Two dental practices collect the same amount of money in a year. One is offered a price the owner is happy with. The other gets an offer that comes in lower, with more of it deferred, and the owner never gets a straight answer about why. Nothing about the clinical work explains the gap. The chairs are the same, the hours are the same, the collections are the same.
The difference is where the money comes from. Dental is unlike almost every other corner of health care in how it gets paid, and the mix of patient cash, PPO reimbursement, Medicaid and now Medicare is the single largest thing separating two practices with identical top lines.
This article is about what each of those dollars is worth to a buyer, why the difference exists, and what an owner can do about it in the twelve to twenty-four months before a sale. Every figure below comes from a federal primary source and is linked so you can check it yourself.
Dental does not get paid like the rest of health care
Start with the fact that frames everything else. In the National Health Expenditure Accounts published by the Centers for Medicare and Medicaid Services, Americans spent 189.2 billion dollars on dental services in 2024. Of that, 72.5 billion dollars, or 38.3 percent, came straight out of patients’ pockets.
Now compare that to health care as a whole. Total national health expenditures in 2024 were 5.279 trillion dollars, of which 556.6 billion dollars was paid out of pocket. That is 10.5 percent.
Dental is close to four times more dependent on the patient’s own wallet than the rest of the health care economy. That is not a rounding difference. It is a structurally different business, and it is the reason a dental practice cannot be underwritten with the same instincts a buyer brings to a home health agency or a psychiatric group.
Where the 189.2 billion dollars actually comes from
The full 2024 breakdown from the same CMS tables, by source of funds:
- Private health insurance: 78.2 billion dollars, 41.3 percent. The PPO and indemnity world.
- Out of pocket: 72.5 billion dollars, 38.3 percent. Patient cash, co-insurance, amounts above the annual maximum, and everything elective.
- Medicaid: 15.2 billion dollars, 8.0 percent.
- Medicare: 12.6 billion dollars, 6.7 percent.
- CHIP: 3.5 billion dollars, 1.9 percent.
- The remainder is the Department of Defense, the Department of Veterans Affairs, and a set of small other programs.
Total dental spending grew 6.6 percent from 2023, when it was 177.5 billion dollars. So the pie is growing at a healthy clip. But the composition of that pie is what a buyer is reading, not the size of it.
Why a buyer treats each dollar differently
A dollar of collections is not a dollar of value. Here is how the four main sources actually get read in diligence.
Patient cash and fee for service
This is the highest quality revenue in the practice and buyers know it. There is no contracted write-off, no payer that can reprice you next year, and no claims cycle. The offsetting concern is demand sensitivity: elective and cosmetic work moves with the local economy in a way that a hygiene recall does not. A buyer will want to see how the cash mix behaved through a soft period, not just in the trailing twelve months.
PPO revenue
PPO revenue is predictable and it is also permanently discounted. The write-off between your fee schedule and the contracted rate is the number that matters, and it varies enormously by plan and by region. Two practices can both describe themselves as “mostly PPO” and have adjusted production that differs by a wide margin.
The trap here is the production figure. Practices advertise production. Buyers underwrite collections net of contractual adjustments. If a listing quotes production and the payer mix is PPO heavy, the distance between those two numbers is where the negotiation is going to happen. Better to lead with adjusted production and remove the argument before it starts.
Medicaid
Medicaid dental is 8.0 percent of national dental spending but it can be most of a single practice’s revenue, particularly in pediatric dentistry. It is not automatically worth less, and it is a mistake to treat it that way. What it is, is different: reimbursement is set by the state rather than negotiated, rates move with state budgets rather than with your fee schedule, and eligibility and enrollment churn drive patient volume in ways that have nothing to do with your marketing.
Buyers who already operate in Medicaid dental price it comfortably. Buyers who do not tend to discount it heavily or pass. This is the clearest case in dental where the identity of the buyer, not the quality of the practice, determines the offer. That is an argument for running a process rather than accepting the first approach.
Medicare
Historically almost irrelevant to dental, and now the fastest moving line on the board. See the next section.
The fastest growing slice, and what it signals
Medicare spending on dental services rose from 10.5 billion dollars in 2023 to 12.6 billion dollars in 2024. That is growth of 19.9 percent in a single year, in the same CMS tables cited above, against total dental growth of 6.6 percent.
Medicare is still only 6.7 percent of dental spending, so nobody should reorganize a practice around it. But a category growing three times faster than the market is a category that changes patient flow at the margin, and a practice that already sees those patients has a growth story that does not depend on the owner working harder.
