Dental revenue bite suggested

THE head of Australia’s only listed dental chain, Daryl Holmes, doesn’t believe in sparing the feelings of his fellow mouth manipulators.

The good doctor accuses the profession of being “asleep at the wheel” ahead of the pending closure of a $1 billion-a-year federal dental scheme for sufferers of chronic ailments.

Holmes says the nation’s 6500 dental practices – most of them sole practitioners – face a nasty 20 per cent-plus revenue bite, at the same time as an emerging oversupply of new dentists.

These “horrific” forces will hit practice profitability and spur a flow-on reduction in the value of practice goodwill at a time when more baby-boomer dentists try to sell their business. “This is probably the most remarkable government announcement in my 25 years of being a dentist,” Holmes told Criterion.
“It effectively takes 20 per cent off dental revenues in Australia, with immediate effect.”

The federal government last month abolished the Chronic Diseases Dental Scheme, a Howard government initiative allowing patients to spend up to $4250 a year to rectify oral problems related to serious illnesses such as heart disease. The scheme, which relied on doctors’ referrals and was not means tested, was believed to have been widely rorted.

Canberra intends to replace the CDDS with a $4.1bn Medicare-style scheme for seven million low-income earners. But Holmes notes the scheme doesn’t start until July 2014 and with an intervening election there’s doubt it will ever come to fruition.

The CDDS is in run-off and ends on November 30.

Holmes says the closure is of little concern to 1300SMILES, whose 24 clinics are in regional areas where supply and demand are better balanced.

“We are sitting reasonably pretty but not arrogantly so,” he says. The Townsville-based 1300SMILES has defied the difficulties faced by other dental entrepreneurs who have tried to consolidate practices and list under a corporate banner.

Last year, the company generated its fifth consecutive record profit of $6.2 million, up 20 per cent on turnover of $36m, which was up 28 per cent.

An intriguing piece of 1300′s defensive armoury is a scheme to offer interest-free financing of major dental work, through Dental Members Australia.

The idea is that for a membership fee of $1 a day, clients are covered for preventative dental work and are financed for 80 per cent of the major stuff.

“It’s just blowing us away,” Holmes says of the initial reaction from door-to-door sales.

Apart from 1300SMILES and unlisted consolidators such as Dental Corp, dentistry remains as much a cottage industry as doily making but this will change as the costs of setting up a surgery soar.

According to IBISWorld research, the dental sector turned over $5.5bn in 2011-12, generating a $1.5bn profit. It forecasts turnover to grow at 3.8 per cent per annum over the next five years, “due to growth in volume and prices.”