Back in 2012, I delved into a topic of utmost importance and surprising depth: children’s dental health. For years, many dentists chose not to treat Medicaid patients. From an economic point of view, it was really no surprise; providers willing to treat the state’s most vulnerable patients faced prohibitively low reimbursement rates, while also being asked to bear prohibitively high administrative costs. As a result, many low-income children simply didn’t receive the dental care they needed.
Given the lifelong health consequences of poor dental health — as well as the rising costs associated with expensive emergency room visits for untreated tooth decay – Texas decided to act in 2007, raising Medicaid reimbursement rates in order to incentivize dentists to serve Medicaid patients. While many dentists continued to avoid low-income populations, something incredible took hold. That is, American entrepreneurs provided a free-market solution to a public health problem.
Specifically, dental practices supported by Dental Service Organizations (DSOs) began opening their doors to Medicaid patients. They were able to do so because DSOs tapped into economies of scale and centralized the nonclinical, administrative aspects of running a dental practice. This made it possible for DSO-affiliated dentists to focus exclusively on treating patients, saving them time and money. Higher reimbursement rates coupled with lower administrative costs provided by DSO affiliation allowed more dental practices to serve traditionally overlooked, low-income patients.