141: 2025 Q4 - State of Dental Industry (ADA Report)

Foreign. Welcome, everybody, to another episode of the Dental Boardroom podcast. As you know, every quarter I do an update on the status of the dental industry using the ADA report that they put out to the public. And I'm using AI to summarize it, which will honestly just do a much better clear job than me on this. It's the one area where I do use AI for a full episode. Hope you enjoy.

Welcome back to the Deep Dive. It is late January 2026.

It is.

The holiday decorations are down. The tax forms are starting to, you know, trickle into the mail.

That distinct back to reality feeling. It. It hits hard this time of year, doesn't it?

It really does. And normally around now, we'd be talking about resolutions, maybe making some wild predictions, but today I want to look backward to really understand where we are right now. We're unpacking the Q4 2025 State of the U.S. dental Economy Report from the ADA's Health Policy Institute. And honestly, I spent some time with this data yesterday, and it feels. Well, it feels contradictory.

Contradictory is a polite way to put it. It's complex. You have these really green lights and then some flashing red ones right next to them.

Exactly. You have patients spending money, but dentist confidence is down. You have practices trying to hire, but then they're also complaining they aren't busy enough.

Right.

So if you're a dentist listening to this, you're probably trying to figure out, is the sky falling or is this a boom time? What is the headline here?

If you need one word, just one word to anchor this whole discussion? I think the word is resilience.

Resilient.

But I want to be really clear, not that everything is sunny and great kind of resilience. It's more of a, you know, gritting your teeth and getting through resilience. The data shows an industry that is definitely taking hits from inflation and reimbursement issues, but it's essentially refusing to break.

So battered but building.

That's the perfect bumper sticker for this economy. I like that.

Okay, let's start with the building part, because for all the doom and gloom headlines we saw about the broader economy in 2025 Cost of living supply chains, the consumer demand numbers in this report are surprisingly stubborn.

They are. And this is the silver lining of the entire report. It really is. It's the bedrock that everything else stands on.

Okay?

If you strip away the sentiment, how people feel, and just look at the transactions, the money is there. In the first nine months of 2025, consumer spending on dental services was up 3%.

Now, let me play devil's advocate for a second. Is that just inflation? Are people just paying more for the same root canal?

That's the first question everyone asks, and it's a good one. But look at the longer timeline in the report. Spending is up 9% compared to pre pandemic levels, and crucially, that is inflation adjusted. Oh, wow. So even after you account for the fact that a dollar buys less today, the actual volume of value flowing into dental practices is significantly higher.

That is significant because think about the context. 2025, you had fluctuating gas prices, high rent, expensive groceries. You would think that elective dental work or even just routine maintenance might be the first thing a family cuts, right?

The first thing to go. But they didn't. And that tells us something really fundamental, I think, about this shift in patient psychology. Oral health has become sticky. It's moved from a nice to have to a must have for a bigger chunk of the population. Patients are prioritizing their teeth even when their wallets are getting squeezed everywhere else.

Now, to be fair, we have to put this in the broader healthcare context. The report does compare dental growth to general physician services, and we aren't exactly winning that race, are we?

No, we are not. If you look at physician services over that same post pandemic period, their spending is up about 24%.

24%. So dental is up 9, medicine is up 24. That is a massive gap. Why?

Well, a few factors. One is just the aging population driving chronic disease management, which hits the medical side harder. But it also highlights that while dental is resilient, it's not a rocket ship. We're stable.

Which in this economic climate, I'll take.

Stable and growing is a win. Absolutely.

Okay, so the patients are coming through the door, the demand is there. If I'm a practice owner, I should be happy, right? My appointment book is decent. Revenue is flowing.

You'd think so.

So why then, when I look at the economic confidence charts in this report, is the mood so Source Confidence in Q4 2025 is lower than it was a year ago. It stabilized a bit, but it's still down.

And this brings us to the most critical concept in this whole report. If you take nothing else away from this deep dive, understand this dynamic. We call it the fiscal squeeze.

The fiscal squeeze sounds like a bad dance move.

Much more painful. See, revenue is the top line. That's the patient spending we just talked about. That looks fine, but the bottom line, what you actually take home, is being attacked from two sides at the same Time.

Okay, so let's break those sides down. What's hitting them first?

Expenses. Just the cost of doing business. The report cites that prices for dental equipment and supplies jumped 5% just since the start of 2025.

5% in a single year. That's well above the general inflation rate we saw.

Exactly. So every glove, every bur, every composite, it all costs more. Plus, labor costs are up. So your overhead is just heavy. It costs more just to turn the lights on every morning.

