Orthodontic Products and Levin Group again teamed up for a look at 2022 orthodontic practice performance. 2022 brought many new and unprecedented challenges to orthodontics—among them, inflation that directly affected practices, staff shortages, increased labor costs, and declines in the average practice profit.
By Roger P. Levin, DDS
For the second year, the team at Levin Group is pleased to work with the editors at Orthodontic Products to provide orthodontists with important insights on the state of orthodontic practice in the United States. The vital information from this orthodontic practice performance survey, collected from orthodontists in January and February 2023, will allow orthodontists to make key decisions and prepare for the future. Many thanks to those who provided valuable information regarding their full year practice performance in 2022.
This year’s data was collected from orthodontists, most of whom were in private practice. 84% of the respondents were owners or partners in a private practice, 6% were associates, and 10% were employed by a DSO or OSO. 73% of the respondents were in solo practice, 14% had one other orthodontist in the practice (total of two doctors), 11% had three orthodontists in the practice and 2% were “other.”
2022 brought many new and unprecedented challenges to orthodontics. Inflation that directly affected practices, staff shortages, increased labor costs, declines in the average practice profit, and other factors were notable. But before we dive down into the details it may be helpful to review some historical data to create some context.
- In 2008–2009 the United States experienced the deepest and longest recession in history. During that time, production in the average orthodontic practice declined by approximately 12%. But there was no commensurate increase in overhead to impact orthodontic practice profitability. This meant that the decline in profit during the “Great Recession” was directly proportional to the decline in practice production.
- By 2012, the U.S. economy returned to strength and continued to improve. This was true even during the COVID pandemic. In fact, many orthodontic practices grew due to pent-up demand following the 2020 shutdown. Orthodontic practices generally grew between 2012-2020 and each year represented an increase in the average production and profitability, despite flat or declining insurance reimbursements. The strong economy and other factors such as growth of aligners, technology improvements, and faster case completion time frames allowed orthodontic practices to experience continual growth. Overhead was predictable and stable between 2012 and 2020.
- Then came the outlier year of 2021. While it was a record year regarding production and profit for most orthodontic practices, this was not due to any specific changes in how practices operated or new innovations in orthodontics. It was mostly due to the American public having excess financial capability that allowed them to focus their discretionary savings on orthodontic treatment since they were not spending money in the 4 traditional areas of travel, entertainment, restaurants, and luxury. This was the major contributing factor to 2021 being a record “out-of-the-ordinary” year for orthodontic production.
- Then 2022 arrived. Last year was characterized by a challenging economy, rapid inflation, higher interest rates, a staffing shortage, rising staffing costs and patients pulling back on treatment decisions. The excess cash enjoyed by most of the American public had started decreasing and with that came a production drop in many orthodontic practices. Unlike the 2008–2009 recession, the 2022 production drop was accompanied by an average 5%-6% increase in practice overhead. This is a key point to keep in mind as you read through this year‘s 2022 orthodontic practice survey.
Let’s start off with the single largest impact on orthodontic practice in 2022: overhead. Keep in mind that every 1% percent increase in overhead equates to 1% decrease of practice profitability. This means that an 8% increase in overhead represents a loss of $8,000 of profit or income for every $100,000 of production. A $1,000,000 practice would lose $80,000, and that happened in a widespread manner in 2022.
So, what does all this mean?
The survey indicated that the average production per orthodontist was $1,611,324. This is statistically similar to last year’s $1,643,605. Basically, this indicates that production was flat in 2022. We were happily surprised that production did not decline further in 2022 given many of the challenges.
Thirty-eight percent of orthodontists reported an increase in production in 2022 versus 2021. That is about half of the 76% reporting increased production in 2021 versus 2020. So, not only did fewer practices report an increase in production this year, but many practices did experience a decline. 47% reported decreased production last year with the majority of those declining by 10% or more. This is the largest drop in production in the orthodontic specialty since 2008.
