The Economics of a Dental Practice: What We Know, What We Could Know, and What Is Not Worth Measuring

Dentistry is a large and, on paper, well understood business. There are roughly 25,500 to 26,500 dentists practising in Canada, working out of about 16,000 dental offices, according to the Canadian Dental Association and Innovation, Science and Economic Development Canada's industry statistics. Combined spending on dental services in Canada reached an estimated 20.5 billion dollars in 2023, split between roughly 19.3 billion in private spending and 1.23 billion in public spending, based on data compiled from the Canadian Institute for Health Information.

So the sector is large, stable, and well measured at the national level. The strange part is what happens one practice down. Most owners run on surprisingly thin information about their own business. They can tell you their monthly production, their collections, and a single overhead percentage. Very few can tell you the one thing that actually drives a pricing decision: the estimated cost and margin of a single procedure. This article is about that gap, and about resisting the opposite temptation, which is to measure everything in sight.

What we already know

The number most owners can quote is overhead. The American Dental Association's Health Policy Institute puts average general practice overhead at roughly 60 to 65 percent of collections, with general practitioners reporting mean practice expenses of about 61.3 percent of collections in its 2023 data. That figure is a decent sanity check. But it is almost useless for any decision more specific than whether total costs are roughly in line.

Here is why. Overhead is an average across the whole practice. It blends a profitable implant with a break-even cleaning and reports the result as a single percentage. So knowing your overhead is 62 percent tells you nothing about which procedures are carrying the practice and which ones are quietly being subsidized by the rest.

The major cost categories are reasonably well documented in industry benchmarks too. Staff compensation is consistently the largest single expense, in the range of 25 to 30 percent of collections. Occupancy costs such as rent and utilities tend to run 7 to 9 percent, clinical supplies and lab fees combined often land in the 4 to 7 percent range, and administrative costs add another 6 to 8 percent. Those splits are handy for budgeting. They do not help you price a crown.

One pattern in the data is genuinely useful: the effect of scale. Benchmark analyses derived from ADA HPI data suggest practices collecting under 750,000 dollars often run overhead of 70 to 80 percent, practices between 750,000 and 1.5 million tend to sit at 60 to 70 percent, and practices above 1.5 million frequently get below 60 percent. That is fixed-cost absorption at work. The chair, the building, and the front desk cost about the same whether they are busy or not.

What we could know, but usually do not

Here is the information that would actually change decisions, and that most practices never assemble.

Start with the estimated cost per procedure. The scarcest and most expensive resource in a practice is clinical chair time. A 45 minute hygiene appointment and a 90 minute crown eat very different amounts of it, yet a fee schedule treats them as unrelated line items. Allocate the loaded cost of each procedure, meaning the staff time, the supplies, the lab work, a slice of equipment, and a slice of overhead, and the picture often flips. Some routine, high volume procedures turn out to sit at or below their estimated cost. Some procedures that feel premium earn less margin than the fee suggests once chair time and lab fees are counted.

From there, margin by procedure and by provider follows directly, and so does capacity utilization, which is just how fully each operatory is used. That last one is the dental version of asset utilization on a factory floor, and it is every bit as telling.

So why is this rare? Because practice management software is built to report production and collections, not cost. Working out cost at the procedure level takes activity based thinking that very few practices apply, and the inputs sit in supplier invoices and appointment schedules rather than in the billing system. The information exists. It just never gets turned into the two numbers that matter. This is exactly the problem I built DentistOpFlow to solve, and I will not pretend otherwise, but the principle holds with or without any software: the costs you already pay can be turned into a estimated cost and margin for each procedure.

What is not worth measuring

The opposite mistake is just as common, and a lot more tiring. Once a practice decides to become data driven, it often starts tracking dozens of numbers that never change a single decision. A few rules keep this in check.

Measure what changes a decision. Cost and margin per procedure change your fees, your scheduling, and your hiring. A fifteenth patient satisfaction sub metric does not. If you cannot name the decision a number would influence, do not bother collecting it.

Do not chase false precision. Apportioning the cost of a box of gloves to the nearest cent across procedures is effort spent for nothing. A reasonable estimate of a big cost beats a precise measurement of a trivial one every time.

Be careful using industry average fees as a target. The regional average fee tells you what other practices charge. It tells you nothing about whether your fee covers your cost. A practice that prices to the regional average can be losing money on a common procedure and never see it, because the benchmark hides the problem instead of revealing it.

Why this matters now

The Canadian Dental Care Plan, which began rolling out in 2024 with seniors able to use coverage from May 2024 and broader expansion through 2025, is reshaping the fee landscape for a meaningful share of patients. At the same time, staff wages, the largest cost in the practice, have been climbing, and lab fees with them. When fees are increasingly guided by a public plan and costs keep rising, the practices that understand their per procedure economics can adjust on purpose. The ones that do not will find out about their losses at year end, when the only options left are blunt ones.

The economics of a dental practice are knowable. Most of the inputs already sit in your invoices and your schedule. The work is not collecting more data. It is turning the data you already have into the two numbers that drive every important decision, the estimated cost and the margin of each procedure, and then cheerfully ignoring almost everything else.