And the other side of the vice, Reimbursement.

This is the killer.

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The report is explicit. Insurance reimbursement rates are flat.

Flat. Not even a small cost of living adjustment.

In many cases, zero. So do the math. Your supplies cost 5% more, your staff costs more. But the check you get from the insurance company is the same as it was in 2024, maybe even 2022.

So you're doing the same work, maybe even more work, because demand is up, but your profit margin just gets thinner and thinner.

That is the squeeze, and that is why confidence is down. It's that cognitive dissonance. You look at the schedule and say, I'm busy. Then you look at the P and L and say, where did the money go?

Speaking of busy, there's a weird data point here I want to push back on. The report says one third of dentists reported being not busy enough in Q4. 2025. That's up from a quarter the year before.

Right.

But at the same time, wait times for new patients are stable at around 13 days. How can a third of the industry be twiddling their thumbs while patients are spending record amounts?

It's a distribution problem. It's not that the industry isn't busy. It's that the busyness isn't spread out evenly. Yeah, we're likely seeing a shift where certain practices, maybe modern ones or those in high growth areas, are slammed while others are seeing gaps in the schedule.

Could it be an efficiency issue, too?

It could be, but not busy enough. Combined with stable wait times, that suggests excess capacity. It means the infrastructure of dentistry, the chairs, the equipment, could handle more patients than are currently coming in.

Which sounds like an opportunity, a massive opportunity.

If you can figure out the marketing or the patient conversion to tap into that. The market share is right there for the taking. But you have to do it while navigating that fiscal squeeze.

So you have to grow your way out of the margin compression.

Precisely. You can't cut your way to growth when costs are rising. You have to increase volume or efficiency, put more production through the same fixed.

Overhead, which requires a team. You can't increase volume if you don't have the hands to do the work. And this moves us right into the labor market section. For the last three years, the story has been, I can't hire anyone. Did that finally break in 2025?

Yes and no. We call this the workforce puzzle. The headline number is positive. We? The dental sector did add jobs in 2025, employment is up about 1.3%.

Okay, so people are coming back to work slowly.

But you have to split the workforce into two completely different buckets. Hygienists and assistants. They are living in two different realities.

Let me guess. The hygienist reality is still a nightmare for practice owners.

A total nightmare. The report literally calls the hygienist the white whale of recruiting. About 1 in 3 dentists were looking for a hygienist in Q4. And of those 95%, 95 rated it as very or extremely challenging.

95%. That's basically statistical unanimity. It means nobody's having an easy time.

Nobody. And that number hasn't budged in three years.

Right.

We have a structural shortage of hygienists. That just isn't fixing itself.

But the story for assistance is different. You said there was a glimmer of hope.

It is. It's the first real glimmer of hope we've seen in the labor data for a while. It's still hard, don't get me wrong. About 83% find it challenging. But that number used to be up near 90%.

So the fever is breaking just a little.

A little bit. We're moving from impossible to just very difficult. It suggests the market for assistance is maybe finding a new equilibrium. Wages likely rose enough to attract some people back.

There was another stat in that section that caught my eye. Average weekly hours worked by dentists and staff are down slightly about half an hour in 2025. Is that a sign of that not busy enough trend or is it a lifestyle thing?

It's likely a mix, but I lean toward the lifestyle and burnout factor. Remember, post Covid practices were running at redline. Everyone was exhausted. Seeing that number dip a bit suggests a normalization.

Or, and this is maybe the cynical take, if we go back to the fiscal squeeze, are owners cutting hours to manage staff costs?

That's a very cynical but also a very possible interpretation.

Yeah.

If margins are tight, you don't keep the team on the clock. If there's no patient in the chair, you tighten up the schedule.

Okay, let's pivot to the psychology of the dentist. This report does something I love. It tracks the save you gap. It asks dentists what they plan to do, then checks back a year later to see if they actually did it.

It is the ultimate reality check. It separates what you want to do from what you actually can do.

So let's look at the gap for 2025. Back in late 2024, they asked dentists their plans, a huge number. 23% said, this is the year I'm going to drop out of some insurance networks.

Which makes total sense given everything we just said about the fiscal squeeze. If reimbursement is flat, the logical move is to fire your worst payer.

Exactly. The spreadsheet says do it. But then we look at what actually happened in 2025.

Only 8.7% did it.

Wow, that is a massive gap. Almost a quarter said they would and less than 10% actually pulled the trigger. Why?

