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Corporately run chains a growing dentistry trend

Dentistry has gone corporate.

"For the single guy on the corner it's going to be very difficult to compete any more," dentist Robert Gherardi, says.  (Dean Hanson/Albuquerque Journal)

“For the single guy on the corner it’s going to be very difficult to compete any more,” dentist Robert Gherardi, says. (Dean Hanson/Albuquerque Journal)

Instead of hanging out their shingles and building practices or working under an established dentist and eventually becoming a partner, dental-school graduates are increasingly opting to work for corporately run chains, according to studies by the American Dental Association.

Key factors driving the trend: Soaring student debt levels; the proliferation of increasingly costly dental technology; and the need for mobility options among two-income couples, according to an American Dental Association study.

Corporate dental operations often are better able to shave overhead by bulk buying of supplies and equipment. And in New Mexico, they’ve also been successful tapping into the Medicaid market.

“For the single guy on the corner it’s going to be very difficult to compete any more,” said Robert Gherardi, an Albuquerque dentist who has been in practice for more than 30 years.

Companies such as California-based Pacific Dental Services, Denver, Colo.-based Birner Dental Management Services, Chicago-based Dental Dreams and Lakewood, Colo.-based Comfort Dental all have opened locations in New Mexico since the late 1990s, either through acquiring existing practices or establishing new offices.

Targeting urban areas, Medicaid

Most corporate dental practices in the Albuquerque area are in high-traffic retail commercial spaces, rather than professional office settings where dentists have traditionally practiced.

“They gravitate to urban areas where they know they can make money,” said Charles Tatlock, associate professor at the University of New Mexico’s School of Medicine, Division of Dental Services

The chains, often called dental management organizations, typically manage all business support and decision-making, leaving the clinical end of the practice to the dentists. The management company receives a fee for its services and/or a share of revenues or profits. One company active in New Mexico, Comfort Dental, operates on a franchise model.

In New Mexico, Medicaid appears to be part of the draw. Most solo and partnership practices in this state do not accept Medicaid because the reimbursement rates are low, Tatlock said, but some of the large dental companies specifically target that market.

The office of Albuquerque Modern Dentists on Menaul NE is associated with California-based Pacific Dental Services.

The office of Albuquerque Modern Dentists on Menaul NE is associated with California-based Pacific Dental Services. (Greg Sorber/Albuquerque Journal)

Unlike many other states, New Mexico does not set a financial cap on how much Medicaid will pay for an individual’s dental care, though the state does require pre-authorization for some services and will not cover crowns, bridges and orthodontic treatment for adults, said state Human Services Department spokesman Matt Kennicott.

New Mexico Human Services Department’s database doesn’t break down Medicaid dental payments by provider type before last year. But the figures for 2014, the year the state expanded Medicaid eligibility, show $57 million in dental payments to corporate providers compared with $13.2 million for sole proprietor practices and $8.2 million for partnership practices.

Comfort Dental, Dental Dreams, and Marietta-Ga.-based Kool Smiles all accept Medicaid.

Pacific Dental and Birner Dental, which operates Perfect Teeth dental offices, accept other forms of insurance but not Medicaid.

Bruce Irick, Comfort Dental’s CEO in New Mexico, said Medicaid is a significant part of their dentists’ business. Comfort Dental opened in 1995 and has offices in 13 states, including seven in the Albuquerque area.

“Financially, they do very well in New Mexico … Medicaid is a big part of it because there is a lot of need there,” Irick said.

Comfort Dental

Irick said the average income in 2014 for a Comfort Dental dentist was around $488,000, out of which they have to pay back loans the company arranged for them to buy into the franchise.

These chairs in this open space at Comfort Dental at 9401 Coors NW is used for work on patients' braces. (Greg Sorber/Albuquerque Journal)

These chairs in this open space at Comfort Dental at 9401 Coors NW is used for work on patients’ braces. (Greg Sorber/Albuquerque Journal)

He said the company purchases or leases property, makes any needed improvements, buys the equipment and trains the staff. The dentist has to put up 25 percent of the $300,000 to $400,000 price to buy in to the franchise. Comfort Dental helps them get a loan for the down payment from a bank in Colorado and guarantees the loan. The company will carry remaining 75 percent of the cost, and the dentist repays Comfort Dental, Irick said.

