Dentist Income Levels Slow to Recover

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1 Dentist Income Levels Slow to Recover Authors: Marko Vujicic, Ph.D.; Thomas P. Wall, M.A., M.B.A.; Kamyar Nasseh, Ph.D.; Bradley Munson, B.A. The Health Policy Institute (HPI) is a thought leader and trusted source for policy knowledge on critical issues affecting the U.S. dental care system. HPI strives to generate, synthesize, and disseminate innovative research for policy makers, oral health advocates, and dental care providers. Who We Are HPI s interdisciplinary team of health economists, statisticians, and analysts has extensive expertise in health systems policy research. HPI staff routinely collaborates with researchers in academia and policy think tanks. Contact Us Contact the Health Policy Institute for more information on products and services at hpi@ada.org or call Key Messages Dentist incomes have been stable since The average annual GP dentist income was $192,392 in Incomes began to decline in the mid-2000s, several years before the start of the Great Recession. There are important differences in dentist earnings by location, gender, and type of employment arrangement that warrant further analysis. Introduction Average real net income of general practitioner (GP) dentists in private practice has declined sharply in recent years, reversing a decades-long trend of steady growth. As we demonstrated in an earlier analysis, this decline in income started well before the recent economic downturn, known as the Great Recession 1. Our analysis also showed that a broad set of factors contributed to the decline in net income, a very important one being a steady decrease in the utilization of dental care among the population. In turn, the decline in utilization of dental care began in the early 2000s, well before the Great Recession, and turned out to be driven entirely by a decline in dental care utilization among adults 2. Dental care utilization among U.S. children has steadily increased since In this research brief, we present an update on trends in dentist earnings since The U.S. economy is slowly beginning to recover and it is important to understand what has happened to dentist earnings since the end of the Great Recession. We present data for both GP and specialist dentists and discuss income differentials related to practice ownership, demographic characteristics, and geographic location. We end by discussing the policy implications of our findings American Dental Association All Rights Reserved. February 2013

2 Data & Methods We rely on historical data from the American Dental Association s Survey of Dental Practice 3. This annual survey is conducted on a nationally representative random sample of 4,000 to 17,000 dentists in private practice. According to the most recent data available, 91.7% of practicing dentists in the United States are in private practice 4. The response rates to the Survey of Dental Practice varied from 17 50%. The most recent year for which data are available is The survey oversampled specialists to ensure an adequate number of responses for statistical analysis. The dental specialties included within the specialist category were oral and maxillofacial surgery, endodontics, orthodontics and dentofacial orthopedics, pediatric dentistry, periodontics, prosthodontics, oral and maxillofacial pathology, public health, and oral and maxillofacial radiology. We defined dentist net income as gross billings minus total practice expenses. We converted all nominal values into constant 2011 dollars using the All Item Consumer Price Index 5. We merged geographic variables related to the location of the dental practice using Rural-Urban Commuting Area (RUCA) codes 6. The rural-urban classification used in this paper was based on a zip-code version of the RUCA file that is considered less accurate than the census tract version. Each dental practice in the study was assigned to a RUCA category using the practice zip code. We developed a dentist net income regression model to analyze the effect of underlying demographic characteristics, such as age and gender. We used standard labor market explanatory variables 7 to the extent they were available in the Survey of Dental Practice data set. For the regression analysis, we limited our sample to GP dentists less than 74 years of age who worked full-time (defined as more than 1,600 hours per year) and trimmed the top and bottom 2.5% of net income earners. We did not include hours worked as an explanatory variable due to the high degree of discretion dentists have over working hours. We used data only for the period where there was sufficient consistency in the definition of key explanatory variables across time. Statistical significance refers to the 5% level throughout, unless otherwise noted. Results Figure 1 shows average annual net income of GP dentists in private practice from 1982 to 2011 in constant 2011 dollars. The peak occurred in 2006 at a value of $219,501. By 2009, average net income fell to $191,495 representing an average annual decline of 4.4%. This decline was statistically significant. The peak year is slightly different than in our previous analysis 1 where we included only owner GP dentists (the peak year was 2005). Since 2009, earnings have stabilized, with no statistically significant change. In 2011, average annual net income of GP dentists in private practice was $192,392. Figure 2 shows average real net income separately for owner and employed GP dentists in private practice. The pattern over time is very similar for the two groups. The peak year differs (2005 for owners, 2004 for employees) but the decline for both groups began well before the recent economic downturn. In 2011, the gap in average net income between owner and employed GP dentists was $68,990 and was statistically significant. It is important to note that this is the unadjusted gap and does not control for differences in demographic characteristics between owners and employees. 2

