The Economics of Dentistry Are Changing. The Practices That Adapt Will Win.

The economics of running a dental practice are getting tougher. Costs are rising, insurance reimbursements aren't keeping pace, and competition is increasing as dental service organizations (DSOs) continue to expand.

For practice owners, this creates a difficult situation. You can be producing more dentistry, seeing more patients, and generating more revenue, yet still be taking home less money.

The data backs this up.

According to the American Dental Association's Health Policy Institute, dental practice revenues increased just 1.4% over a five-year period, while expenses rose 4.9%. Inflation-adjusted incomes for general dentists have also been declining over the past 15 years.

The 2025 Dental Economics–Levin Group Annual Practice Survey found that:

• 58% of practices reported higher overhead compared to the previous year.

• Among practices with rising overhead, the average increase was 4.5%.

• More than half identified rising overhead as a major challenge.

• Roughly half reported that at least one insurance plan had reduced reimbursement rates.

None of this means dentistry is becoming a bad business. Americans still spend nearly $190 billion annually on dental care, and there are plenty of opportunities to build a successful practice.

But the economics are changing, and I think those changes will force dentists to rethink how they operate their businesses.

For years, growing a dental practice largely meant attracting more patients, increasing production, and eventually expanding capacity.

Those things still matter. But when the cost of doing business rises faster than revenue, growth alone doesn't solve the problem.

You have to become more efficient.

And I believe AI and dental analytics will play an increasingly important role in helping practices do that.

Growing Revenue Doesn't Always Mean Growing Profit

Let's say you're running a dental practice that collects $2 million annually.

Your operating expenses are $1.7 million, leaving you with $300,000 in profit.

That's a 15% profit margin.

Now imagine your operating expenses increase by $100,000, but revenue stays the same.

Your profit drops to $200,000.

You haven't lost any patients. Your production hasn't declined. Your team is still working just as hard.

But you're now making 33% less money.

This is a simplified example, but it illustrates what's happening across the industry.

And the traditional response is often to focus on bringing in more patients.

Spend more on Google Ads. Hire a marketing agency. Add another provider. Open another operatory.

Sometimes those are exactly the right decisions.

But what if the practice already has enough patients and the real problem is that too many of them aren't returning for hygiene appointments?

What if your marketing campaigns are generating hundreds of leads, but half of the people scheduling consultations never show up?

What if your team is producing more dentistry, but collections are falling behind because of unresolved insurance claims?

Adding more patients won't necessarily fix those problems.

In fact, it could make some of them worse.

That is why I think we'll see a bigger emphasis on operational efficiency in dentistry.

Not simply cutting expenses, but understanding how to get better results from the resources a practice already has.

DSOs Are Changing the Competitive Landscape

Another factor is the continued expansion of DSOs.

According to the ADA's 2025 dental workforce report, the percentage of dentists affiliated with DSOs increased from 7.2% in 2015 to 16.1% in 2024.

That's more than double in less than a decade.

Meanwhile, the percentage of dentists who own their practices has declined over the past two decades.

Several factors contribute, including the financial burden of dental education, the complexity of ownership, and the appeal of working for a larger organization.

But I think there's another important part of this story.

Larger DSOs can operate differently from independent practices.

They can centralize administrative work, negotiate purchasing agreements, share resources, and standardize processes across multiple locations.

They can also compare performance across practices to understand what's working and what isn't.

For example, if you operate 50 dental practices, you have 50 different sets of operational data to learn from.

You can identify why certain locations have higher production per new patient, better hygiene retention, or stronger case acceptance.

You can then use those findings to improve other locations.

Of course, being a DSO doesn't automatically make an organization more efficient. Larger organizations have their own problems, particularly when their technology, reporting, and workflows become fragmented.

But measuring performance across multiple practices creates an opportunity smaller operators historically haven't had.

That's starting to change.

With advances in dental analytics software and AI, independent practices can access more sophisticated business intelligence without hiring an analyst or building an operations department.

And I think that's an important development for the future of private practice ownership.

Most Dental Practices Already Have the Data They Need

One thing I've learned building Root Data is that dentists generally don't have a shortage of data.

Their practice management software is already collecting enormous amounts of information.

Production, collections, new patients, appointments, procedures, treatment plans, hygiene performance, and much more.

Whether they're using Open Dental, Dentrix, Eaglesoft, or another practice management system, the information is usually there.

The problem is making sense of it.

Most practice owners are busy treating patients and running a business. They don't have hours every day to pull reports, compare trends, and investigate why certain numbers are changing.

And even if they do, knowing that a metric has declined doesn't necessarily tell them what caused it or how to fix it.

Take hygiene reappointment rates.

Let's say your practice typically reappointments 90% of hygiene patients before they leave the office.

Over several months, that rate declines to 75%.

That might not seem like a huge deal in the moment. Your schedule could still be full, and your production might look perfectly healthy.

But over time, fewer patients are returning for preventive care.

That means fewer hygiene appointments, fewer periodic exams, and potentially less diagnosed treatment.

The decline could stem from staffing changes, scheduling availability, or something as simple as an inconsistent checkout process.

You might not recognize the problem until months later, when hygiene production starts falling.

Now imagine having software that automatically identifies the trend, tells you why it matters, and helps you decide what to investigate.

That's a much more useful application of technology than simply putting another chart on a dashboard.

AI Makes It Easier to Spot Problems Before They Become Expensive

There's a lot of hype around AI in dentistry right now.

AI agents, automated front desks, virtual employees, and all sorts of applications promising to revolutionize dental practice management.

Some will be useful. Others probably won't deliver much value.

But I think dentists are overlooking one of AI's simplest and most practical applications.

It can help you understand what's happening inside your business much faster.

