And They Don't Blush

And They Don't Blush

The Federal Trade Commission is a stern adversary. Thus, in commissioning a study of health care delivery trends since 1977, it was not sufficient to seek an overview of the three areas selected for study; a second goal was "to identify various factors impeding their growth for possible investigation by the FTC staff". Did the FTC want to know if the public was well served by advertising, retailing, and franchising? Apparently not.

Well, a report was duly issued entitled "Entrepreneurial Trends in Health Care Delivery: The Development of Retail Dentistry and Freestanding Ambulatory Services". "Freestanding ambulatory services" relate to medical facilities. The report started out by stating that dentists began to encounter financial difficulties in the 1970s largely because of a great increase in the number of dentists due to the availability of federal funds through capitation grants. That's like saying that someone was knocked out because of the availability of a fist in the vicinity of his jaw. The plain truth is that the federal government was under the impression that there was going to be a shortage of dentists, and it mandated the increased number of dental students in the undergraduate and graduate programs as quid pro quo for the capitation grant money.

The report then admits that many recent graduates, ridden by debt for their education, and unable to raise the money to open an office, had to go to work for HMOs, retail dental clinics, etc. Practicing dentists, meanwhile, experienced problems with busyness in spite of the fact that more than 90 million people are covered by some form of dental insurance. This combination has resulted in an increase in marketing efforts by dental societies, and by individual and group practices through advertising.

The chief advertisers are the retail dental centers located in shopping centers and in drug, discount, and department stores. Location in retail settings was not new. The difference is that since 1977, when the U.S. Supreme Court handed down the famous or infamous Bates decision, advertising by professionals has been permissible. As of May 1982, there were 90 retail dental centers in the U.S. (see chart), with more than half in New York (15), Florida (13), California (11), and New Jersey (8).

The present trend is away from the instore facilities and toward separate offices in the same shopping centers. This may have been brought on by the stores themselves--charging high rent or a percentage of gross, relegating the dental clinic to some remote section of the store, or suddenly deciding to close a store, leaving the dentist high and dry after a considerable investment.

GROWTH OF IN STORE GENERAL DENTAL CENTERS

In-Store Centers (1)

Notes

1. Excluded from the list are limited service facilities such as hygiene or denture centers. Also excluded are freestanding centers in shopping malls or plazas.

2. Included in the May 1982 totals are four Zayre stores with scheduled opening dates on or before April 30, 1982.

Sources

1. Years 1977-1981, Dental Group News, demographic supplement to Dental Products Report, September 1981.

2. May 1982 figures derived from following sources: (a) Marilyn Stapleton, Senior Editor, Dental Products Report; (b) Robert Hankin, Ph.D., Urban Systems Research and Engineering, Inc., Boston, Massachusetts; and (c) telephone survey of selected stores by Joan B. Trauner and Joy O. Robinson, Institute for Health Policy Studies, University of California, San Francisco.(From Entrepreneurial Trends in Health Care Delivery, 1982.)

The offices are designed much like any traditional offices. What is not traditional about retail dentistry is the marketing. In lower income areas it is based on expanded hours, advertising, high volume, and competitive fees. These offices lean toward advertised specials, introductory offers, discount coupons, loudspeaker announcements, and package stuffers--marketing efforts of retail businesses. In middle-class areas, the retailers emphasize quality, convenience, play rooms, and TV in every operatory. In areas where workers do not have much dental insurance coverage, there is a lot of price advertising. In areas where workers have high wages and a good deal of dental insurance coverage, there is little or no price advertising; the emphasis is on out-of-pocket costs.

With most state laws banning lay ownership of a dental facility, there appear to be only two instances of corporate ownership of retail dental facilities--Searle Optical in Florida and IPCO Corporation in Maryland--although most in-store facilities have an intermediary management company between the store and the dentist. Franchisors operate both in-store and in separate facilities. Initial license fees range from $20,000 to $50,000, and the initial investment in the office can range from $150,000 to $700,000. Additional fees are for a monthly advertising charge (maximum $1500-2000 per month) or, more often, a percentage of gross (2-6%). As of May 1982, there were eight franchise programs--Dental Works, Inc. (New York), Dental World Center, Inc. (New York), DentCare (New York), Nu-Dimensions (New Jersey), Omnidentrix Systems Corporation (Massachusetts), Dental Enterprises, Inc. (Illinois), Retail Dental Centers, Inc. (Minnesota), and AmeriCare (Arizona). These programs are not necessarily confined to their states of origin, and there are indications of greatly expanded efforts by some of them. Dentists purchasing a dental franchise incur high costs that must be recouped through high volume, productivity, and low personnel costs.

Full-time specialists in retail settings are rare, but many retailers bring in specialists one or two days a week. This may be on a sublet basis, or, more often, on a percentage basis that leaves the specialist with 35-50% of fees.

Appalling as it may seem, since these various new marketing forces were turned loose there have been no published research efforts to document what kind of service is being rendered and whether the customers of these retail offices are being recruited from the 50% who have not seen a dentist regularly or are merely being enticed away from traditional dental offices through advertising. Retailers generally say that they think their patients are from the group that has not been seeing a dentist regularly, but there is no evidence that that is so. Retailers are also under the impression that their patients are attracted by convenient locations, extended office hours, and no need for an appointment, but interviews showed that less than 5% of patients agreed. Their major reason for going to these centers was a belief that the fees would be reasonable.

Those who are attracted by reasonable fees would probably be surprised by a survey that showed that while some fees in some locations were considerably lower, many fees were comparable to or even higher than the area average. However, the fees quoted for orthodontia (sic) were low ($975-1500).

As requested by the FTC, factors impeding development of retail dental centers were also investigated. Those mentioned were:

1. Some state licensing boards interpret charging a percentage of gross in lieu of rent as fee-splitting.

2. Some shopping centers may give an exclusive lease to a traditional dental office.

3. Management companies may be required to take a package of sites from discount/department stores, and some of the sites may be marginal as support for a high-volume dental operation.

4. Some state licensing laws restrict procedures that may be performed by dental auxiliaries and dental hygienists--specifically New York, New Jersey, Massachusetts, and Rhode Island. If licensed professionals must be hired, but costs kept down at the same time, there is a tendency for high turnover, youthful, inexperienced personnel, and disinterest, all of which affect quality.

5. Small-scale operations cannot afford adequate advertising campaigns.

6. Some state laws still curtail effective use of radio, TV, and other advertising. For example, if the names of the dentists must appear in the advertising, then a multi-office operation cannot have a standard advertising format. Some states prohibit discounted fees, and some prohibit advertising discount coupons, introductory specials, and free consultations.

7. Some state laws bar the use of fictitious trade names, thereby limiting the effectiveness of franchises.

8. There is a question of whether dentists can waive co-payment and deductibles for insured patients without the insurance companies lowering fees. In some states, such waiver is illegal.

9. Membership plans, in which a small annual fee ($6-35 per person) entitles one to reduced fees and free semiannual or annual checkups, are having problems with some regulatory agencies on the question of fee-splitting.

10. The continued active opposition of dental associations seeks to turn back the clock in many ways through legislative action.

The report concludes by pointing out that retail dental offices are for-profit operations, and not cost containment programs; and that "it is impossible to make definitive statements about the impact of these services upon system-wide costs, quality of care, or the distribution of health facilities". And they don't blush when they say it.