In the face of a worldwide recession, we talk to Richard Scarborough of Medenta Finance, to find out how it might manifest itself within the profession and how to reduce the impact.
How do you think the recession will affect the dental sector?
It is important to understand the wider impact first.
Not all recessions are equal, nor do they impact everybody equally. Also, whilst the UK economy officially emerged from recession with strong growth in the third quarter of 2020, the Office for Fiscal Studies still expects the UK economic output to have dropped by 6% from the final quarter when compared to the final quarter of 2019.
This is a larger drop than the peak to trough fall during the financial crisis of 2009.
Looking back at the financial crisis, the financial markets were hit hard. Sectors such as banking and construction struggled. But, whilst these sectors suffered, others – such as the discount retail sector – prospered.
In contrast, if you look at where we are today, it is industries such as leisure, hospitality and aviation that have taken the brunt. Tradesmen are in high demand. Investment from homeowners and home improvement projects has created an absolutely booming market for them.
The UK economy might have contracted but what has happened to the population’s spending power?
With the constraints placed on us there are less places to spend it. We need to think about dentistry in this context. How is the current economic and social climate influencing the patient?
We also need to consider what else is happening to the supply and demand curves of dentistry. In particular the supply of NHS dentistry and how that is influencing the demand for private dentistry.
There is no doubt that the supply of dentistry reduced throughout 2020. I regularly hear about practices whose phones are ringing off the hook with new patient enquiries because their NHS practice cannot meet their requirements. In addition, there appears to be a change in the types of treatment that patients are demanding.
In particular, I have witnessed a significant uplift in the use of patient finance to fund orthodontic treatment using aligner systems. For the first time, it is significantly ahead of implants and fixed orthodontics.
What can dentists do to lessen the impact of the economic downturn or take advantage of other areas?
It is a time where the profession needs to remain flexible and prepared to change.
There is undoubtedly a backlog of patients within the NHS. This is driving patients towards the private market because that’s where they are able to access dentistry.
For NHS-focused practices, they need to consider: ‘What is the future of the NHS contract and how can I diversify?’ If you’re looking for financial security for your business, having diversity in income streams is crucial.
We also need to acknowledge that just as all sectors are not impacted equally, not all dental practices have been impacted equally.
Practices who provided care purely via the NHS during the March 2020 lockdown had their income streams supported in various degrees across the four nations of the UK.
Whereas for fully private practices, without the majority of their patients on a dental plan, their income dropped significantly with little support from the government. Associate dentists also received varying degrees of support.
Private practices that maintained a significant plan membership appear to have fared well. The majority of their patients continued to pay their plan membership fees.
Looking forward, it seems unlikely that the NHS will have more budget to ease the backlog. That’s going to be a big challenge for many NHS practices in 2021. However, there is still an opportunity for them to branch out with private, cosmetic dentistry.
Restrictions on how dentists have been allowed to practice has changed treatment provision.
Returning to orthodontics as an example, there are practices that already have the technology in place to monitor their patients remotely. Invisalign can be sent directly to patients to continue their treatment, despite not being able to visit the practice in person.
We’re currently living in a time where there is a very clear demand for cosmetic dentistry. It’s about asking: ‘How do I enable that for my patients?’
Moving forward, understanding the evolution of what your patients want from you and how you can provide that service, could be critical. That’s where support like patient finance lends itself.
One of the impacts of the recession and uncertain economic times is that patients are more careful with their money. They see friends, colleagues and other people on the news experiencing redundancies. Many are aware that they need to make sure they’ve got a rainy-day fund in case they face a similar situation.
Rather than spending a lump sum on cosmetic treatment and dipping into their savings, they might prefer to spread the cost.
Society has moved onto a ‘subscription’ model for many products and services. People often prefer a monthly payment option. This is how finance supports not just the business, but also the patient.
Looking at previous recessions, then looking forward, what does the future of patient finance look like?
In the 2009 financial crisis, Medenta went through a very strong growth period driven by patient demand. Practices became more responsive to the demands and needs of their patients.
The profession needs to listen to customers who want the ability to spread the cost effectively in order to access treatment. Logically, a practice would put patient financing in place as a service to meet that need.
There are practices today that effectively offer their own payment plans that allow patients to spread the cost of treatment or put a standing order in place. For these practices, this might have worked very well during more stable times. But now the risk is very different.
We’re currently in a turbulent economic scenario, where patients may not pay for the treatment provided. This means the practice could end up out of pocket.
In recent times, the costs associated with patient finance has decreased dramatically. As an example, Medenta’s fees are substantially lower now than they were a few years ago.
Some providers are constantly developing their application portals to ensure that they meet their clients’ demands.
Based on the above and the fact that practices are paid upfront for treatment by the finance company, I expect strong growth in the demand for patient finance in the weeks and months ahead.
Is there anything else you’d like to mention?
The underlying demand for dentistry and cosmetic treatment is there. We can focus on the recession as much as we’d like. But we need to also look for the opportunities available to the sector.
The proportion of patients that still have their teeth later in life has massively increased over the years. This, coupled with increased awareness of treatments, leads to increased demand.
I would always encourage dentists to look to advance their clinical skills to generate new avenues of revenue in order to secure their financial future.
Practices need to think about how they make patients aware that they provide the services that patients want. If your local competition doesn’t offer a certain treatment, make sure you are sending the message to potential patients that you do.
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Medenta offers some of the lowest subsidy rates in the market. It is one of the few providers of finance solutions to also offer a comprehensive support service, including an online patient application portal and an e-learning suite. For more information call 01691 684175 or visit www.medenta.com.
