Rising labor costs combined with a higher cost of capital are placing a greater financial squeeze on dental practices and DSOs, according to one executive.
Drew Tedlock, the director of payer relations at Effingham, Ill.-based Heartland Dental, recently joined Becker’s Future of Dentistry Roundtable to discuss how rising labor and capital costs are impacting dental practices and DSOs.
Note: This response was lightly edited for clarity and length.
Question: What cost pressures are having the biggest impact on dental practices right now, and where are you seeing the greatest financial strain?
Drew Tedlock: I would definitely say that labor is what we struggle with most right now. Everything costs more, and that’s not just within dental practices. That’s for all the people who are working in a dental practice and all the people who are coming in to get the care they need and want to receive but sometimes struggle with affordability.
When we think about labor, it’s not just the fact that doctors are coming out of school with increasingly high debt-to-income ratios. It’s also the practice managers, it’s the business assistants who are running the front desk, it’s the dental assistants [and] it’s the hygienists. We see the cost of labor is obviously increasing significantly, and there’s also a lot of turnover. I think in the industry we’ve noticed higher turnover rates, and that’s because people are feeling the pressure, so when they can move somewhere else and maybe get a few dollars more an hour, they’re taking that. There’s then a cost for the practices to train those new staff members, to recruit the staff members and to make sure they’re bringing in the culture and holding on to the tenents of the organization to make sure they’re providing care in alignment with their philosophy.
The other thing I would note is of course the cost of capital. We all have investors, we’re all pursuant to demands from the market, so that element has changed significantly over the past few years. We don’t have the cheap capital that we sort of got used to for a very long time. So, in this period of higher inflation, I think these two things combined are particularly compelling.
