e f u tu r e of d e n tistry —especially dental education. J D ent Educ 1986;50:162-6. 3. C o u n c il o n D e n ta l E d u c a tio n . S u p p le m e n t 11 to th e A n n u a l R e p o rt 85/86 D ental E ducation. C hicago; A m erican D ental A ssociation, 1986. 4. D ouglass CW. A b rig h ter o u tlook. D ent Econ 1986;76:41-58. 5. F reid so n E. T h e fu tu re of th e p ro fessio n s. J D ent E duc 1987;51:140-4.

6. G otow ka TD . E conom ic g ro w th of the dental profession: co m p ariso n s w ith o th e r h e a lth sectors. JAD A 1985;110:179-87. 7. O w en D. T h e secret lives of dentists. H a rp e r’s 1982; Mar: 12-52. 8. W ilhelm s K. T h e future of d e ntistry—a favorable prognosis. C onn D ent S tu d en t J 1987;7:3. 9. K ennedy JE. T h e case of dentistry, a h arb in g er for the profession? J D ent E duc 1987;51:145-8. 10. B ailit H L. E n v iro n m en tal issues in dentistry: re flections o n the p ractice of d e n tistry in the 21st century. PEW N atio n al D ental E ducation P rogram , 1987. 11. H ix so n JS. Research o n the dem and for dental services. In: B row n L J, W inslow JE, eds. Proceedings o f a c o n fe re n c e o n m o d e lin g te c h n iq u e s a n d a p p lic a tio n s in dentistry. U S D ep artm en t of H e alth a n d H u m a n Services, 1981. 12. H u n t N, Silverm an HA. U se of d e ntal services in 1980. H e alth Care F inanc Rev 1987;9:31-42. 13. B ureau of E conom ic an d B ehavioral Research. D is tr ib u tio n o f d e n tis ts in th e U n ite d S ta te s by re g io n a n d state. C hicago: A m erican D e n tal A sso­ c iation, 1982. 14. S o lo m o n ES. D e n tis ts a n d d e n tis t- to p o p u la tio n ra tio s 1985-2020. M a n p o w e r p ro je c t. W a sh in g to n , DC: A m erican A ssociation of D ental Schools, 1988. 15. Beazoglou T , G uay A, Heffley D. C ap itatio n a n d fe e -fo r-se rv ic e p la n s : e c o n o m ic in c e n tiv e s , u tiliz a tio n a n d s erv ice -m ix . JA D A 1988; 116:4837. 16. B ureau of E conom ic an d B ehavioral Research. T h e 1985 survey of d e ntal practice. C hicago: A m erican D ental A ssociation, 1985. 17. B ureau of E conom ic an d B ehavioral Research. T h e 1982 survey o f dental practice. C hicago: A m erican D ental A ssociation, 1982. 18. B ureau of E conom ic an d B ehavioral Research. T h e 1979 survey o f dental practice. C hicago: A m erican D ental A ssociation, 1979.

Self-Assessment Questions 1. C o n sid e rin g the re d u c tio n in the incidence of dental caries in the last 2 decades it is safe to say that during this period: a) the average gross incom e of dentists declined b) the average real gross incom e of dentists declined c) the value of d en tal services utilized per person declined d) none of the above 2. D u rin g the 1965-85 p erio d , the average gross incom e per d en tist increased at a rate higher than that of: a) physicians’ gross income b) Gross National Product c) Consumer Price Index d) all of the above

3. T h e econom ic prospects for the dental profession appear to be: a) worse than the past b) worse than the present c) brighter than ever d) worse than that of the medical profession 4. T he short-term fluctuations in the use of dental services at the national or regional level will depend on: a) the population growth b) the introduction of alternative delivery plans c) the grow th in the n um ber of dentists d) the state of the n a tio n a l or regional economies

5. T he rate of growth in the of practicing dentists in the years: a) was greater th an th a t number of physicians b) was less than that in the population c) was a bit higher th an the population d) none of the above

number last 20 in the general th a t in

Answers are found in the People 8c Meetings section.

Beazoglou-Guay-Heffley : ECONOMIC HEALTH OF DENTISTRY ■ 121