CEREC CAD/CAM Technology: Vertical Integration in Dental Practices

Have you ever cracked or broken a tooth and needed a crown? If so, you know what a pain it can be. The traditional method for getting a crown is:
  1. You go to the dentist, and the dentist examines the tooth and determines you need a crown.
  2. The dentist numbs the area and then prepares the tooth.
  3. The dentist or dental assistant makes an impression of the tooth while you try not to gag on the impression material.
  4. The impression is sent off to the lab.
  5. The dentist puts a temporary crown in place.
  6. You wait 1-3 weeks for the crown to be made by the lab.
  7. You return to the dentist and have the permanent crown placed.

CEREC CAD/CAM technology offers dentists the opportunity to vertically integrate and make crowns in their offices, decreasing the need to use an outside dental lab. This innovative technology gives patients a more convenient and stream-lined method to get a crown:
  1. You go to the dentist, and the dentist examine the tooth and determines you need a crown.
  2. The dentist numbs the area and then prepares the tooth.
  3. The dentist makes an optical impression of the tooth using a camera.
  4. The CEREC machine's 3-D software takes the optical impression and converts it to a virtual model that the dentist can fine tune.
  5. The model is sent to the milling machine where burs carve the crown out of an all-ceramic block in about 20 minutes.
  6. The dentist polishes and places the crown.

The biggest advantage of CEREC technology is patients can have a crown done in one office visit, rather than two. This advantage may increase the amount of crowns the dentist does every month because patients may be more likely to choose this dentist over one that does not have a CEREC machine.

Is this vertical integration worth the $100,000 investment?

An analysis of the costs associated with doing a crown would need to be performed by each individual dentist or dental practice to determine if purchasing a CEREC machine is financially beneficial.

Using some numbers found in SPEAR, I made a simple table to analyze costs:

Monthly Costs Associated with Placing a Crown
Traditional Method CEREC Method
Fixed Costs Variable Costs Fixed Costs Variable Costs
    Lab Fee $250 CEREC Payment $2,000 Operatory Set Up  $50
    Impression Material $25     Block and Burs $40
    Operatory Set Up [1st visit] $50     Distilled Water and Powder $2
    Operatory Set Up [2nd visit] $50        
Total Cost Traditional X Total Cost CEREC Y

If Total Cost CEREC (Y) is less than Total Cost Traditional (X), a dentist or dental practice may want to invest in the CEREC machine.


Dave Tufte said...

Jacob Cole: 100/100

I had heard that they were moving in this direction, but I didn't know they were actually doing this for real now.

I'm not sure what your post has added that was not already in the two linked articles.

My guess is that what this new capability is going to do is lead to the creation of crown specialists who defray the costs of capital with high volume. This would work much the same way that we now have dentists that do nothing but wisdom teeth, or veneers. The message is the same one that's in a lot of micro texts: if you shift variable costs into fixed costs, you create economies of scale (but you have to be willing to take advantage of those by getting bigger).

FWIW: I know some of you online folks are not in town, but if you're interested in playing with 3-D printing, they now have a makerspace set up in RadioShack where you can come in and play with all their cool tools (including 3-D printers).

KC Hulse said...

In the article one dentist says that the market will not support a price increase for crowns, I think his thoughts are backwards. I agree with Dr. Tufte, to really be able to maximize profits a dentist would have to specialize. This would require physical-asset specificity investment. As Dr. Tufte mentioned, a high volume of crowns would need to be place to offset the cost of capital. I think it would be a smart move for a dentist to charge a lower price. If the price was low enough it would attract more customers. The goal would be to have the CAD/CAM machine running all day. I attempted to see if there were any statistics on the number of crowns placed in a given year. Without this knowledge it would be hard to understand if the risk of specialization would pay off. It will also be interesting to see how technology improvements in the 3D printing world will have an effect on this process.

Dave Tufte said...

KC Hulse: 47/50 You wrote "... crowns would need to be place ..." which makes no sense. (-3)

I think that dentist ... hmmm ... isn't going to be a rich dentist.

One of the vagaries of our healthcare payment systems is that we've got procedures that are almost always covered, and others that are less commonly covered (Lasik and and most voluntary cosmetic surgery). Those latter markets are thriving: people want those procedures, they're willing to pay for them, and the market provides them readily.

Crowns also fall into that latter category. This is because many people do not have dental coverage, but also because the preferred solution has traditionally been to pull the tooth. So, most crowns are largely paid for out-of-pocket (I know mine cost about $750 out-of-pocket, and I have better dental coverage than most of my friends). So I think if that dentist doesn't think there's a market for this, I'd question their judgment.