Dentistry and Porter Five Forces Competition Analysis

 

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According to Professor Porter there are five forces or powers that determine the degree of competition in a business environment:

  1. Supplier power: the fewer the supplier the less power a business would have.
  2. Buyer power: the fewer the buyers the less power you would have.
  3. Competitive rivalry: how many other businesses provide similar products or services.
  4. Threat of substitution: how easy is it for customers to find another way or product to achieve the same result.
  5. Threat of new entry: how easy is it for new businesses to enter the market and compete against you.

I would argue that in dentistry in general and particularly in Canada, all the forces work against the dentists especially the newbies. Here is how:

  1. Supplier power: there is only a handful of major dental supply companies that dentists deal with. In Canada, these are Henry Schein, Patterson, and Sinclair. Their prices are very comparable. It’s a situation similar to the case of phone and data providers: Telus, Bell, and Rogers. Consequently, dentists have very little bargaining power when they purchase equipment and materials
  2. Buyer power: the end customer of dental services is the patient. Unfortunately, the population to dentist ratio is falling across Canada. This gives the patients more bargaining power over dentists. Moreover, there is only a few insurance companies that provide dental plans and they have tremendous bargaining power over dentists as patients rarely go to the dentist unless the service is covered by their plan.
  3. Competitive Rivalry: dentistry is a homogenous health service and it’s very difficult to differentiate yourself from other dentists without stepping on the toes of the licensing jurisdictions. In the eyes of the patients, all dentists are the same. Moreover, a lot of dentists are willing to throw their colleagues under the bus in the hope of winning over some patients.
  4. Threat of substitution: this might be the only power that keeps dental clinics open. People will always have teeth that need to be checked and maintained. However, it might not take long before patients can bypass the dentist to achieve their goals. Just look at the increasing number of over the counter dental products such as whitening products and night guards.
  5. Threat of new entry: although it’s still quite challenging to get into a dental program in Canada, it’s not really the case for foreign-trained dentists. Canada has relaxed its criteria for immigration and foreign dental credentials. For more information, please refer to my blog on the oversupply of dentists.

The Equivalency Process & The Standard of Care

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In 2011, the Canadian National Dental Examination Board (NDEB) launched the equivalency process for foreign or internationally trained dentists (FTDs). A foreign-trained dentist is a dentist who graduated from an un-accredited dental program. As of 2012, dental schools in Canada, the US, Australia, New Zealand and Ireland are considered accredited.

The equivalency process consists of four steps and three exams:

Part A: Application and document verification. According to the requirements, any dentist with a bona fide dental degree from any country in the planet and any GPA can apply be approved to proceed to part B. Although, there are a lot of great schools in Europe, there are a lot of private schools in developing countries where the admission and passing requirements are so low that it’s almost like buying a dental degree. Not to mention that work ethics is not as high.

Part B: Assessment of Clinical Skills. This is a multiple choice question exam on the theory of Dentistry.

Part C: Assessment of Clinical Judgement. This is also a multiple choice questions exam on possible clinical scenarios.

Part D: Assessment of Clinical Skills. This exam consists of a few excersises on plastic teeth and a manikin (simulation). This exam does NOT involve a real patient and doesn’t cover a lot of clinical procedures required of a dentist.

The Assessment of Clinical Skills excersises are:

Class II amalgam preparation.
Class III composite resin preparation.
Full metal crown preparation.
Metal-ceramic (porcelain fused to metal) crown preparation.
Endodontic access preparation on a molar tooth.
Direct Class II composite resin restoration on a pre-prepared* tooth
Direct Class IV composite resin restoration on a pre-prepared* tooth
Class II amalgam restoration on a pre-prepared* tooth.
Provisional crown restoration for a pre-prepared* metal-ceramic (porcelain fused to metal) crown preparation on Day 2 of the Assessment. The original unprepared tooth will be in the typodont used on Day 1 of the Assessment.
Rubber dam application
Those excersises are done by a Canadian or US dental student in the second year of the four year dental program!

The Clinical Skills Assessment does NOT test many necessary disciplines such as:

Endodontics (Root canal treatment)
Dentures (complete and removable)
Periodontics (gum treatment and cleanings)
Oral surgery such as extractions
Orthodontics (braces)
The equivalency process will lead to a drop in the standard of health care as more and more dentists with inferior training and work ethics are allowed to treat Canadian patients. Unfortunately the public are unaware of the equivalency price and its possible negative consequences.

 

Corporate Dentistry

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Corporate dentistry is a steadily growing trend in Canada. The largest dental corporation in Canada is Dental Corp Canada. It started buying up dental practices in 2011 and currently owns over 140 dental offices nationwide. Dental Corp Canada was founded by Graham Rosenberg (CEO) and Dr Andrew Miele (CDO). Dental Corp Australia also one of the leading dental corporations in Australia.

Another significant dental corporation is Altima Dental, which was founded in 1993 by Dr Sven Grail and Dr George Christodoulou. It owns over 30 dental offices nationwide. There are also various smaller dental corporations such as Dental Choice in Alberta. There is a growing trend of the investing dentists who collaborate to own and run multiple practices.