Production is an important indicator of future strengths or weaknesses, but profitability is the “bottom line.” Profit is what practice owners get to keep or use for their own personal incomes. In 2022, 49% of orthodontists reported a decrease in profit, also the largest drop since 2008.
As mentioned above, overhead was the major and most important aspect of our 2022 survey. The average orthodontic practice reported having overhead of 57%, which means a 43% profit. These numbers are about 3 percentage points worse than 2021 and were the major cause of decreasing profit in 2022. Most practices reported an increase in overhead and those that did saw 6% higher costs.
Very few practices escaped higher overhead in 2022. Only 8% of respondents stated that their overhead was lower in 2022. And 62% of respondents listed that rising overhead was “their biggest challenge” right now. That is up from 41% last year.
Table 1: Biggest challenge
|Ability to retain or hire clinical staff
|Not enough new patient starts
|Competitive threat from GP’s doing more orthodontics
|Ability to retain or hire office staff
|Competitive threat from DSOs/OSOs
|Declining insurance reimbursements
|Competitive threat from “direct-to-consumer” orthodontic companies
Levin Group insight
2022 appears to be the first time in history that orthodontic practice production was relatively flat, and profitability declined by a significant amount. The impact of overhead on practice financial performance has led to a significant decrease in orthodontic practice profitability. In past recessions, even if orthodontic practices declined in production they were not met with a concurrent higher overhead. However, staffing challenges, inflation, supply chain issues, higher pricing by suppliers and vendors are all contributing to higher overhead. The challenge for the future is to compensate for overhead increases while overcoming other significant competitive challenges.
This year will bring its own set of issues as the economy continues to stay challenged, interest rates continue to rise, banking issues emerge, and consumers reallocate where they are spending money. Orthodontic practices will now need to focus on identifying strategies to increase production to offset rising overhead.
Pandemic era government stimulus programs are now essentially gone, and patients are back to spending money in the traditional areas. As consumers use up their excess savings and credit card debt rises to record levels, we believe that more Americans will be financially challenged and pull back from spending money in healthcare, including orthodontics. Even if production remains stable, orthodontic practices can expect a decrease in profit by 6% to 8% due to higher overhead if no other practice changes are made.
So, what happened to patient volume?
Most orthodontic practices have recovered to pre-pandemic patient volume. In 2022, 64% reported the same or higher total patient volume versus 2021. However, that’s down 80% from the increase in patient volume practices saw in the outlier year of 2021. In 2022, 55% of orthodontists reported the same or higher new patient volume over 2021, which is also down 82% from 2021. Again, we’re comparing it to the oddball COVID-19 years. The 2020 shutdown artificially lowered patient numbers that year, but pent-up demand increased those numbers in 2021. In simple terms, 2020 was extraordinarily low, 2021 was extraordinarily high, and 2022 appears to be returning to “normal.”
Levin Group insight
Based on production being relatively flat or slightly in decline for most orthodontic practices in 2022 it was not surprising that patient volume was also relatively flat. Keep in mind that being flat means that growth has slowed down which is often the first phase of production decline. It typically goes unnoticed because flat performance or slower growth does not jump out as significantly worse performance than the previous year. It’s reassuring to see that orthodontic practices “held their own“ in 2022, but the “slowing growth” is cause for concern. This is a warning sign for orthodontic practices to improve practice production, systems, referrals, and other factors starting now to avoid being forced to play catch up in the future.
And what about referrals?
We asked respondents to break down the source of their new patients and the average looked as follows:
Table 2: Sources of new patients
|Referrals from dentists in your area (referring doctors)
|Referrals from parents of existing patients
|Referrals from existing adult patients
|Referrals from social media activity
|Referrals from community activities (health fairs, sponsorships, etc.)
These numbers were remarkably similar to last year with the notable exception of the decline in social media as a referral source and the increase in community activities. We believe this may be due to some practices experiencing weaker results from social media marketing and a desire to reduce associated expenses in the face of higher overhead. Social media marketing can be expensive. Community activities, such as health fairs, sponsorships, and participation with local groups is often less expensive than the monthly check for social media marketing. We are not commenting on which marketing activity works best, but we do note that referrals from dentists held essentially steady, making up 38% of referred patients to orthodontists.