3 Figure 3 shows average annual net income for specialist dentists. The peak was in 2007 at a value of $367,958. Similar to GP dentists, specialist dentist net income has been stable since Figure 1: GP Dentist Average Annual Net Income (in 2011 dollars) $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $126,281 $126,463 $128,858 $130,425 $138,518 $139,615 $142,702 $143,377 $146,012 $147,583 $152,150 $161,115 $171,523 $173,594 $171,543 $180,119 $197,266 $205,324 $211,415 $210,118 $211,561 $211,775 $213,392 $217,593 $219,501 $212,825 $204,218 $191,495 $196,885 $192,392 $ Source: American Dental Association, Health Policy Institute, Surveys of Dental Practice Figure 2: GP Dentist Average Annual Net Income, Owner and Employed (in 2011 dollars) $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 $129,322 $128,206 $131,816 $134,058 $143,462 $143,187 $148,804 $149,564 $152,365 $151,986 $157,342 $167,784 $178,502 $181,345 $179,150 $187,005 $203,909 $213,437 $217,749 $220,229 $218,298 $216,732 $221,133 $228,127 $226,208 $222,128 $216,485 $202,022 $204,755 $203,300 $79,423 $98,646 $85,535 $70,208 $82,848 $82,022 $83,859 $76,414 $80,477 $100,707 $106,337 $95,875 $85,723 $79,605 $93,250 $118,616 $103,330 $131,746 $107,700 $115,491 $135,071 $148,503 $156,411 $133,183 $145,387 $130,796 $133,970 $127,559 $140,344 $134, Owner GPs Employed GPs Source: American Dental Association, Health Policy Institute, Surveys of Dental Practice 3

4 Figure 3: Specialist Dentist Average Annual Net Income (in 2011 dollars) $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $195,960 $193,425 $200,819 $213,161 $198,552 $222,391 $221,186 $230,709 $237,632 $228,059 $236,891 $242,894 $259,616 $275,710 $271,570 $265,080 $305,547 $320,001 $329,429 $335,209 $341,233 $359,994 $363,291 $328,080 $350,097 $367,958 $343,459 $304,627 $316,778 $313,873 $ Source: American Dental Association, Health Policy Institute, Surveys of Dental Practice Table 1 summarizes the net income regression results. The regression-adjusted decline in GP dentist net income from 2005 (the peak year once various factors are controlled for) to 2009 was smaller than the unadjusted decline. This indicates that changes in demographic and employment characteristics of dentists account for some of the decline in net income over this period. The regression results confirm that net income had been stable since 2009, and has not rebounded with the end of the Great Recession. There are several other results worth noting in Table 1. Controlling for age, gender, and location, owner GP dentists earned, on average, $45,821 more per year than employed GP dentists. This is about two-thirds the unadjusted difference of $68,990. Female GP dentists earned, on average, $36,260 per year less than male dentists. The net income of GP dentists practicing in isolated rural areas was, on average, $24,993 lower than in urban areas. Variable Table 1: General Practitioner Net Income Regression Results Coefficient 2005 $15,344 ** $6,099 Age $11,443 *** Age squared -$120 *** Owner $45,821 *** Female -$36,260 *** Large Rural $3,423 Small Rural $1,072 Isolated Rural -$24,993 *** Number of Observations 9,458 Adjusted r Notes: Dependent variable is annual net income (in constant 2011 dollars). Control variables include a full set of year dummies, age, age squared, gender, ownership status, location, and region. Omitted values are '2011' for year, employee for ownership status, 'male' for gender, and 'urban' for location. *** Significant at 1% level, ** Significant at 5% level, * Significant at 10% level. See methods section for description of sample. 4

5 Discussion While we only have two years of post-great Recession data, our results strongly suggest that dentist earnings have not rebounded. There are some important potential consequences that are worth noting. If earnings were to decline further, this could reduce the future supply of dentists since dentist net income relative to dental education costs is an important predictor of the dental applicant pool 8. In turn, this could affect the viability of several new dental schools that have opened recently or are planned. An overall decline in dentist net income may also have an effect on the geographical distribution of dentists, the mix of patients whom dentists are able to treat (for example, patients covered by Medicaid versus those with private insurance) and dentists ability to provide charity care 1. Due to these potential consequences, it is important to closely track the pattern of dentist earnings in the coming years. It is important to note that the gender and geography effects cannot be interpreted as causal, since there are many variables that our data do not capture that could explain these differences. For example, employed dentists or female dentists could differ in terms of their patient mix, fee levels, or practice style. In fact, previous research has suggested that fee levels, patient mix and practice style are important factors explaining the gender gap in dentist earnings 9, 10. Unexplained gender differences in earnings have been reported for many health care professions. For example, a recent study showed a significant gender gap in earnings among physicians that cannot be explained by specialty choice, practice setting, work hours, or other characteristics 11. In dentistry, the topic warrants further research. In terms of geography, our results indicate that GP dentists practicing in small and large rural areas did not have different net income levels than dentists practicing in urban areas. Previous studies have reported that a combination of population and per-capita income largely determine the viability of a private practice located in a rural area 12, 13, 14. Our analysis suggests the effects could become critical at the isolated rural area level. Other data are consistent with our finding of stagnating net incomes and challenging economic times overall for dentists. A nationally representative survey of dentists in private practice indicated that 39% of dentists reported being not busy enough in This is significantly higher than the 2007 level of 19%. Results from the American Dental Association s Quarterly Dentist Economic Confidence Survey indicate that in the third quarter of 2012, 45% of dentists felt negative about overall economic conditions in their office compared to only 22% who felt positive 16. The economics of dentistry are changing. Due to a confluence of several factors, the profession finds itself at what could be a critical crossroads. New models of dental practice are emerging. There is rapid growth in large group practices and dental-service-organizationsupported practice models 17 that are thought to be more cost-effective than traditional solo or small group practices. Increased debt loads and changing preferences related to practice and life styles among new graduates are likely to have long-term effects on the profession. Health reform, with its increased focus on accountability, coordination of care, paying for outcomes and results rather than procedures, combined with the continued fiscal challenges within state budgets will lead to increased cost pressures on the dental care delivery system. The pattern of utilization of dental care this past decade 2 could also be signaling what could be a dramatic shift in how adults especially younger adults utilize dental care and, more broadly, view oral 5

