Why accepting higher staffing costs is key to keeping profits intact
If your dental practice hasn’t experienced major staffing challenges over the last year or two, consider yourself lucky. The entire industry is feeling the staffing squeeze and has been since 2021. No specialty is immune, but general practitioners are especially affected, as hygienists are proving to be one of the toughest roles to fill.
Making these labor pains worse, rapid inflation and a continued strong demand for dental services have driven salaries higher. This means it’s not only taking dentists longer to find quality front office, chairside assistants and, of course, hygienists, but the cost to keep them is driving profits down in many practices.
“What the dental industry is experiencing right now is a classic supply and demand issue,” says Scott Clynch, CPA. “Supply of dental staff is down, but demand for dental services is up. It’s market forces at work.”
Still, many dentists are fighting the tide of rising wages, holding out for that rare individual who is really good at what they do, and won’t demand an arm and a leg to do it.
According to Scott, it might be time for dentists to stop fighting the rising wage tide and start paying more to get their team filled with good people. While this approach might seem counterintuitive, it doesn’t mean dentists have to throw in the towel on profitability.
So what should dental owners do to keep profits intact while staffing costs keep increasing? Scott suggests a three-pronged strategy, starting with a healthy dose of acceptance.
“First thing is to accept the fact that you’re going to be paying more for staffing,’ says Scott. “As an accountant, that is not something I like to tell my clients, but that’s where we are, unfortunately.”
“The market dictates what is fair, and the market is dictating that a $5 an hour increase for front desk and chairside or an $8 to $10 increase for hygiene is fair,” added Scott. “As frustrating as that may be, dentists that don’t accept that are going to lose out on candidates, and possibly their current staff, because they’ll go down the street to a dentist or DSO that will pay it.”
With many dental practices pushing appointments out six months or more, filling those open roles faster with higher quality candidates is key to taking full advantage of this period of higher demand.
“Next thing we’re telling our clients is to continue raising fees to keep up with the rising overhead,” says Scott. “Again, this is simply market forces at work, so your patients are much more apt to accept that your fees are going up again.”
The third strategy, and the trickiest one to execute according to Scott, is to take a hard look at In-Network insurance plans with an eye toward re-negotiating reimbursement amounts, paring down or even moving away completely from those commitments, depending on the specific client situation.
“The fact that insurance reimbursements have not kept up with the higher operating costs means owners are having their profits squeezed out of their practices,” says Scott. “We’ve been working with our clients closely to help determine if/when the time is right to make changes with in-network insurance plans, as this is often the only way to make those higher fees result in higher profit.”
In fact, Scott feels that the higher operating costs dental practices are experiencing are accelerating the shift away from insurance.
“I think more and more patients are going to start seeing their dentists no longer accept their insurance,” says Scott. “When done the right way, going out of network can pay big dividends for practice owners in terms of profitability.”
The “right” way to unwind from insurance is unique to every practice, and Scott says it’s important for dentists not to try to go it alone.
“There’s a strategic way to remove yourself from your insurance, knowing which ones to let go and when,” says Scott. “There’s also training needed to educate staff on how to effectively communicate to patients, so they don’t have a negative reaction.”
Scott highly recommends talking to an advisor to determine when you may need to transition your practice away from insurance. CWA can help make sure you approach the process with a clear 360-degree view of your practice, from your financials to the intangibles.
For more insights into staff wages and transitioning away from insurance, check out this episode.
To speak to an advisor about retaining profitability in the face of rising staff salaries or to get answers to any other business or personal finance questions, talk to CWA.