Dentists report income dropping

By Laird Harrison, Senior Editor

May 26, 2009 -- An ADA survey conducted in February found U.S. dentists pessimistic about their economic prospects these days, with a majority reporting a drop in income between the third and fourth quarters last year.

At the same time, however, an independent research company's analysis of accountants' data suggests U.S. dentists actually made more money as the year went by -- and more last year than the previous year.

How can this be? One accountant said he thinks the steady drumbeat of bad news in general may be coloring dentists' perceptions of their circumstances.

“In these tough economic times, dentists need to focus on their numbers.”
— Bassim Michael, certified public

"Most people don't feel so good about the state of the economy," said Bassim Michael, a certified public accountant in Fresno, CA, who specializes in working with dentists. "I had a number of clients come in and say they thought they had a really bad year. But the numbers showed otherwise."

Michael is one of thousands of accountants reportedly polled by Sageworks, a financial analysis company that tracks financial trends in various industries -- including dentistry. (The company declined to state exactly how many accountants participated in the survey.)

In a January report, Sageworks said that private dentists had the highest profit margin -- 17% -- of any private business in the U.S.

Not only are dentists doing better than other professions, the company said, but dentists did better in 2008 than in 2007, when their profit margin was 15%. This wasn't just a matter of dentists tightening their belts to eke out a better margin. Actual sales rose in 2008 as well, Sageworks said.

And dentists made more money each quarter of last year than the previous quarter, according to the data. From the third to the fourth quarter of last year, Sageworks found that dentists experienced a 13.43% increase in profits.

The trend fit what Michael has seen among his own clients. "What we're seeing so far is that most dentists have not really been affected by the recession," he said. "The majority of my dentists' income has been higher than the year before. I would say 2008 was a really good year."

The only exception was among those dentists who do a lot of elective procedures, Michael said.

Contrasting numbers

The accountants' numbers contrast with the ADA's "Quarterly Economic Confidence Survey Volume 2." Conducted in February 2009, the survey found that 58% of dentists thought they made less money in the fourth quarter of 2008 than in the third. Almost as many (53%) thought their income had declined from the second to the third quarter -- when Sageworks found an increase.

Dentists in the ADA survey reported other downward trends as well. On treatment acceptance and numbers of new patients, many more said they had a decrease than an increase. On open appointment times and average days of accounts receivable, more reported an increase than reported a decrease.

Periodontists and endodontists were particularly downcast; for example, almost three-quarters of periodontists who participated in the ADA survey said their income dipped from the third to the fourth quarter last year.

Looking ahead, dentists in the ADA survey were evenly split between those who were not at all confident about their future billings versus those who were somewhat or very confident.

Michael pointed out that the ADA survey took place almost two months before tax returns were due, so many of those who participated may not yet have sat down with their accountants.

A difference in the approach of the two surveys could also explain the discrepancy. The ADA did an actual survey, posing questions to 1,699 dentists and trying to get a geographically representative sample. It found statistical significance for key findings -- such as the perception that income went down over the year.

Sageworks, on the other hand, pooled the data reported by the accountants who participate in its service, but did not obtain a representative sample of the dentists themselves and did not include dentists who are part of a corporate practice.

But assuming the figures can be compared, revealing a real conflict between perception and reality, dentists should take heed, according to Michael. Acting as if your business is down "can be a self-fulfilling prophesy," he said. If you cut back in the wrong ways, you can discourage patients from coming.

On the other hand, if you think you're doing better than you are, you could also run into problems, spending money you don't have or overlooking the need for more marketing.

The overall lesson: "In these tough economic times, dentists need to focus on their numbers," Michael said.

Copyright © 2009


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