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Trend analysis of dental practice rent and mortgage expenses: 1989-1995
1American Dental Association, Health Policy Resources Center, Chicago, Ill. 60611, USA.
Background:
The authors analyzed trends for rent and mortgage, as reported by independent active private practitioners, for the period of 1989-1995. Rent and mortgage were analyzed overall and by different characteristics.
Methods:
In the ADA's annual "Survey of Dental Practice," dentists reported gross billings and net incomes, as well as itemized practice expenses. The authors tabulated survey responses over time to develop trends and compare rent and mortgage expenses for each year. If trends over time were not exhibited, the authors combined multiple years of data to develop more reliable statistics.
Results:
Approximately three-fourths of independent active private practitioners reported rent but no mortgage expenses. The percentages of practitioners who reported rent or mortgage was stable over time. The percentage reporting rent only as an expense increased with the number of dentists in the practice, the age of the reporting dentist and the number of office locations. In contrast, the opposite was true for dentists reporting mortgage only as an expense.
Conclusions:
The authors found that office rental is more common than is office ownership and that mortgages as a percentage of gross billings and in dollar amounts were similar to rents. They also found that because the cost of office space as a percentage of gross billings decreased as the number of dentists in the practice increased, limited economies of scale may be present in the cost of dental office space.
Practice Implications:
There is not a large financial advantage to ownership, so renting is likely to remain an important way to acquire office space. As only limited economies of scale exist in office space expenses, many group practices may choose to rent office space.