It's fear. It's the devil you know versus the devil you don't. Dropping a network feels like jumping off a cliff. You worry, will my patients leave? Will my schedule just empty out? Even if the math says you're losing money on every procedure, that psychological security of a full, even a low paying schedule is just hard to give up.

It's interesting because when asked about spending money on equipment or software, the gap was much smaller. If they said they were going to buy a laser, they mostly did.

Because buying a solution is easier than restructuring a business model. Writing a check for a new piece of tech feels like progress. It feels active. Cutting ties with an insurance company feels like a huge risk. It's human nature.

But here's where we look forward. We're in January 2026. The report asked these same dentists about their plans for this year. And despite the squeeze, despite the fear, the mood is surprisingly aggressive.

It is. I'd call it construction mode when they're asked about their top challenges. Of course, insurance and staffing are number one and two. No surprise there, right? But when asked about actions, 40% of dentists plan to add staff this year.

Two and five are hiring. You do not take on more payroll if you think your business is dying.

Exactly. That is a massive vote of confidence in their own practices. They believe the patients are there. They believe the demand we talked about at the top of the show is real, and they are staffing up to meet it.

And a quarter plan to buy major equipment.

Yes, but here's a nuance we need to highlight. The report splits this data between private practices and DSOs. And the DSOs are behaving differently.

How so?

The DSOs are significantly more aggressive on the technology front. A much higher percentage of them plan to invest in new software and equipment compared to the private guys.

Is that just deeper pockets?

Partly capital, sure. But it's also strategy. DSOs are trying to use technology to solve the fiscal squeeze. If you can use AI or automated billing or faster scanners you can increase efficiency. They're trying to tech their way out of the labor shortage and the margin.

Compression, while the private practice is trying to what, hire their way out?

In a sense, yes. Yeah, or just work harder. The private practice is betting on the relationship. The DSO is betting on the workflow.

That's a fascinating split, but I have to go back to the insurance thing.

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For 2026 what's the say number for dropping networks? Is the dream still alive?

It's even higher. More than 1/3 over 33% of dentists say they plan to drop some networks this year.

So the intention is rising. It was 23%. Now it's 33.

The pain is increasing. The fiscal squeeze isn't letting up, so the pressure to act is getting higher. The real question for 2026 is will the dam finally break?

Do you think it will? Or will we be sitting here in January 2027 talking about another huge Seydou gap?

That's the million dollar question. My gut says we might see a real shift this time. And here's why. Inflation isn't going back to zero. Supply costs aren't dropping. If insurance reimbursement doesn't budge, the math just stops working for a lot of practices at some point. The fear of stagnation outweighs the fear of dropping insurance.

So we might be at the tipping point where the quote unquote safe option keeping the insurance is actually the most dangerous one.

We might be that 8.7% who actually did it last year. If that doubles to 16 or 17% this year, that's a market moving event that starts to change the leverage dynamic with the insurance companies.

So pulling all this together, we're looking at Q4, 2025 to understand 2026. We've got resilient demand, a tight squeeze on profits, a thawing labor market for assistance, and a desperate one for hygienists and a profession that is nervous but still investing.

Battered, battered minute building. I'm sticking with that.

It's a strong summary. But I want to leave our listener with one last thought on that consumer spending stat we started the show with. IT spending is up 9% over pre pandemic levels. Inflation adjusted.

Right.

To me, that is the most empowering piece of data in this entire report. It proves that the patient values the dentistry. The patient is willing to open their wallet.

That's the key.

The only entity in this equation saying dentistry isn't worth more is the insurance company.

Correct. The intermediary is the bottleneck, the end user. The patient is happy to pay for value.

So if you are a dentist listening to this and you are terrified of that Seydu gap, terrified of dropping that network, maybe look at that consumer spending chart again. The market is telling you that your service is valuable. The patients are proving it with their behavior.

It's a powerful reframing. We often think patients only come because of the insurance card in their pocket. This data suggests they come despite the economy because they truly value their health.

And if you believe that, then 2026 isn't the year to be squeezed. It's the year to align your business model with the people who actually value you. The patients, not the people who view you as just a cost center.

That is the strategic leap if you can make it. The data says the demand is absolutely there to support you.

We will have to see if the do catches up with the SEI this year. I'll be watching the Q1 2026 numbers like a hawk.

I'll bring the stack of papers next time.

Perfect. To everyone listening, thank you for diving deep with us. Whether you're hiring, buying, or just trying to navigate that squeeze, keep analyzing and keep building. We'll see you on the next deep dive.