As a dentist, you know that staying stocked up on dental supplies is essential to providing high-quality care for your patients. But how do you get a return on your investment when the cost of operating a dental practice is skyrocketing?
From dental instruments and materials to lab equipment and disposables, these supplies can be expensive, and their prices seem to be increasing year after year. So, why are dental supply prices so high, and how can your practice combat them?
Firstly, the supply chain of pretty much everything felt the effect of the pandemic, especially PPE. It seems to be stable now, but at a cost. As inflation continues to rise, many industries are feeling the impact on their supply chain costs, including the dental industry.
The price of dental supplies has been steadily increasing, making it difficult for dental practices to maintain profitability while providing quality care to patients. This has ultimately led to most practices raising the prices for their services, which can have a huge impact on your patient intake.
Inflation is a term used to describe the increase in the price of goods and services over time. It is typically measured by the Consumer Price Index (CPI), which is a basket of goods and services that reflects the average household’s consumption patterns. Inflation occurs when the demand for goods and services exceeds the supply, causing prices to rise.
In January 2022, the annual inflation rate in the US rose to 7.5%, the highest since February of 1982.
Rising Costs of Running a Dental Practice with Inflation
With inflation on the rise, the costs of running a dental practice are also increasing.
Factor in the cost of dental equipment, supplies, and labor, which has risen significantly over the past few years. The cost of dental equipment, such as X-ray machines and dental chairs, has increased due to higher manufacturing costs, while the cost of dental supplies, such as dental implants and Impression materials, has increased due to higher raw material costs.
The process of manufacturing dental supplies can be expensive, especially for products that require specialized materials or equipment.
According to a November 2021 article from the New York State Dental Association, pre-pandemic dental practices were spending an average of 5.5% of revenue on supplies. A year after the pandemic began, that cost rose to 8-9%.
Although PPE supply chains have improved, it’s unlikely that the prices will revert back to what they were pre-pandemic. Your office has probably also had to invest in extra safety measures such as hand sanitizer, plexiglass dividers, and disposable masks for patients.
Dental supply companies invest a significant amount of money in research, development, and testing before a new product is ready to be brought to market. These costs are often passed on to the consumer in the form of higher prices. Distributing dental supplies also requires a complex supply chain, involving shipping and handling, warehousing, and logistics. These costs can also add to the price of dental supplies.
Additionally, the cost of labor has also increased due to higher wages and benefits.
Inflation on Dental Employees
Your staff members are also feeling the pressure of inflation. The cost of living has skyrocketed, and it’s up to you to figure out how to keep your employees happy while also being able to pay yourself.
As you increase your employees wages, you will increase your payroll tax expense as well. CPA David J. Goodman recommends you increase fees for patient services by about 4-5%. Even if your practice is insurance-based, the increase in the UCR (usual, customary and reasonable) charges will put an insurance provider on notice that fees are increasing in your area.
“If fee for service rates are submitted when billing the insurance company, renegotiation of reimbursement rates are then more compelling. We understand this may require more recordkeeping when adjusting for insurance reimbursement, but we believe it is better than having to work more or make less,” Goodman wrote in an article for PKF O’Connor Davies.
The ADA says more dentists are reporting that recruitment of hygienists is very challenging in March 2023 compared to a year ago.
Inflation Impact on Patients
With the cost of living on the rise, patients are less likely to invest in dental care.
According to a March 2023 report from the American Dental Association (ADA), patient no-shows and late cancellations remained the most common factor for unfilled schedules.
ADA reports that while patient count is slightly down, dental schedules still remain steady for 2023. Dentist’s schedules were 86% full on average in the month of March.
The Health Policy Institute of the ADA asked 1,049 dentists how confident they were in the recovery of the dental care sector in general, to which 13% responded very confident, 44% said they were somewhat confident, 22% were neutral, 17% were somewhat skeptical, and the rest were very skeptical.
According to Goodman, the median dental practice overhead is 75% of collections. Meaning that if a practice collections $1 million, it will only provide $250,000 for owners.