6 health. While more research is needed on the underlying causes of the decline in dental care utilization among adults, the available evidence indicates that while improved oral health 18 might be a factor, increased financial barriers to care are certainly a key driving force 19. Low oral health literacy also remains an important issue 20. Now more than ever, it is crucial for dentists, the public, educators, and policy makers to work together to reduce barriers to dental care to ensure all Americans have the opportunity to be mouth healthy for life. This was published by the American Dental Association s Health Policy Institute. 211 E. Chicago Avenue Chicago, Illinois hpi@ada.org For more information on products and services, please visit our website, 6

7 References 1 Vujicic M, Lazar V, Wall T, Munson B. An analysis of dentists incomes, JADA 2012;143(5): Wall T, Vujicic M, Nasseh K. Recent trends in the utilization of dental care in the United States, JDE 2012; 76(8): For more details, see: American Dental Association, Health Policy Institute Survey of Dental Practice: Income from the Private Practice of Dentistry. Chicago: American Dental Association; American Dental Association, Health Policy Institute, Distribution of Dentists in the United States by Region and State, Chicago: American Dental Association; U.S. Department of Labor, Bureau of Labor Statistics. Consumer price index. Accessed Feb. 15, Washington, Wyoming, Alaska, Montana and Idaho (WWAMI) Rural Health Research Center. Accessed Nov. 30, Lemieux T. The Mincer equation thirty years after schooling, experience, and earnings. In S. Grossbard-Shechtman (Ed.), Jacob Mincer, a Pioneer of Modern Labor Economics. Springer Verlag; Nash K, Brown J. The structure and economics of dental education. JDE 2012; 76(8): Brown LJ, Lazar V. Differences in net incomes of male and female owner general practitioners. JADA 1998;129(3): Riley JL, Gordan VV, Rouisse KM, McClelland J, Gilbert GH; for the Dental Practice-Based Research Network Collaborative Group. Differences in male and female dentists practice patterns regarding diagnosis and treatment of dental caries: findings from The Dental Practice-Based Research Network. JADA 2011;142(4): Lo Sasso A, Richards M, Chou C, Gerber S. The $16,819 pay gap for newly trained physicians: the unexplained trend of men earning more than women. Health Affairs 30. No. 2(2011):193: Wall TP, Brown LJ. The urban and rural distribution of dentists, JADA. 2007;138: Nash KD. Geographic Distribution of Dentists in the United States. Health Policy Institute. Chicago: American Dental Association; Waldman HB, Chaudhry RA. Update on the changing numbers and distribution of periodontists. J Periodontol May;80(5): Unpublished data from the American Dental Association, Health Policy Institute, Survey of Dental Practice. 16 American Dental Association, Health Policy Institute, Dentists' Economic Confidence Third Quarter of 2012 (September 2012) Available at: (accessed 12/14/2012) 17 Guay A, Wall T, Petersen B, Lazar V. Evolving trends in size and structure of group dental practices in the United States. JDE 2012; 76(8): Dye BA, Tan S, Smith V, Lewis BG, Barker LK, Thornton-Evans G, et al. Trends in oral health status: United States, and National Center for Health Statistics. Vital Health Stat 11(248) American Dental Association, Breaking Down Barriers to Oral Health for all Americans: the Role of Finance. Chicago: American Dental Association: American Dental Association, 2012 Consumer Awareness Survey. Chicago: American Dental Association, Suggested Citation Vujicic M, Wall T, Nasseh K. Dentist Income Levels Slow to Recover. Health Policy Institute. American Dental Association. December Available from: 7