We recently wrote about this in Dentists Are Overcomplicating AI.

The real value isn't necessarily replacing your employees or automating every aspect of your practice.

It's turning data into decisions faster.

Think about how many things can affect a dental practice's profitability.

Your new patient show rate might decline. Case acceptance might drop. Hygiene production might slow down. Insurance collections might start lagging behind adjusted production.

And these problems rarely happen in isolation.

For example, a decline in new patient production could be caused by several different things.

Maybe fewer patients are scheduling appointments. Maybe your marketing is attracting lower-quality leads. Maybe patients are showing up but aren't proceeding with recommended treatment.

Those are three very different problems requiring three different solutions.

Traditional dental analytics dashboards can show you the numbers, but someone still has to interpret them.

AI can help analyze relationships between those metrics, identify unusual changes, and narrow down the likely causes.

The practice owner or manager can then investigate and take action.

That's the key distinction.

AI doesn't need to make every decision for you. It needs to make it easier to know which decisions deserve your attention.

Your Marketing Data Is Part of the Problem

Marketing is another good example of how fragmented data creates operational blind spots.

Let's say you're spending $15,000 per month advertising your dental practice.

Your marketing agency reports that leads are up 20%. Your cost per lead is declining, and the campaign appears to be performing well.

Sounds great, right?

But how many of those leads became actual patients?

How many scheduled appointments? How many showed up? And how much production did those patients generate?

Those are the numbers that actually matter.

The challenge is that marketing data typically lives in platforms such as Google Ads, while appointments, patient visits, and production live in your practice management software.

Without connecting those systems, you might be making marketing decisions based on leads rather than actual financial outcomes.

This is one reason we've been expanding Root Data's capabilities beyond traditional practice management reporting.

Our dental marketing funnel analytics help practices and DSOs connect advertising activity with calls, contacts, appointments, and new patients seen.

The goal is to make it easier to understand where patients are coming from, where they drop out of the funnel, and which areas need improvement.

For larger DSOs, we also offer custom AI integrations that bring together information from practice management systems, CRMs, call tracking, marketing platforms, and other operational tools.

Marketing attribution is just one application of this approach.

The larger opportunity is connecting all the information that affects practice performance so owners and operators can make better decisions.

Small Improvements Can Make a Big Difference

Here's something worth thinking about.

If a practice collecting $2 million annually improves its profit margin from 15% to 18%, annual profit increases from $300,000 to $360,000.

That's a 20% increase in profit without generating an additional dollar of revenue.

Of course, improving margins isn't always easy.

But the opportunity doesn't have to come from one dramatic change.

Maybe you reduce appointment cancellations by improving your confirmation process.

Maybe you increase hygiene retention by making sure more patients schedule their next appointment before leaving.

Maybe you improve collections by identifying insurance claims outstanding for more than 90 days.

Or perhaps you discover that one marketing channel consistently generates patients who complete treatment, while another produces mostly missed appointments.

Each improvement might seem relatively small on its own.

But together, they can meaningfully impact profitability.

And there's another benefit.

When you understand your practice's performance, you can make better decisions about where to invest.

You know when it makes sense to spend more on marketing, hire another provider, or expand capacity.

And just as importantly, you know when it doesn't.

This is one reason I believe dental analytics will become increasingly important as the economics of dentistry continue to change.

Why We Built Root Data

We started building Root Data alongside Shared Practices Group, a dental organization operating more than 50 locations.

One of the things we learned early was how important it is to give operators fast, reliable access to their numbers.

The people running these practices don't want to spend hours pulling reports or navigating complicated dashboards.

They want to know how their practices are performing, what's changing, and where they should focus their attention.

That's the problem we're trying to solve.

Root Data connects to your practice management software and organizes important KPIs, including adjusted production, collections, new patients, hygiene, case acceptance, and appointments.

Our dental analytics dashboard gives practice owners a clear view of performance, while Root AI helps identify meaningful changes and opportunities worth investigating.

Instead of digging through reports to figure out why production is declining, you can ask questions about your data and get answers in plain English.

As we continue developing the platform, our goal is to make more of that analysis proactive.

Rather than waiting for someone to notice a problem, we want Root Data to surface meaningful signals and help teams understand what to optimize next.

We're also thinking beyond analytics.

Our long-term vision for the self-operating dental practice is one where connected systems and AI handle more routine operational work, allowing owners and their teams to spend less time managing software and more time improving their businesses and caring for patients.

That won't happen overnight. Real technical and operational challenges stand in the way.

But the direction is becoming increasingly clear.

As AI improves, the cost of analyzing information and automating repetitive work will keep falling.

That should create opportunities for both independent practices and DSOs to operate more efficiently.

The Practices That Adapt Will Have an Advantage

Despite the challenges, I'm optimistic about dentistry's future.

The industry is still growing, patients still need care, and enormous opportunities remain for dentists who know how to run successful businesses.

But I don't think the next decade will look like the last.

Rising operating costs, changing reimbursement economics, and increasing competition will put more pressure on practice owners to understand their businesses.

They'll need to pay closer attention to profitability, not just production.

They'll need to understand which investments are generating returns and which areas of their practices are underperforming.

And they'll need to recognize problems sooner instead of waiting until the end of the month or quarter to discover what went wrong.

That's where I think AI will make a real difference.

Not because every dental practice needs a fleet of AI agents or a complicated new technology stack.

But because every practice benefits from better information, faster understanding, and knowing what to do next.

The economics of dentistry are changing. The practices that learn to operate more efficiently will be in a much stronger position to compete.

Increasingly, AI and dental analytics will make that possible.

If you're looking to better understand your practice's performance, try Root Data and see how we're helping dentists turn their data into better decisions, higher revenue, and stronger profitability.