Australasian Dental Practice

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31 Mar 2013 | Australasian Dental Practice

news > Spectrum > Page 40

Dentists facing economic uncertainty

Marketing Practice Management

Thousands of Australian dental practices are facing uncertain futures as practice owners are forced to deal with the perfect storm of financial challenges that will put downward pressure on practice profitability and value.


CDDS and Teen Dental

CEO of smile.com.au, Dion Kramer, said the anticipated 20% revenue bite to practices caused by closure of the $1 billion-a-year Chronic Disease Dental Scheme (CDDS) and the upcoming closure of the Medicare Teen Dental Plan on the back of the Global Financial Crisis (GFC) was just the tip of the iceberg, with several unprecedented challenges looming.

"Analysts predict there will be horrific times ahead for practice owners as they face challenges never seen before in the dental industry at a time when revenues are already down due to the GFC," Mr Kramer said.

"Anyone that keeps up-to-date with opinion polls would certainly not be relying on Labor's new dental plan to save the day in 18 months' time, especially given December Newspoll results1 that revealed Labor's primary vote had dipped to a six month low of 32 per cent."

Add to that the fact that in 2008, Labor proposed the Commonwealth Dental Health Program which it never delivered. This program promised funding for one million services.2

Insured numbers declining

Mr Kramer said the majority of mainstream media, including The Australian predicted a mass exodus from health insurance commencing in July 2013 as health insurance premiums fall due.

"According to media reports,3 more than 160,000 people prepaid health insurance this year in a bid to beat means testing which would have slashed their 30 per cent health insurance subsidy," he said.

"Means testing makes health insurance more expensive for around 2.4 million Australians and its anticipated when the next round of premiums fall due, many of these people will either downgrade or abandon their health insurance."

These predictions follow Opposition Leader Tony Abbott's announcement to Parliament that about six million Australians would downgrade or abandon their health insurance as a result of the means test.

"The Government's recent announcement of an expected five per cent premium hike looks set to make the likelihood of a health insurance exodus even more of a certainty," Mr Kramer said.

"For dentists, this means many patients will put off treatment as it will no longer be covered by their health fund. This will have an immediate impact on dental revenues when many practices are still suffering the consequences of the closure of the CDDS and Teen Dental Plan," Mr Kramer said.

Dental graduates doubling

Further adding to challenges is the emerging oversupply of new dentists in 2014, at a time when many practices will need to fill appointment books.

"In 2007 the Australian Government announced the establishment of three new dental schools. The first round of graduations will occur in 2014 which will see the number of dentist graduates in Australia more than double to 500 shortly,"he said.

"The Australian Government Dentist Labour Force Projections paper4 predicts this dramatic increase in dentist graduates will result in the number of participating dentists in Australia increasing by almost half (49.4%) to over 15,000 by 2020."

Dental tourism soaring

Despite an emerging oversupply of dentists, the ADA predicts 'dental tourism' to remain a problem, having recently released a public statement outlining concerns about its increasing prevalence.5 The paper follows a media article6 that revealed in Thailand alone the number of 'medical tourists' visiting from 2002 to 2011 had increased from 600,000 to 1.6 million.

"According to the ADA, overseas clinics are offering savings of up to 60 per cent at 'top-notch' international hospitals which seems very attractive to many people and is predicted to grow in popularity," Mr Kramer said.

"What this means is that not only are dentists competing for patients with other dentists, but also overseas clinics that are spending up big to lure Aussies with the promise of substantial savings."

Dental consolidators growing aggressively

The aggressive growth plans of dental consolidators in Australia is also tipped to impact independent dentists as corporates increasingly become involved in the dental profession and implement cost cutting measures and clever marketing campaigns.

Mr Kramer said with practice values dropping and financial strain increasing among practice owners, it was increasingly likely dental consolidators would move in next door and be a fierce competitor with more buying power, clever marketing strategies and payment plans for patients.

"Comments from 1300 Smiles about their plentiful cash reserves and rapid acquisition plans certainly indicate consolidators are ready to make the most of a tumultuous situation," he said.

Insurers becoming competitors - not partners

The risks associated with an increase in dental consolidators looks set to worsen as insurance companies enter the consolidation market. In December, insurance giant Bupa announced its plan to acquire Dental Corporation, therefore taking control of more than 190 practices across Australia.

This figure is in addition to other insurance companies such as Manchester Unity and nib offering dental services through company owned facilities at an increasing rate.

"Pacific Smiles and nib have entered an alliance, therefore dentists that are nib providers are in fact lining the pockets of a major dental consolidator," Mr Kramer said.

"There is no doubt insurers are emerging as a major competitor and are clearly no longer a partner for dentists, which forward thinking dentists are fast discovering.

"Smile is committed to being a trusted partner for all of our participating dentists as we strive to connect an ever increasing number of dentists with patients."

What are you going to do?

Mr Kramer said practice owners would be wise to implement marketing and patient retention strategies before feeling the full effects of the upcoming challenges.

"Unfortunately the days of practice owners being able to rely on a Yellow Pages advertisement and sheer luck are over and we're about to see a dramatic shift in the dental landscape," he said.

"I would urge practice owners to think carefully about the challenges that lay ahead and ways to move with the times if they are to remain competitive.

"Smile works to bridge the gap between dentists and patients and welcomes applications from dentists interested in exclusively servicing their area and attracting Smile members," he said.

References

  1. The Australian, Labor ends year behind as run stall, December 11, 2012.
  2. Federal MP, Jane Prentice, address to Federal Parliament, 21 September, 2012.
  3. The Sydney Morning Herald, Poll Position, September 5, 2012.
  4. The Aust. Inst. of Health and Welfare, Dentist labour force projections, 2005-2020.
  5. ADA, 'Overseas dental holidays fraught with risk warns ADA, October 11, 2012.
  6. Sydney Morning Herald, 'Smile, you're in Bangkok,' December 10, 2011.
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