Two cautions, both of which a buyer will raise. Plan benefit design in this space is not stable year to year, so revenue tied to it is forecast with wider error bars than PPO revenue. And it is administratively heavier than patient cash, which lands back on the same front desk that is already handling PPO claims. Growth that consumes administrative capacity is worth less than growth that does not.
The practice universe is barely growing, and that is the whole consolidation story
Here is the supply side. The Bureau of Labor Statistics Quarterly Census of Employment and Wages counts 137,612 private establishments in offices of dentists (NAICS 6212) for 2025. That is up 1,572 locations, or 1.2 percent, from 2024. Employment across those offices averaged 1,051,878, also up 1.2 percent, and the average weekly wage was 1,297 dollars, up 2.9 percent.
More current national figures from the BLS Current Employment Statistics program put employment in offices of dentists at 1,054,000 in August 2026, with average hourly earnings of 41.69 dollars in July 2026.
Put those two facts next to each other. The number of dental offices is growing by roughly one percent a year, and the money flowing through them is growing by more than six percent. A group that wants to grow faster than one percent cannot do it by opening offices, because the country is not producing offices at that rate. It has to buy them.
That is the structural reason acquisition interest in dental has stayed firm even in periods when financing has not been cheap. It is also why an owner has more leverage than they usually think. The scarce thing in this market is an established practice with a clean chart of patients, and you own one.
The labor line that eats the payer mix
Payer mix sets your gross revenue per procedure. Labor decides how much of it you keep. From the BLS Occupational Employment and Wage Statistics for May 2025:
- General dentists: 124,390 employed, annual mean wage 191,350 dollars, annual median 170,950 dollars.
- Dental hygienists: 222,740 employed, annual mean wage 98,990 dollars, annual median 98,100 dollars.
- Dental assistants: 387,790 employed, annual mean wage 50,200 dollars.
Note that there are nearly twice as many hygienists as general dentists, and that hygienist pay is now close to 99,000 dollars a year on average. Hygiene is the recurring revenue engine of a general practice and it is also the hardest chair to keep staffed. A practice with an open hygiene position at the time of sale is a practice with a visible hole in its forward revenue, and buyers model that hole rather than assuming you will fill it.
This interacts with payer mix directly. A PPO heavy practice earns less per hygiene hour after write-offs, so it needs higher chair utilization to produce the same profit. If that practice is also short a hygienist, both halves of the equation are working against the valuation at once.
What a buyer will ask you for, and what most owners cannot produce
These are the payer mix items that show up in every dental diligence request. None of them is exotic. Most practices still need a week to assemble them.
- Collections by source, monthly, for twenty-four months. Patient cash, each major PPO plan separately, Medicaid, and any Medicare Advantage dental. Twelve months is not enough to show seasonality or to survive a bad quarter.
- Adjusted production against gross production, by plan. This is the write-off picture. If you do not present it, the buyer will build it from your data and present it to you.
- Your fee schedule against each contracted rate, with the effective date of each contract and the renewal mechanism.
- Active patient count and hygiene reappointment rate. Payer mix explains the revenue you have. Reappointment explains the revenue you are going to have.
- New patient sources. A practice fed by one referring specialist or one insurance directory listing has concentration risk, which is a payer mix problem wearing a different coat.
Item two is the one that moves money. Owners who lead with adjusted production and a plan by plan write-off table consistently spend less time in diligence and defend their number better, because the buyer’s own model arrives at roughly what the seller already said it would.
What to do in the twelve months before you go to market
- Measure the mix before you change it. Twenty-four months of collections by source is the foundation for every other decision here, and it takes an afternoon in most practice management systems.
- Review your worst PPO contracts. Not to drop them reflexively, which usually costs volume, but to know precisely what each one contributes after write-offs. Some practices discover that one plan is producing volume and almost no profit.
- Fill the hygiene chair. If there is one operational thing to do before a sale, it is this. An open position is a discount you hand the buyer for free.
- Do not re-engineer the mix in the last ninety days. A sudden shift out of a payer right before a sale reads as preparation for sale rather than as a durable business change, and it invites more diligence, not less.
- Separate the real estate question from the practice question. If you own the building, decide early whether you are selling it, leasing it to the buyer, or holding it. Vallexa advises on the operating business; the building is a separate decision with separate advice.
- Get your Medicaid participation status documented. Enrollment, the programs you actually bill, and current rates. Enrollment and active contracting are not the same thing, and the difference has stalled deals in other health care verticals.
What payer mix does not decide
It is worth being precise about the limits of this argument.
