Dental Practices

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 122,700 dental practices in the US are in the business of providing “oral health,” including hygiene or preventative care, restorative treatments, and oral surgery. 78% of dentists are in general dentistry, while orthodontists represent 5% and oral surgeons and pediatric dentists each represent 4%. The rest are specialty practices, such endodontists or periodontists. About half of dentists are in solo practices.

Weak Economy Lowers Demand

Demand for dental services had been thought to be “recession-proof,” but the past recession and recent pandemic saw a drop in dental appointments and billings.

New Treatment Technologies

Technological advances continue to increase quality, enhance patient comfort, and speed the delivery of dental treatments.

Industry size & Structure

The average dental practice employs about 8-9 workers and generates about $1 million in annual revenue.

    • There are about 122,700 dental practices in the US that employ 1,027,000 workers and generate annual revenue of $158 billion.
    • Dentists must be licensed by their State to practice. This requires a bachelor's degree, 4 years of dental school, and passing written and practical exams. Specialty licenses typically require another 2-4 years of postgraduate education and up to 2 years of a residency program. These licensing requirements create a significant barrier to entry for the industry.
    • 78% of dentists are in general dentistry. Orthodontists represent 5% and oral surgeons and pediatric dentists each represent 4%, with the rest in other specialties (endodontists, periodontists, etc.).
    • The average practice has 1-2 dentists and about 2 dental hygienists and 3 dental assistants for each dentist.
                                Industry Forecast
                                Dental Practices Industry Growth
                                Source: Vertical IQ and Inforum

                                Recent Developments

                                Jun 15, 2024 - Labor Costs Increase Slightly
                                • Dental practice employment and average wages for nonsupervisory employees increased slightly during the first four months of 2024, according to the US Bureau of Labor Statistics (BLS). Dental Practices slightly raised their prices during the first four months of 2024, according to the BLS. Dental practice sales are projected to grow at a compound annual growth rate of 4.4% from 2021 to 2031, faster than the growth of the overall economy, according to the Centers for Medicare and Medicaid Services.
                                • Fewer than half of Medicare beneficiaries see a dentist each year, according to Lisa Simon, M.D., D.M.D., an associate physician at Brigham and Women’s Hospital in Boston, MA. Medicare beneficiaries spend more than $1,000 out-of-pocket on their care when they do see a dentist. Patients delay dental care due to cost more than any other healthcare service, according to Simon. The Congressional Budget Office estimated that a universal Medicare dental benefit would cost $23.8 billion per year, less than the cost to Medicare of the single discontinued Alzheimer’s drug Aduhelm (aducanumab), according to Simon. She noted that Medicare has been barred from providing a dental benefit since 1965, causing substantial harms to seniors and people with disabilities.
                                • The dental industry is approaching the apex of the consolidation curve, according to Harvard Business Review (HBR). The apex is reached when organizations scale up through mergers and acquisition (M&A) and major players emerge. Many high-value practices have already been acquired. There will always be practices available for purchase but practice availability won't meet investors' appetite for acquisitions in the coming years, according to HBR. Affordable capital also plays a role in consolidation. Free-flowing capital helped drive the pace of M&A in the dental sector, and many investors took a hands-off approach to acquired practices, focusing on M&A to drive growth. Industry players are now looking for new growth vectors because interest rates are up and inventory is shrinking. Even if interest rates decrease, increased competition for practices raises the multiples (estimate of practice value) on a per-practice basis. That in turn increases the pressure on PE to find new ways to grow to reconcile financial outcomes and debt.
                                • The top challenges facing dental practices in 2024 include staffing shortages, insurance issues, and rising overhead costs, according to the Health Policy Institute at the American Dental Association. Low-concern issues are patient payment, competition with other practices, and remaining out of network. Major trends on the patient side for the next several years are shifting practice models, shifting patient expectations, and the artificial intelligence (AI) technology revolution.
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