Andy Acton shares his thoughts on the increasing costs of dental practices.
Last week Bupa announced they are closing, selling or merging 85 dental practices in the UK.
So is this an isolated incident or a wider issue affecting corporate dentistry in the UK?
Recruitment is a well-known issue not just affecting dentistry, many sectors are struggling to find the skilled necessary team needed to deliver a high-quality service. This recruitment issue covers associate dentists, through to nurses and the non-clinical support team.
Very few dental practices are immune to this, and the corporates, by the very nature of how many practices they own, are affected to a greater extent.
Rural areas are taking the brunt of the recruitment impact. Many of the practices identified by Bupa would be candidates for being affected by this issue due to their location. I’ve advised various corporate clients on their portfolios, and the location of the practices is a key consideration as to their suitability.
As a service industry, not having the necessary qualified team directly compromises the ability of that business to perform.
Where independently owned dental practices have the principal on-site, this very present leadership tends to create a strong positive culture which in turn means there is less of a churn of team members. Furthermore, it can help with recruitment for the same reason.
We have all experienced a rise in the cost of living in the past couple of years, with food, utilities and travel all significantly higher. This has been felt by businesses too.
From a business perspective, these increased costs have a direct impact on profit margins - meaning the business will be less profitable.
These increased costs can be mitigated through increasing patient charges. However, where a practice is heavily reliant on an NHS contract for their income, this option is not available.
However, where there is a combination of surgery capacity, available clinicians and a demand for private dentistry, these increased costs can be mitigated through the delivery of additional dentistry. For many of the Bupa practices identified, it might be that this combination does not exist.
Any well-managed business should constantly review its performance and adjust accordingly. Bupa has nearly 500 dental practices and is adjusting its portfolio to the tune of 85 practices which is nearly 20 per cent, broadly in line with Pareto’s 80/20 rule.
Maintaining profitability is a challenge for many businesses at the moment. It is arguably easier for owner-managed practices as they have the flexibility to manage the reliance on associates to maintain or boost profitability through delivering a higher personal gross. Corporations are under profit margin pressures, coupled with recruitment issues and constant scrutiny from investors and funders.
It may well be that we see more consolidation across corporate dentistry, but we shouldn’t conclude from this that UK dentistry is in trouble. It is more about the sector just realigning itself to suit the current market conditions, which will create opportunities for independent owners.