According to the U.S. Bureau of Labor Statistics, the cost of dental equipment is rising. Recent data shows an acceleration in the already steeply upward-sloping pre-crisis trend, indicating a clear break from historical norms.
This resurgent inflation puts dentists in a difficult position. Either they absorb higher costs (which hurts their bottom line) or raise prices (which isn’t popular among patients).
Statistics show that they are doing the latter, with prices for dental services rising 1.9% in the month of June alone, the highest on record according to the American Dental Association. Dental practices simply cannot shield cost increases from their patients, so the cost of out-of-pocket treatment and insurance is going up.
Naturally, the cost increases facing the dental sector aren’t specific to healthcare. They are a symptom of supply chain disruption and credit expansion affecting the rest of the economy. However, the effects on the lives of ordinary people could be significant. The U.S. could be entering a period in which citizens on average incomes cannot afford to receive basic dental care.
Many dental practices cite staff salary increases as the chief reason for raising prices. But inflation has been present in the sector for some time now. When the HPI surveyed dentists at the beginning of the year, it found that 35 percent believed rising input costs were their biggest challenge.
As economists point out, the U.S. is currently in the midst of a two-pronged inflationary crisis. On the one hand, supply shortages are pushing up prices in the short term, causing dentists to fight over a dwindling stockpile of equipment already in the country. And on the other hand, an asset “superbubble” (as it has been called by GMO’s billionaire hedge fund manager, Jeremy Grantham) is now deflating, releasing all the stored-up money printing of the last forty years into the real economy.
For dentists, these events mean that the price of dental equipment is rising and will likely continue to do so. In 2023, prices could be 10 percent higher than they are today, and in 2024, they could be 22 percent higher.
The reason for this has to do with the overvaluation of assets. Stocks, bonds, and real estate are all above fair value, at least compared to historical averages. And because of this, perceived wealth is higher than warranted by the productive capacity of the economy. As investors draw down on their capital assets and spend them on goods, more dollars are entering circulation. Unfortunately, there are so many dollars now changing hands that both consumer and producer prices are rising.
The Federal Reserve is currently raising rates and trying to deflate asset markets and control inflation. Many believe that its strategy will work. But the pain of raising rates to the level required to stop prices from going up will likely be too difficult politically. As a consequence, more quantitative easing and credit creation are likely to follow next year, pushing up equipment prices even more.
For dentists, this economic environment should serve as a salutary warning. Failing to adequately care for medical equipment imposes extraordinarily high costs because the price of replacement goes up every year. Any clinics that make capital outlays in 2023 or 2024 will pay a large premium compared to today.
Fortunately, there is a solution: better equipment management and maintenance. Dentists that track their equipment’s needs can reduce the burden of both producer price inflation and supply chain disruptions.
In practice, this means using software solutions. Take UptimeHealth, for instance. With our tool, you can budget for spending on new equipment, anticipate servicing requirements, and assess maintenance efficiency. In short, you get a full overview of your current equipment position and how to maximize returns from it. It’s easy to see depreciation and pull data and reports showing you your current position, ensuring that you achieve a healthy return on investment.
In today’s inflationary environment, tools like this are helpful. When you can track your equipment needs, you no longer have to make last-minute purchase decisions. Moreover, you can delay the need to purchase new equipment, avoiding near-term inflation. While other clinics are raising their prices in a knee-jerk manner, you have more scope to keep yours constant and attract more loyal customers.