An Analysis of Smith Dental Care, LLC.

By Cassie Peay

Econ 2010: Microeconomics

July 25th, 2021
 1. Company Profile:

The firm, Smith Dental Care, was established in 2009 by Dr. John Joshua Smith, DMD. This
office is based in Sandy, Utah. Smith Dental Care is a dental practice, in which they provide cosmetic
smile makeovers, implant restoration, crowns and fillings, dental cleanings, and Botox. On average,
this office sees up to as many as 40 patients in a single day. This includes patients coming in for their
6-month checkup as well as those who are coming in for specific treatment from the doctors. Due to
the high volume of patient traffic, a complete and knowledgeable, full-time staff is necessary. Smith
Dental Care employs a total of 12 people. This includes administrative personnel, dental assistants,
dental hygienists, and two dentists. This practice is considered well-established and well-known for its
unmatched patient care and strong, patient dedication. (https://www.smithdentalcare.net/)

2. Consumer Demand:

There has always been a high demand for services provided in the dental industry and there
always will be. It’s a pillar of the healthcare standard and shouldn’t be neglected. Dental health, or lack
thereof, impacts so many responses in our bodies, such as diabetes, heart disease, stroke, high-risk
pregnancy, and gut health. (L. Yoffee, “The Link Between Oral Health and Medical Illness.”) The
importance of dental services always remains high, so while demand may rise and fall for elective and
cosmetic treatment, demand generally always remains fairly inelastic for hygiene appointments and
necessary restorative procedures, regardless of changes in price.
The unique thing about dental practices and their pricing is that it’s not up to the firm, but
rather the insurance companies. The fees that firms are legally required to bill patients are a
contractual obligation. That makes demand even more inelastic because fees will be the same across
the board, regardless of which dental practice you go to, if you have dental insurance. For those that
don’t have dental insurance, most offices generally have similar in-house fees, so the patient is going to
find an office they like, anyway. Proving again, that the demand for dental is inelastic. If there is work
to be done, people will get it done.
Interestingly, the demand for dental procedures has actually risen in the last few months,
recovering from the Covid-19 pandemic. People started to use their stimulus money toward dental
work they had otherwise put off, either due to hesitance or cash flow. Additionally, I believe that
people were just anxious to get back to “normal” but, ultimately, the pandemic made a lot of people
realize how important their dental health is. Patients who were ready to get back to their regularly
scheduled dental appointments increased to 94% in April of this year, compared to 78% from August of
2020. (D. Burger, “Consumer Confidence in Returning to the Dental Office Hits a New High”)
Some of the factors that influence elasticity of demand would include how educated the patient
is on what needs to be done, waiting periods on their insurance coverage, how severe their symptoms
are, the state of the economy, and how comfortable they are with the office staff. For the firm to
successfully keep future demand high and set themselves apart from other offices, the staff should be
well-educated and kind, and the dentist should inform the patients on what needs to be done. The more
well-informed patients are, the higher demand stays to provide sufficient income for the firm.

3. Cost Structure:

There are many costs associated with running a dental practice. The variable costs include
dental lab fees, dental supplies, office supplies, and implant parts. The fixed costs consist of lease
payments for the space, utilities, taxes, depreciation on dental equipment, bank charges, insurance, and
marketing. Fixed costs absolutely make up the largest amount of costs for Smith Dental Care.
Costs for certain supplies could rise in the future, with the ever-growing number of dentists in
the market. If the number of dentists increases nationwide like experts are predicting, then dental
supply companies could start increasing their prices annually. According to the U.S. Bureau of Labor
Statistics, the overall employment of dentists is projected to rise 3%, between 2019 and 2029. Dental
product suppliers could see that projected increase and consider raising prices in order to grow with
the job field. In which case, those variable costs will increase.
If demand for masks, gloves, and other necessary supplies that are used daily skyrocket again,
like they did during 2020, then those costs will rise. As of right now, however, those costs are expected
to stay the same or near the same. As for payroll costs, I predict that they will increase throughout the
rest of this year due to most businesses being short-staffed, Smith Dental Care included, with hiring
rates on the rise.

4. Market Structure:

Smith Dental Care mainly operates as Monopolistic Competition with some characteristics of
Perfect Competition. They function as a Monopolistic Competition because there is a large number of
dental offices available to the public, they have slightly differentiated products and services that are
highly substitutable, there are fairly low barriers to entry, and a dentist could easily make or lose
money or simply break even. They can differentiate their services (products) with exceptional quality,
new technology, and extensive staff training.
 Some factors that make Smith Dental Care seem structured like a perfect competition would be
that their prices are determined by market demand and market supply, they provide a service that can
be provided almost identically by a competitor, and they will produce a positive amount of output in
the short-run, as long as procedure fees exceed variable costs. One main difference, proving Smith
Dental Care is more of a monopolistic competition, though, is that their demand is less elastic than that
of a perfect competitor. Finally, as a monopolistic competitor, if Smith Dental Care were to raise their
in-house fees for cash-paying/uninsured patients, they could start to lose some of their patients - not
all but some.
Smith Dental Care’s major competitors are any other general dentist offices in the surrounding
area. In Utah, the market is very saturated with dentists, so Smith Dental Care has needed to set
themselves apart over their years of operation. This is done with stellar customer service from the
administrative staff, exceptional patient care from the dentists and assistants, and consistently
scheduling 6-month cleanings with the hygienists. As proven in the article, “Preparing Your Practice
for Increasing Competition,” by Dr. Roger Levin, DDS, it is vital to have systems in place to set Smith
Dental Care apart in this market structure. Having these systems in place would include keeping track
of high-level referrals, a consistent, ongoing communications program to maintain patient loyalty,
ensuring patients are comfortable enough to accept doing elective treatment, and ensuring that new
patients calling/emailing/texting in are booking and confirming appointments. Smith Dental Care
needs patients coming through the front door in order to present everything important that’s been
mentioned in this analysis. The patient must experience something unique, different, and welcoming.
As I mentioned before, having the monopolistic competition market structure prevents this
firm from raising their fees because it’s all based on the contractual fees of the in-network insurance
companies. On the other hand, being in a monopolistic competition, marketing is extremely important
to set themselves apart from any other office. There must be a unique appeal that can be expressed
through advertising.
In conclusion, their market structure is highly unlikely to change. There are so many well-
established dental offices around the Salt Lake Valley, all with a slightly different draw. As soon as
patients find where they’re comfortable and where they feel valued and safe, they will usually stay with
that same dental office until the dentist retires or sells their practice. Smith Dental Care has been a
home for a substantial number of patients over the last 12 years, providing only the absolute best of
care for each individual, their family members, and their friends.
5. Sources:

• Smithdentalcare.net
• Yoffee, Lynn. The Link between Oral Health and Medical Illness - Dental Health Center.
EverydayHealth.com, 2012, www.everydayhealth.com/dental-health/oral-conditions/oral-
health-and-other-diseases.aspx.
• Burger, David. HPI: Consumer Confidence in Returning to the Dental Office Hits New High, 2021,
www.ada.org/en/publications/ada-news/2021-archive/april/consumer-confidence-in-
returning-to-the-dental-office-hits-new-high.
• “Dentists : Occupational Outlook Handbook.” U.S. Bureau of Labor Statistics, U.S. Bureau of
Labor Statistics, 2 June 2021, www.bls.gov/ooh/healthcare/dentists.htm.

• Levin, Dr. Roger P. Preparing Your Practice for Increased Competition. StackPath, 18 Aug. 2014,
www.dentaleconomics.com/practice/article/16390451/preparing-your-practice-for-increased-
competition.