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HPI: Gap in earnings between owner-dentists and nonowners declining

July 30, 2018

By David Burger

Adjusted gap earnings of self-employed and employed health care professionals graph
The difference in earnings between dentists who own practices and nonowner dentists is narrowing, according to a paper developed by the ADA Health Policy Institute and published in The Journal of the American Medical Association in July.

Marko Vujicic, Ph.D., chief economist and vice president of the HPI, co-authored the paper, Earnings of Employed and Self-employed U.S. Health Care Professionals, 2001 to 2015, with Kamyar Nasseh, Ph.D., a health economist with HPI.

“The percent of dentists who are owners of their practice is declining over time,” said Dr. Vujicic in an interview with the ADA News. “This trend has been identified before, but our paper confirms it using a different data source and also compares dentistry to other occupations.”

He added that the gap in earnings between employees and owners is shrinking over time in all health care professions. “For physicians and many other occupations, it has actually disappeared,” Dr. Vujicic said. “Dentistry [still] has a bigger ownership premium compared to other professions.”

The changing landscape is apparent, Dr. Vujicic said. “We know that the share of dentists in dental service organizations is increasing, the share of dentists who are owners are declining and the share of dentists in solo practice is also declining. All of these trends are related and clearly indicate practice structure is changing. Given that, it is important to understand the implications of the shifting practice model for dentists.”

“Given current demographic trends and economic realities, the trend toward practice consolidation and more dentists being employees is going to accelerate,” he said. “This study suggests that the financial return of investment for owning your practice, at least in terms of earnings, is declining.”

The researchers used the 2001 to 2015 American Community Survey to compile their paper. The analyses were restricted to 175,714 self-identified dentists, physicians, pharmacists, optometrists, podiatrists, chiropractors and physical therapists aged 30 years and older who worked at least 40 weeks per year and 20 hours per week. More than 20,000 were dentists.

The study concluded, “Future research is warranted to determine the driving forces behind the shift away from self-employment and the shrinking earnings gap between employed and self-employed health care professionals.”
 
Read the paper.