Key Issues
Insurance reimbursements remained stagnant despite higher operating costs for dental practices
According to an August poll by the American Dental Association's Health Policy Institute, insurance reimbursements have not risen for the majority of dentists, despite rising costs. The Health Policy Institute surveyed about 1,200 dentists on their operating expenses and found they have reported increased costs for supplies, staff wages, PPE, equipment and rent to name a few. Nearly one-third of dentists (31%) indicated that PPE prices have increased by more than 20% and around 26% indicated that supplies and materials prices went up by at least 20% in the past year.
According to the poll results, the insurance industry is yet to respond to increased operating costs for dentists. Nearly 60% of dentists responded that rates have remained stagnant, 25% indicate their rates have decreased and only 7% of dentists reported getting an increase in insurance reimbursement in the past year. The ADA provides a guide to help dentists engage with third-party payers on contract negotiations, which can help curb rising costs.
Key Issues (continued)
ADA backs Education Department student loan initiative, urges more incentives to train more hygienists, assistants
The American Dental Association issued comments applauding an Education Department proposal to eliminate interest capitalization on certain federal student loans and reform the Public Service Loan Forgiveness program. According to the comments, federal student loans are sometimes subject to interest capitalization, which can add tens of thousands of dollars to a new dentist's educational debt. This interest is triggered by designated "capitalizing events" that can cause a borrower's accrued, unpaid interest to become part of the principal balance, often without their knowledge and eliminating this and other capitalizing events could be a benefit to dental and medical residents. Becker's Dental Review compared Dental school debt vs. medical school debt, and found that the average debt for a dental student was $292,169 in 2019 while medical students owed about $215,900 in 2018, the last year data was available.
In a separate letter, issued Sept. 6, to the Health Resources and Services Administration (HRSA), the ADA supported Title VII education grants and encouraged the agency to prioritize training programs for hygienists and assistants. The ADA currently runs a campaign to improve oral health in America, which looks to address the 181 million U.S. citizens who do not visit the dentist, as well as the nearly 50% of all people over the age of 30 who are suffering from some form of gum disease. The plan includes providing more Community Dental Health Coordinators in order to address barriers to effective oral health care in underserved areas. Improving training programs for hygienists and assistants can also be part of the solution. As was noted in previous editions of the Benesch DSO report, staffing shortages in dentistry, particularly among hygienists and assistants is one of the main issues in preventing practices from meeting patient demand, and according to the ADA and the Health Policy Institute, a pandemic-related decline in enrollment has not improved in the 2021-22 enrollment year.
Sources: American Dental Association, Dental Economics, Health Policy Institute
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Dental Support Organization News
Pacific Dental partners with Epic to install EHR across network of 900 practices
Pacific Dental Services, one of the largest DSOs in the U.S., partnered with Epic to install electronic health records across almost 900 dental practices in its network. Pacific Dental spent two years converting 9.7 million patient records from legacy software to Epic and trained 13,000 team members and clinicians with the new system. The first Pacific Dental practice went live with Epic in April, and now the system is live across all the DSO's locations. Pacific Dental also helped optimize Epic's dental module, Wisdom, so dental records could more easily integrate into the patient's overall health records and treatment plans.
Source: Pacific Dental Services on August 24, 2022
Smile Generation Serve Day has record year, with $7.6M in donated dental services from Pacific Dental Services-supported practices
In August, Pacific Dental Services (PDS) partnered with Smile Generation to take part in the 12th annual Smile Generation Serve Day, a day of service and nationwide campaign of giving that focuses on providing donated dentistry to underserved patients. The collective efforts of PDS-supported clinicians and team members said a record $7.6 million was donated in dental services, while PDS team members provided over 55,000 hours of service to their local communities. Since its inception in 2011, more than 24,000 patients have received donated dentistry during Smile Generation Serve Day, totaling more than $46.8 million in donated oral healthcare.
Source: Pacific Dental Services on September 2, 2022
SmileDirectClub appoints Alex Dimitrief and Linda Williams to Board of Directors
SmileDirectClub appointed Alex Dimitrief and Linda Williams as independent directors on its Board of Directors. Dimitrief is an experienced director and C-suite leader with a track record of steering global businesses through a wide range of challenges. Williams is an executive who brings business, regulatory, and information security experience in the healthcare and insurance industries. Mr. Dimitrief will join the Audit Committee and the Nominating and Corporate Governance Committee and Ms. Williams will join the Audit Committee of the SmileDirectClub Board of Directors. Following these appointments, SmileDirectClub's Board will be comprised of nine directors, four of whom will be independent.
Mergers & Acquisitions
Sentinel exits Altima Dental via merger with 123Dentist
Sentinel Capital Partners, a private equity firm that invests in promising companies at the lower end of the middle market, closed the merger of its portfolio company, Altima Dental, with 123Dentist, a DSO based in Vancouver, to create one of the largest DSOs in Canada. The transaction was financed through equity capital provided by 123Dentist's existing private equity sponsor, Peloton Capital Management, and new investors KKR, a leading global investment firm, and Heartland Dental, a KKR portfolio company and the leading dental support organization in the U.S. Sentinel will retain a minority equity stake in the combined company. Terms of the deal were not disclosed.
Source: Sentinel Capital Partners on August 15, 2022
Private Equity
Silver Oak's Smile Partners USA reportedly hits the auction block
Silver Oak Services Partners-backed DSO Smile Partners USA is up for sale through Piper Sandler. Dental is a well-utilized space for private equity but it remains fragmented, and Smile Partners' emphasis on physician alignment differentiates the company, according to Axios. The company is marketing $175 million-plus revenue and $40 million-plus EBITDA for 2022, accounting for its near-term M&A pipeline. The company encompasses 90-plus clinic locations including 15 under LOI and is a physician-led platform. The DSO has a relatively large doctor-equity ownership model through which a large portion of dentists that join Smile roll equity into the parent company. PE-backed physician practice management groups are increasingly trending towards higher doctor compensation and equity models as specialists call for greater autonomy, both clinically and economically.
Sources: Axios on August 26, 2022
Great Lakes Dental Partners expands in Ill. with Signature Dental Group affiliation
Great Lakes Dental Partners (GLDP) added Signature Dental Group to its network of affiliated practices, growing its reach in the greater Chicagoland area. GLDP, a Shore Capital Partners portfolio company, provides practice management services to 40+ partner locations. GLDP is actively seeking dental office partnerships in the Midwest and is backed by Shore Capital Partners. Ideal affiliation opportunities include owner doctors who want to partner with functional experts to grow their practices.
Innovation & Future of Dental
SmileDirectClub introduces second generation retainer manufacturing technology
SmileDirectClub transitioned to its second-generation retainer manufacturing technology in the Company's FDA-registered Smile Labs based in Antioch, Tennessee. The company's upgraded retainer manufacturing lines feature laser technology and automations that produce its Comfort Sense aligners. The technology allows it to manufacture automations that will continue to increase the Company's efficiency and productivity. The technology will allow it to produce twice as many aligners and retainers with approximately 1/3 of the manpower, increasing productivity by 225%, according to the company.
Sources: SmileDirectClub on September 6, 2022
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