He said they also teach the dentist how to run the operation with low overheads.

“The enemy in dentistry is always high overheads,” Irick said. “The average dental office overhead is about 70 percent (of monthly revenue). Our overheads are about 45 percent, so these docs are making a lot more money with us,” Irick said.

At a Comfort Dental office on the West Side, the main area for treating children is a large open space with a row of dental chairs. Adults get their teeth cleaned and cavities filled in areas separated by shelving units with the digital X-ray machine on an arm that swings between two treatment areas.

“As you can see, we’re pretty bare bones. That’s how we keep expenses down,” said Jeffery Greene, one of three dentists at the Comfort Dental office at 9401 Coors.

Financial incentives

UNM’s Tatlock said the number one reason driving dental graduates toward the corporate model is financial.

An American Dental Association study showed the average dental student’s debt on graduation jumped 104 percent from $105,574 in 2001 to $215,145 in 2013. Tatlock said some students carry much higher debt loads.

“It’s difficult to get financing (to start a practice) with that kind of debt, and you still don’t have the track record to show you can run a viable practice,” he said.

He said a practice typically needs four patient treatment rooms to be viable, and he estimates it could cost up to $75,000 to equip each room, plus leasing and building improvement costs and support staff salaries.

Buying an existing practice from a retiring dentist can be equally costly according to Gherardi. He estimates the cost of an average practice at between $400,000 and $500,000.

On top of the cost, he said, the recession put a squeeze on the number of practices available for purchase.

“A lot (of dentists) were ready to retire when the economy crashed, but they lost a lot of money and couldn’t afford to retire,” Gherardi said.

The corporate model, he said, appears an attractive alternative for older dentists wanting to sell out as well as young dentists who need to pay off student debt.

You run the practice, they run the business

Dentist job descriptions on the Perfect Teeth website tout the chance to locate in a beautiful location and practice dentistry without all the administrative hassles.

Sandwich boards advertise dental services at a Pacific Dental Services office on Menaul NE.

Sandwich boards advertise dental services at a Pacific Dental Services office on Menaul NE.

“Without all of that administrative work dangling over your head,” it says, “you can switch off the lights at the end of the day and enjoy yourself in the beauty of the Southwest. Skiing, sunshine, mountain trails, rafting, and dozens of other tempting activities make our locations the stuff of dreams.”

The website did not show salary information and the company did not return calls asking for comment.

Pacific Dental Services offers dentists a chance to start as an associate working under other dentists, with an opportunity to become a practice owner or part-owner.

According to the website, the average full-time Pacific Dental-affiliated associate dentist earns $160,000 in their first year rising to $220,000 in their fifth year.

But there are downsides. Gherardi and Tatlock both said the corporate practices are typically a high-pressure work environment.

“Often those hired are valued by how productive they are,” Tatlock said, “They feel pressured to have certain productivity goals.”

Tatlock’s words are borne out by a 2013 Senate committee report on a yearslong investigation into allegations of Medicaid fraud by private equity-backed FORBA Holdings, owner of the Small Smiles Dental Centers network of practices. The report said the company targeted the low-income Medicaid market and provided productivity bonuses based on criteria such as number of patients seen per day and number of patients converted from simple to higher-cost procedures.

FORBA, now owned by Nashville, Tenn-based CSHM, paid $24 million in 2010 to settle the fraud allegations and entered into a five-year agreement to introduce remedial measures to prevent similar unlawful conduct from occurring in the future, according to a Justice Department release. But last year the federal Office of the Inspector General said CSHM had “committed repeated and flagrant violations” of the agreement and barred the company from participating in Medicaid, Medicare and all other federal health programs for five years.

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