Is a Market Crash Coming? The Dental Indicator Says Yes

Is a Market Crash Coming? The Dental Indicator Says Yes
Tracking the performance of the nation's dental industry may suggest broader themes in the overall economy (Photograph by Getty Images)
Photograph by Getty Images

If you’re looking to predict where the economy is heading, look under your nose—right at your teeth. When times get tight, dental care slips. Tracking the performance of the nation’s dental industry, then, may suggest broader themes in the overall economy.

Sikka Software provides business health-care applications to small and midsize practices, including dentists’ offices. The company has immense amounts of aggregated data on patient behaviors, and an analysis of patients at 12,200 American dental practices suggests some early economic warning signs.

The chart above shows that patients are increasingly canceling required follow-up appointments, or simply not showing up. According to Vijay Sikka, the company’s founder, “This is a forward indicator signifying lack of consumer confidence.” The current levels are now below 1.8, roughly where we were in the down years of 2007 to 2009. The uptrend from 1.8 to 2.0 that occurred during the economic recovery has quickly disappeared.

Second, compare what dentists planned to do at regular hygiene appointments—cleanings, X-rays, maintenance—with what was actually done. The last couple of months have shown a high level of volatility, which suggests that patients’ plans are more fragile than they’ve been in the past. Sikka says this may only be the beginning, and notes that “we haven’t seen similar fluctuations in the recovery years.”

Sikka also likes to look at “treatments planned,” because it highlights how dental practices try to chase revenue—more treatments mean more money. “Practices are getting ahead of themselves and planning more treatments than the patients are accepting,” Sikka says. “It’s a disturbing trend and in contrast with recent years.” And when he says “getting ahead,” he means that practices are getting “desperate,” trying to aggressively schedule people and presenting plans to patients, many of which don’t get accepted or scheduled.

Finally, it comes down to money. And people aren’t paying up. Accounts receivable are now climbing back up to 2008 bubble-bursting levels. It’s up 22 percent compared with 2013. “The steady curve upward shows money is not being collected after treatments are performed,” Sikka says. “It could be because patients or insurance are not paying in time, and over-optimistic treatments are being performed by dentists.”

Overall, Sikka’s data suggest that weakness is starting to appear in the economy. If the trends in 2014 prove to be as predictive about the economy as they were in 2007 and 2008, we may soon be looking at a downturn.

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