- Payer mix does not override owner dependence. A practice where the selling dentist personally produces most of the revenue has a transition problem no payer mix can fix.
- It does not override geography. The local labor market for hygienists and the local competitive density move value in ways a national mix cannot describe.
- It does not make a single number. There is no published, verifiable figure that translates a given payer mix into a multiple, and anyone who quotes you one over the phone is guessing. We deliberately do not print one in this article for that reason.
- It does not replace clean financials. Accrual-basis statements with the owner’s compensation and personal expenses clearly bridged will do more for your price than any payer mix adjustment available to you in a year.
Where this fits with the rest of the dental picture
We wrote earlier this year about who is actually buying dental practices now that fewer young dentists are buying them, in Selling a Dental Practice in 2026: Who Buys When Younger Dentists Are Not Buying. That piece is about the demand side: who shows up, and what they want.
This one is the supply side of the same conversation. Once a buyer shows up, payer mix is the lens they look through. The two stack, and an owner who understands both is negotiating with the same information the other side has.
You can see how we work in this sector on our dental practice and DSO advisory page. Our current healthcare practice inventory gives a sense of the kinds of clinical businesses trading right now, including an established pediatric therapy clinic in northern Illinois and a pediatric ABA practice in Colorado. Those are adjacent clinical practices rather than dental offices, and we mention them as examples of live inventory rather than as comparables.
If you are twelve to twenty-four months from an exit, the prepare for your exit section of our seller learning center covers the wider readiness work. If you want a confidential read on where your practice stands, including a look at your payer mix, contact us. Vallexa Advisors works on a success fee basis, so the first conversation costs you nothing but an hour.
Frequently asked questions
There is no single best mix, and any advisor who names one has not looked at your numbers. Patient cash and fee for service revenue carries no contractual write-off and is generally the highest quality, but it is more sensitive to local economic conditions. PPO revenue is predictable and permanently discounted. Medicaid revenue is state-rate dependent and prices very differently depending on whether the buyer already operates in Medicaid dental. What matters more than the mix itself is that you can document it, plan by plan, for twenty-four months.
It is harder to sell to the wrong buyer and no harder to sell to the right one. Medicaid was 15.2 billion dollars of the 189.2 billion dollars spent on dental services in 2024, and groups that already operate Medicaid dental price it comfortably because they understand state rate setting and enrollment churn. Buyers with no Medicaid footprint tend to discount it or pass. That gap is the strongest argument for running a competitive process rather than negotiating with one interested party.
Because production is what you billed and adjusted production is what you are actually going to be paid after contractual write-offs. In a PPO heavy practice the distance between those two figures can be substantial, and it varies by plan. A buyer will build the adjusted figure from your data whether or not you provide it. Presenting it yourself, with a plan by plan write-off table, removes the single most common source of mid-diligence repricing in dental deals.
Not yet on its own, but it is the fastest moving line in dental. Medicare spending on dental services grew from 10.5 billion dollars in 2023 to 12.6 billion dollars in 2024, which is 19.9 percent growth against 6.6 percent for dental overall. It is still only 6.7 percent of national dental spending. A practice already seeing those patients has a growth story that does not require the owner to work more hours, which is worth something. Buyers will discount it for benefit design instability and for the administrative load it puts on the front desk.
Measure first, and be careful about timing. Knowing exactly what each plan contributes after write-offs is always worth doing, and some practices find a plan producing volume and very little profit. But dropping a payer inside the last ninety days before going to market reads as preparation for a sale rather than as a durable business change, and it invites more diligence rather than less. If a contract genuinely should go, change it early enough that the practice has posted real results without it.
Sources
- Centers for Medicare and Medicaid Services, National Health Expenditure Accounts, historical tables, national health expenditures by type of service and source of funds, calendar years 1960 to 2024. Dental services expenditures and total national health expenditures, 2023 and 2024.
- U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages, NAICS 6212 offices of dentists, private ownership, 2025 and 2024 annual averages.
- U.S. Bureau of Labor Statistics, Current Employment Statistics, offices of dentists, August 2026 employment and July 2026 average hourly earnings.
- U.S. Bureau of Labor Statistics, Occupational Employment and Wage Statistics, May 2025, occupations 29-1021 dentists general, 29-1292 dental hygienists, and 31-9091 dental assistants.
This article is general information about market conditions and is not legal, tax, accounting or investment advice, and it is not a valuation of any specific practice. Figures are current as of September 14, 2026. Confirm the application of any payer contract or state program rule to your practice with your own advisors.