 

Oversupply of Dentists in Canada

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It used to be that a dentist right after graduating would hang out their shingle and not before long there would be lots of patients coming through the door. Dentists did no or very little marketing. In fact, most dental offices were on high floors in professional buildings. Yet dentists were quite busy and most of them were booked 3-9 months in advance.

Today, the picture has changed considerably. Dentists nowadays strive to be in very high exposure retail locations that come at a premium. They spend a lot of time and money on marketing and advertising campaigns. However, most of them are only booked a couple of weeks in advance.

You might be wondering why you’re seeing a dental office sign at every street corner in all cities across Canada. The answer is simple: there are too many of them!

According to the Canadian Dental Association, the population to dentist ratio has been dropping in all the provinces. In Ontario, the ratio dropped from about 1800:1 in 1997 to about 1500: 1 in 2013. In Newfoundland, it fell from about 3700:1 to about 2700:1 over the same period. Those ratios are even lower in urban centres like the GTA, Montreal, and Vancouver.

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Courtesy of the Canadian Dental Association.

Back in the late 90s and early 2000s, it was thought that there will be shortage of dentists in Canada as baby boomer dentists start to retire. However, this has proven not to be the case as the number of dentists entering the market has been far more than the ones exiting especially in the last few years due to the launch of the equivalency process and reciprocal accreditation of Australian, New Zealand, and Irish dental schools.

Are Dental Fees Too High in Canada?

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When people find out that I’m a dentist, they often ask me: why is dental work so expensive? Why is it so much cheaper to get a dental implant in Mexico?

As a person without dental benefits, I totally agree that dental treatment might be too expensive for some people that don’t have a dental benefits plan of some sort.

Let’s look at the cost of some dental treatments in Alberta as an example. Typically, if you’re taking good care of your teeth and have no issues, you would need to go the dentist’s at least twice a year:

  1. First Visit: a recall exam, X-rays  and a cleaning (cost is about C$ 300-350)
  2. Second visit (6 months later): a cleaning only (cost is about C$ 200-250)

The total is about C$ 500-600 for two hours time.If you happen to have a couple of cavities, that would typically take an hour and cost about C$ 400. This means that the clinic hourly rate is about C$ 300. This is actually how much you would pay ANY professional such as a lawyer, accountant, etc. per hour. In fact, a plumber or electrician would charge you that much for a job that takes under 30 minutes. Not to mention that cleaning your teeth or filling cavities is much more demanding physically and mentally for the dentist than punching in numbers into a computer.

It is true that there are some procedures that cost over a thousand dollars such as:

  1. Molar root canal: C$ 1000-15000
  2. Crown: C$ 1200-1500
  3. Implant with crown: C$ 4000-5000

However, those procedures take more time and skill.

To answer the Mexico questions, the cost of running a dental office in Alberta is definitely a lot higher than running a practice in Mexico due to:

  1. Much tougher regulations from Alberta Health and the provincial regulatory body.
  2. Higher cost of human resources: a dental assistant for example averages C$25 per hour in Alberta.
  3. Higher rent especially in high exposure retail locations: at least C$40 per sqft.
  4. Higher cost of equipment and materials.
  5. Higher cost of construction to begin with. In Alberta, leasehold improvements average C$ 150-250 per sqft.

There are a few entrepreneurial and investing dentists that are rich. However, the vast majority of dentists are in the middle class of society.

Foreign-trained Dentists in Canada

 

Up until 2010, a dentist would have to graduate from a Canadian or US dental school to be eligible for licensure in Canada.

Graduates of dental schools outside North America had to go through an advanced standing or qualifying program at an accredited North American dental school. This literally involved re-doing the last 2-3 years of dental school with regular dental students and graduating with a DMD or DDS degree.

Getting accepted at those qualifying or advanced standing programs was very competitive as there were only 70-80 spots across Canada. In order to get in, successful candidate would have to perform better than other candidates in all these competencies:
1. GPA earned in dental school in their home country
2. ACFD exam: a written exam on fundamental knowledge of dentistry
3. Interview by dental school teaching staff
4. Assessment of clinical skills: various clinical excersises on typodonts and manikins.

Successful foreign trained dentists who were accepted had to apply for loans and bank lines of credit in order to pay tuition and other expenses which were comparable to what a regular dental student would pay. A dentist in North America typically graduates with about 100-300 thousand dollars of debt.

In 2011, the government started:

  • Reciprocal accreditation of dental schools in Australia, New Zealand, and Ireland (2012).
  • Launched the Foreign trained dentists FTDs equivalency process.

The Equivalency process for FTDs consist of a set of three exams:
Part 1: Fundamental knowledge written exam
Part 2: Clinical judgement written exam
Part 3: A clinical assessment exam: excersises on typodonts and manikins

The exams cost less than ten thousand dollars, don’t involve a real patient, don’t test all clinical skills, and can be passed within one or two years. Applicants don’t have to be a Canadian citizen or permanent resident to write them. In fact, dentistry is on the express entry for immigration to Canada.

The number of successful FTDs has skyrocketed in the last few years. When the program first launched in 2011 only 44 candidates passed. In 2014, the number was over 260, which is equivalent to the graduates of 6 typical Canadian dental schools.

 

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