Levin Group insight
Most orthodontic practices continued their marketing activities in a very similar manner in 2022 versus 2021 and recent previous years. We did not find practices expanding their marketing programs or investments, and this is to be expected given the 2021 was such an excellent year that many practices saw no reason to change their marketing strategy or tactics. However, in a declining economy, it may be necessary to carefully analyze marketing activities and the results they produce, and then reallocate marketing dollars to the best opportunities. Unlike other dental specialties (except pediatric dentistry) orthodontists can draw patients from different areas and need a broader base of referral marketing strategies. Levin Group recommends that orthodontic practices market in all the Five Focus Areas: patients, parents, referring doctors, social media, and the community.
And, what happened to staffing?
It will not surprise anyone that orthodontic practice staffing is more challenging than ever before. Unlike the restaurant business that has similar staffing challenges and can hire almost anyone, orthodontic staff typically need some level of trained, licensed, or experienced staff. There was a slight staffing shortage prior to the pandemic, but now the entire situation has reached a crisis level.
More than 88% of respondents believe there is a shortage of orthodontic staff available to hire. 64% of practices have a vacant position and are seeking to hire right now. This does not include practices that want to increase their staff size and are also seeking new staff members.
Staffing costs are contributing heavily to overhead and have risen approximately 10%. Not including doctor compensation, 88% of orthodontic practices or paying more total compensation per individual job position now than in 2021 and the trend of escalating staffing costs is continuing. No orthodontist or office manager will be surprised that staffing is viewed by most practices as “very challenging.“ In fact, 65% stated this in the survey. This is a major contributory factor to the total overhead increase which now has escalated by 6% to 8%.
The survey asked practices, “What are you doing to address the current staffing challenges?” Respondents identified the following strategies.
- Increasing base compensation for staff: 59%
- Providing more bonuses for staff: 39%
- Offering more or better employee benefits: 37%
- Adding technology for productivity enhancement: 37%
- Utilizing a staffing agency: 22%
- Reducing office hours: 8%
Only 15% of respondents reported, “We are not experiencing any staffing challenges right now.” Note that the top three strategies are all relative to increasing staff total compensation which directly increases practice overhead.
Levin Group insight
Staffing is a crisis in orthodontics. Many team members resigned during the pandemic and have not returned, contributing heavily to the staffing shortage. Those who took new positions outside of orthodontics had various reasons, but the most impactful was the attraction of higher compensation. As practices have started to play catch-up in providing competitive compensation they’ve been able to attract new (or re-attract prior) team members, but the rate of team members resigning positions and changing jobs is still high.
The increase in staffing compensation will not reverse in the future and its impact on overall overhead will remain. From a business standpoint, practices should focus on designing specific strategies to increase production to offset increases in staffing compensation. Attempts to focus solely on cutting costs will not be enough. Examples of production-enhancing strategies include raising fees, submitting new fee schedules to insurance companies to increase profiles, cross training team members for coverage of a team member if someone were to leave, implementing highly efficient step-by-step systems to eliminate waste, maximizing efficiency and patient flow, adding advanced team training to promote functioning at high levels of skill sets, and others will offset rising overhead costs.
No one knows exactly how the staffing crisis will play out, but we believe it will be with us for the next 10 years. Levin Group estimates it will be a major challenge (along with increasing competition) affecting practice production, profitability and income. Practices should start now to implement innovative ways to retain team members, including options on a case-by-case basis, such as signing and longevity bonuses, gas allowances, more paid time off, and job sharing.
And what type of cases were started?