If you have too many cancellations or no shows, you’re losing money. Even when a patient doesn’t show up, you still have to pay rent, utilities, and your employee’s wages. One way you can combat this is to educate your patients on the importance of their treatment and what could happen if they don’t receive the treatment. Also keep a running list of patients who are available on short notice, that way you can ask if they’d like to fill an open spot.
So, as a dentist, how can you combat these high prices?
While it’s not ideal to have to raise the prices for your services, realistically you may have to make that choice in order to stay afloat.
Raising fees may be necessary to offset the rising costs of running your dental practice. Be sure to communicate any fee increases to your patients and provide them with a clear explanation of why the increase is necessary. Remain transparent with your patients about why your prices are increasing, and ensure them that they’ll still get the same quality of care.
It’s also beneficial to promote preventive care to your patients. Investing in preventive care can help you reduce the overall cost of care for your patients. By promoting preventive care, you can help your patients avoid costly dental procedures, which can help reduce the overall cost of care.
Negotiate with Suppliers
After consulting with your financial advisor (we recommend you get one), you can start navigating the marketplace to begin implementing cost-saving measures.
This can include negotiating with suppliers to receive better prices or discounts, purchasing supplies in bulk to take advantage of bulk pricing, and exploring alternative suppliers who may offer lower prices. Additionally, you can invest in newer, more efficient equipment like intraoral scanners that can reduce the need for expensive supplies like impression materials.
As a regular customer, you may be able to negotiate better prices with your suppliers. You can try to negotiate better deals on larger purchases or ask for discounts on products that you use frequently.
If negotiating isn’t your strong point, look into a dental group purchasing organization (GPO). They can negotiate and get you the best prices on equipment and products you already need.
Consider Alternative Products
Shop before you buy.
Don’t be afraid to shop around and compare prices from different suppliers. You may find that some suppliers offer better prices than others.
There may be alternative products or materials that are just as effective but cost less. Be open to trying new products or materials that may offer cost savings without sacrificing quality.
It is also important for dentists to stay up-to-date on the latest trends and technologies in the industry. By staying informed, dentists can make informed decisions about which supplies and equipment are necessary for providing quality care to patients, while also being mindful of cost.
Continue to look for ways to improve the efficiency of your practice. For example, you could implement new technologies, such as software to manage your purchasing across all vendors.
Keeping close tabs on your inventory can help you avoid overstocking on expensive products or materials that you may not need right away. This can help you manage your costs more effectively.
It’s noted that the dental industry standard for the cost of supplies as a percentage of collections is around 5-8%. Goodman says that practices with a higher percentage should review their purchasing, inventory, and supply usage for inefficiencies. Even a 1% decrease can save your practice thousands of dollars.
Additionally, you can train your staff on proper handling and disposal of supplies to reduce waste and prevent unnecessary expenditures. However, if there are supplies you know are a daily necessity, you could increase that inventory to assure you will have it on hand if it becomes hard to come by.
Consider Group Purchasing
Joining a group purchasing organization (GPO) can help you leverage your buying power to negotiate better prices with suppliers.
GPOs combine the purchasing power of different practices to negotiate better prices. These costs are usually not attainable by a majority of independent practices.
These organizations work with dental practices to identify their specific needs and develop customized solutions that meet their unique requirements. This can help your practice optimize your purchasing and supply chain management processes and improve efficiency and profitability.
SourceClub is a dental GPO that offers clients a subscription-based pricing model with no hidden commissions or continual up-charges. With this flat rate subscription model, SourceClub is able to deliver their dental office members the best prices possible, regardless of their size.
Don’t Let Inflation Bring You Down
Inflation is a significant factor that affects the costs of running a dental practice. As inflation continues to rise, it’s essential to evaluate your practice expenses, increase fees if necessary, improve efficiency, and invest in preventive care.
While our economy continues to recover from the pandemic, let our team of experts at SourceClub help you combat the rising costs of the dental supplies you need without breaking the bank. With our purchasing power we guarantee the best prices on high quality products.
Click here for more tips on how your dental practice can save money.