August 20, 2014
by Goldin Peiser & Peiser - CPA's and Stretgic Advisors
The cost of higher education has increased exponentially in recent years. Students graduating with a bachelor’s degree can expect to take on an average of $25,000 in student loan debt each year, and the numbers get much higher when you consider the cost of medical or dental school.
Approximately 90% of all dental students use student loans, of varying amounts, to fund their education. As a result, more and more young medical professionals are burdened with serious student loan debt. According to the American Student Dentist Association, the average educational debt from public dental schools was $192,299; for private dental schools was $263,382. The cost at some schools could be has high as $400,000. However, this burden is not stopping students from entering dental school. Baylor University Medical Center reports that from 1994 to 2010, dental schools graduation rate increased by more than 1,000 students.
What is the potential impact of student debt on the dental industry?
With the level of debt incurred from the 4 years of dental school, it stands to reason that new dentists want to pay-off their loans as soon as possible, thus forgoing a specialty which brings with it additional loans. The ADEA Presidential Task Force on the Cost of Higher Education and Student Borrowing reports, that “…students with the greatest amount of expected accrued debt plan to pursue private practice in general dentistry or postdoctoral general dentistry (i.e., enter General Practice Residency/Advanced Education in General Dentistry programs) and not a dental specialty.”
Increased Growth of Dental Practice Management Companies (DPMCs)
The high cost of a dental education, coupled with the start-up expenses of opening a practice, including the soaring costs of new technology and dental equipment (and the Medical Device Tax), makes it difficult for new dentists to go out on their own. This, plus other factors have led to an explosion of DPMCs, large companies that provide management services to multiple dental offices. An IBISWorld’s Dentist in the U.S. industry reports that the number of industry operators is expected to increase at an annualized rate of 0.4% to 164,966.
Fewer dentists practicing in low income areas
The increased debt may lead to fewer dentists treating underserved patients due to low reimbursement rates. Government assistance programs, such as Medicaid, have a lower reimbursement rate than that of private insurance or private pay; many new dentists cannot afford reduced rates.
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Cutler, Erick. “Dental CPA Dental Accountant | Goldin, Peiser & Peiser, LLP.” What Does the High Cost of Dental School Mean for the Profession? | Blog. N.p., n.d. Web. 13 Aug. 2014.