January 17, 2022

A Dental Outlook

By Brian Tortolano, Principal, Advisory Services

A Dental Outlook Dental Services

It is difficult to discuss the state of the dental industry in 2021 without first mentioning 2020. We all remember 2020 and the initial fear it created for many practice leaders. Based on the results from the second quarter of 2020, it seemed for a time those fears were well-founded. Ultimately, however, in 2020 we learned that dentistry is a “recession-” and pandemic-proof industry. Dental concerns will always need to be addressed. When the 2008 recession was upon us, many called that year the last great year of dentistry. It did signal a coming shift for parts of the industry. Back then, there were several practices that presented themselves as high-end, cosmetic offices. Those offices suffered greatly and many were forced to close, especially in the southwestern part of the country.

At the same time, family-style dental offices continued to thrive as basic dental needs still needed to be met. Realizing this, many practices pivoted back to “basic” dentistry to retain patients and stay in business. As we roll forward to 2020, we saw a forced shutdown of our practices. Then there was a gradual reopening to handle emergent dental need, and finally a full reopening — albeit in a much different manner than before the pandemic.

We also saw a surge in 2020 once practices re-opened. This surge continued into 2021 and is still ongoing. We saw operators take advantage of the pause in business to streamline operations. They met with their accountants, financial advisors, and dental consultants to see if they should change anything inside of their offices. Practices had an opportunity to be proactive as opposed to reactive. Like they did in 2008, smart practitioners looked for ways to improve performance and handle a less than predictable staffing model. As a result of this preparation and streamlining, practices were able to handle the next waves of COVID disruption.

The increased focus on operations and efficiency soon impacted profitability. When we talk about profitability, we are talking about EBITDA: earnings before interest, taxes, depreciation, and amortization. Why is EBITDA important? It is how the leaders of a DSO or other potential buyers will evaluate your practice to determine the value or what they would be willing to pay. While many Americans ranked 2021 as one of the worst years ever, most in dentistry and specifically the DSO industry felt otherwise. It was an extremely active year within mergers and acquisitions and the opening of new locations.

Why did some practices return from the shutdown with strong financial performance and increased earnings? Clinical aspects aside, two key differentiating factors are operations and finance/accounting. We have learned accurate and timely financial reporting is imperative to make proper operational decisions and continue to grow profits and the practice.

Your advisors matter. Accounting and operations go hand-in-hand. You need the proper team to help you succeed. At Marcum, we believe in tight integration of accounting and operations.

We also believe in a balanced approach to operations for DSOs. During the pandemic we worked with each of our clients, first to bring them back to work safely and in full compliance and second to run as efficiently as possible. There were hurdles to overcome then, just as there are some now. There are seven key areas of dental office operations: day-to-day operations, finance/accounting, marketing, human resources, compliance, facility management, and integration with technology.

Together, we have commanding knowledge of the operational and accounting side of the business. We can make rapid, accurate, strategic suggestions and subsequently implement any policy or protocol required. Most offices are struggling to stay fully staffed. An office dealing with staffing shortages should be looking at outsourcing certain tasks in the dental office.

We look forward to discussing seven key elements of dental office operations in detail in the coming months. Our Marcum LLP healthcare team has the dental experience and is committed to assisting our clients in the coming year as we expand our footprint and offerings across the United States. Learn more about our dental leaders who care and believe that your success is our success.