UK Dentistry - 2007 Predictions

A few days ago Arun Mehra of Samera shared his review of dentistry in 2006. Here he looks ahead with the Samera 2007 Crystal Ball Gazing.

We have reviewed the year gone by, and now look ahead to what the future holds in 2007. I think 2006 represented massive change in the sector, and personally believe the real affects of the major changes will only start being felt in 2007. I detail below eight issues from a dental business perspective, not in any particular order, that I believe will occur or develop further in 2007.

I am sure there are many more than eight, but these are the ones that spring to mind, and I think you will find that all the issues listed below are not in isolation, all the factors inter-relate with each other making the dynamics of the industry from a strategic view point very interesting indeed (well certainly from a business person's point of view anyway!)

1. Valuation of practices remain high

Since the new contract, the valuation of dental practices, particularly, those with a large private client base, have shot up…perhaps unjustifiably but not unexpected. With it being virtually impossible to open an NHS squat practice, young, and perhaps inexperienced buyers have, in my opinion, being paying over the odds for practices.

At the moment it is no doubt a seller's market, especially in the south east, and I expect it to be the case for at least the next 6-12 months, after that who knows? But my word of advice to anyone considering buying a practice is to understand what you are buying, and is the goodwill price really worth it? From my experience over the last 12 months, 8 times out of 10 times it has not been, so sharpen those negotiating skills to get the price down lower.

2. Associate remuneration

This is a firm favourite of mine, and I have advocated the historic 50% rule is something of the past, and will eventually come down in the next few years. You may not drop the % for your existing associates, but for any new joiners you must certainly consider paying a lower percentage of net fees to the associate.

We have done such study in many practices and 50% of the time associates are losing money for practices!!…. Not very nice reading for associates, but I think it is still early days on this, but you have been warned.

3. More private squats and hygiene centres open including new corporates emerging

The advent of incorporation, allowing non dentists to own dental practices, subject to a few GDC rules (such as a majority of the board must be registered with the GDC), the floodgates are now open for non dentists to 100% own a dental corporate and stick a nominee director (puppet director - could be a dentist, hygienist or a registered dental nurse) on the board of the company, and then pay him/her a small fee for his trouble.

The directors of a company are responsible for the day to day running of the company (according to the Companies Act of 1985) but ultimately it is the shareholders (investors) who appoint the directors and determine their remuneration. Although the spirit of what the GDC is doing is right, in trying to ensure patient care is considered as the utmost consideration for a dental practice, I do honestly believe that some corporates will emerge whereby patient care is not the number one priority but shareholder return.

As I am sure you are aware, I believe if you adopt the right business principles and business model, both can be achieved, but it is very easy to be swayed by an interested investor who wants to make a 20% annual return on their investment!

The higher prices of practices to purchase plus the allowance of non dentists and other DCP's to own practices, will in my opinion see individual and corporates opening up new dental practices. New ideas will challenge convention, but I also expect some big mistakes to be made by dentists, some expecting after spending £300k on setting up a new dental practice, patients to flock in.

Unless you have thought through all the aspects here, this is an unlikely scenario. The key for the new practices that will open is to understand clearly who are their target customers and then work out what needs to be done to get them in the practice! If you are considering opening a new practice our Sprint service is a programme which we will be able help you achieve your business goals. Click here for more details

4. Bank lending becoming more cautious

The advent of more private practices and the demise of NHS practices over the next year is sure to concern many bank underwriters. Dentistry has in the past had the luxury of being a safe bet for banks, mainly as a result of the security of NHS contracts being given to dentists. You and I know things have changed, and the increase in dentists wanting to move private or open private squats does I am sure concern bank underwriters.

To me it is clear, the generous lending criteria historically offered to dentists is probably something that needs to be reviewed by all the main lending institutions in the sector….I believe it will take a few burnt fingers, a few too many times before they review their lending policy to dentists, but having spoken to all the main lenders they already acting more cautiously.

5. A more discerning dental patient, knowing more, expecting more

No doubt dentistry is slowly rising up the priority list for the UK public. Previously seen as a need, it is now being seen as a must, and the advent of so many cosmetic procedure shows only makes dentistry more aware to the public. But to provide private cosmetic care, at higher rates, in an NHS fashion will not last long. I have, and I am sure you know of some, seen practices make the move private but really not change their modus operandi.

Sooner or later, the customer will express their dissatisfaction by moving on to a new practice that meets their needs AND wants, not what the practitioner wants! In my opinion, people are willing to pay for great customer service, if you can deliver this the business will work. As Ray Kroc, founder of McDonalds once said "Look after the customer and the business will look after itself"…I think he is right there!

6. PCT's wielding their axe and the decline of the NHS dental contract

Only nine months in and I personally have heard that in various locations across the UK PCT's are starting to wield their axe against practitioners not hitting their UDA targets. Dentists who signed a contract and are not hitting their targets are being told not to expect the same money next year, so only nine months in and the real wrath of PCT power is occurring.

I personally feel the next 2 ¼ years are going to be ugly and that PCT's will do what is right for them. This I imagine will leave many dentists in the lurch, without a contract and perhaps even with out a business. I expect PCT's to be quite ruthless, with the Department of Health sitting on the sidelines washing their hands of the mess.

I would recommend going all out to meet the UDA targets, and building a strong relationship with your PCT OR start making the move away from NHS, if possible, so that your practice does not remain reliant on any NHS income…the writing is quite clearly on the wall.

7. Dentistry turning global

On two fronts I expect the dental market to turn increasingly global, firstly from UK dentists learning from overseas counterparts, but also from the increasing growth in dental tourism.

We have probably seen most US speakers visit our shores, some insightful and excellent, others in my opinion, bordering on the clueless. Certainly we can learn from the US and other markets, but at the same time, different rules and regulations, market dynamics, customer education and sophistication of customers make the UK market place very different to say the US or Canada. Knowledge from local market experience and the local customer dynamics is essential to understand how dentistry will work in the local market place.

Dental tourism increasingly common place in Europe will in my opinion continue to grow for a certain portion of the market place. Not for everyone of course, but such an industry will eventually dictate pricing and delivery standards across dentistry as a whole even here in the UK. Pricing of dental services will not forever remain insensitive to pressures outside of the UK market. Did you know now that you can get power whitening plus take home trays for £250 in London?? Times are changing.

8. Business and financial management coming to the fore

All the above factors, plus the business momentum we can observe in dentistry really does highlight the fact that whether dentists remain in the NHS or move to the private sector, one must really start taking control of the business.

In the NHS world, hitting UDA targets, keeping costs low and negotiating good contracts with PCT's will be essential. But how will you do that?

In the private world, understanding patient demands, knowing which treatments provide the higher margins, knowing what hourly rate you should be charging yourself at, getting the right patient in the chair will be essential. Again, but how will you do that?

In all honesty, the real way to make this happen right for you is to take control of your business, take an active interest in the business planning, marketing, finances. But you trained to be a dentist? Well yes you did, but the dentist of tomorrow needs to be a business person too. If that is too much for you, and you still want to practise the dentistry you desire, in your own practice, our team at Samera can help you manage the business. We have come along way in 3 years, and now are helping over 100 practices throughout the UK, from effectively managing all main aspects of long standing practices to helping new start up practices get off the ground.

We wish you all the best for 2007.