As discussed in our prior multi-part series, dental clinic and dental practice management companies remain an exciting investment opportunity for many private equity investors. Medicaid spending on dentistry increased 63% to $7.4 billion between 2007 and 2010. Medicaid reimbursement in the field is, in fact, projected to reach $622 billion over the next decade.
Thus dental companies tend to be heavily dependent on both their commercial payor relationships but Medicaid reimbursement as well. For example, in 2011, dental clinics affiliated with Church Street Health Management LLC had over 1 million patient visits; the company reported $161 million in revenue with over 90% of it originating from Medicaid and the State Children’s Health Insurance Program (SCHIP) during that same period.
Of course, as with many subsectors, there are companies who push the limits of regulatory appropriateness, and we occasionally see instances of companies being ousted from Medicaid. It is therefore important for investors to understand the potential abuses and closely vet any dental company investment for these risks.