Dentistry and Inflation
With prices rising sharply in the United States and around the world, people are feeling the pinch in their pocketbooks. This of course often means that patients will take steps to reduce their spending on items that they deem to be non-essential. It still remains to be seen whether dental care will be one of these restricted expenses, but some dentists are taking some preventive steps to protect their practices from the effects of inflation. Inflation raises costs for practices just like it does for patients, with costs for everything rising across the board. Some dentists are responding by raising prices, seeking reduced interest rates on debt, and inquiring about cost reductions from partners and vendors.
Dentists begin to feel the effects of inflation while they are still attending dental school. Student loan rates are adjusted regularly by the Department of Education and tied directly to the yield on the 10-year Treasury Note. Recent graduates from dental school may face higher financing costs for practice and equipment purchases or consumer items such as a car or a home.
The Consumer Price Index (CPI) measures the change in prices paid by consumers for goods and services and is used by the government to track inflation. The data is compiled monthly and used by the Federal Reserve Board at its meetings to control potential inflation by raising interest rates.
Fortunately, dentists can take preventive steps to ensure that rising inflation does not affect their overall productivity. Here are some simple steps that can help insulate your practice from the effects of rising inflation:
It’s nobody’s favorite step, but it is often unavoidable: raise your fees. Over a quarter of all dentists have raised their fees, and the amount should be across the board for all fees. The American Dental Association publishes a survey of dental fees.
Conduct a salary review. Examine what you pay each staff member to determine whether it is competitive in your local market. It is always less expensive to retain staff than to retrain new hired. Review nontaxable benefits as a way of retaining employees, such as a 401(k) plan, health savings/childcare account, and other options that benefit staff members without increasing their tax liability.
Talk to your dental supply and dental lab representatives to see if you can cut costs. Often, dental supply and dental lab companies will provide discounts on items if they have a large portion of your business. Negotiating discounts can produce some significant savings.
Renegotiate loan rates with your financial institutions. While interest rates are still relatively low, now is the time to meet with your banking professional to lock in favorable interest rates and save significant interest costs over the course of your business loans.
By following a few proactive steps, dentists can make sure that the effect of rising inflation is minimized in their practices.
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