The headline here is that orthodontists appear to be starting more aligner cases. The respondents to this survey reported their ratio of aligner to bracket and wire cases at 31% to 69%. They are still doing more bracket and wire cases, but aligners are making advances. Aligner case increases may be due to several distinct reasons. First, there are parents and patients who will only consider aligners as a treatment option. Second, orthodontists who were not originally trained in aligners are becoming more comfortable with the technique. Third, aligners can be utilized for a wider variety of cases due to advances in AI (artificial intelligence) and other technology.
One interesting note is that the fees remain very similar for bracket and wire orthodontics versus aligners. With the average fee for bracket and wire at $6,024 and the average fee for clear aligners at $5,960.
Table 3: Starts and fees for bracket and aligner cases
|Avg. annual starts per orthodontist
|Avg. fee for complete treatment
|Brackets & wires
Respondents, as expected, are seeing aligner patients much less frequently than bracket and wire patients. The average bracket and wire patient was seen every 7.6 weeks and aligner patients were seen every 10.8 weeks, and in some practices even less frequently. That basically means the practices are seeing their bracket and wire patients seven times a year and aligner patients five times a year. We expect the interval of visits for aligner patients to continue to expand, and that leads to…
Whatever happened to teledentistry?
The use of teledentistry, or teleorthodontics, in orthodontic practices appears to be prevalent but declining. Among respondents, 46% of orthodontists are using teledentistry in their practice compared to basically 0% for general practices. This is down from 2021 which was reported at 53%. In some ways, this is not a surprise. During the pandemic, teledentistry became a lifeline to patients. If it is going to decline, we would expect those declines to take place gradually each year going forward now that the pandemic is not a major factor.
Orthodontist reported they are using Teledentistry for:
Table 4: Use of teledentistry/teleorthodontics
|Type of appointment
|New patient consult
|New patient exam
One interesting note is that 100% of practices using teledentistry are not adjusting their fees for patients choosing virtual appointments.
This year‘s Orthodontic Products/Levin Group Annual Orthodontic Practice Survey was certainly different. What we saw was very flat production with decreasing profitability due to increasing overhead. This is the first time we have seen this scenario in orthodontics, and it is unlike any previous challenging economic time.
One of the strongest factors contributing to higher overhead is the staffing crisis and higher staff compensation (about 10%). Not only have staffing costs risen, but managing the whole staffing process of recruiting, hiring and retaining the team has become an emotional and fatiguing day-to-day frustration. Not having the right number of trained orthodontic staff simply makes day-to-day practice harder and less pleasant. However, staffing is not the only area of overhead increase. Inflation has driven up the cost of supplies, materials, and technologies. The 10% rise in staffing combined with the increase in inflation on other expenses have contributed to an overall 5% to 6% increase in orthodontic practice overhead. This results in a direct reduction in practice profitability and doctor income. The solution is for practices to identify systems, strategies and methods to ensure increasing production to offset rising overhead. Just attempting to lower overhead will not be enough of a gain to offset lower profit.
With all of this noted, orthodontics is still in an extraordinarily strong position as a specialty. Although practices did not grow in 2022, overall production remained stable. Most practices still have experienced robust performance. One practice, we know recently held a “new patient only day“ to bring in all the new patients that they were having trouble scheduling within the next 1 to 2 weeks. They ran seven chairs of new patients to help catch up and increase starts. All patients that day received a 10% discount (this may not be appropriate for your practice). Examples of this type of innovative thinking are helping practices to improve performance, increase starts, attract new patients, and maintain excellent financial performance.
2023 has started out with a continuation of the challenges we saw in 2022, but we are optimistic that in 2024 practices that are putting systems and operations in place today and continuing to focus and analyze on their referral marketing programs will perform well. This is the formula for orthodontic practices to increase profitability. OP
Roger P. Levin, DDS, is the CEO and founder of Levin Group, a leading practice management consulting firm that has worked with over 30,000 practices to increase production. A recognized expert on orthodontic practice management and marketing, he has written 67 books and over 4,000 articles and regularly presents seminars in the U.S. and around the world. To contact Levin or to join the 40,000 dental professionals who receive his Practice Production Tip of the Day, visit levingroup.com or email [email protected].