Sep 29, 2025
Margins Under Pressure: How Rising Costs Are Reshaping Orthodontic Practice Performance
Discover how rising operational and economic costs are impacting orthodontic practice performance in Australia. This article examines key financial pressures, shifting patient expectations and practical strategies to protect margins while maintaining quality care. A must-read for orthodontic practitioners seeking to strengthen profitability and resilience in a changing market.
Margins Under Pressure: How Rising Costs Are Reshaping Orthodontic Practice Performance
For orthodontic practitioners across Australia, the past few years have brought a difficult balancing act. Even as patient sentiment begins to recover from the economic turbulence, cost pressures remain stubbornly high. From staffing and laboratory expenses to utilities and compliance costs, orthodontic practices are facing one of the most sustained periods of margin compression in recent memory. Understanding where these pressures come from and how to manage them is now essential to protecting profitability and long-term sustainability.
The New Cost Landscape
While inflation has eased in the wider economy, orthodontic practices are still experiencing elevated operational costs. In part, this lag reflects the nature of the healthcare sector: contractual wage increases, supplier adjustments, and technology adoption cycles take time to filter through.
The most significant cost drivers include:
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Staffing and labour costs: Clinical assistants, treatment coordinators, and front-office roles have all commanded higher wages since the post-pandemic talent shortage. Even as unemployment edges up, wage levels in healthcare remain structurally higher than before 2020.
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Laboratory and material expenses: The global rise in resin, metals, and plastics prices has filtered through to appliance and retainer manufacturing. For practices outsourcing laboratory work, this has lifted per-case costs by between 8% and 12% over the past two years.
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Technology and compliance: Digital orthodontics, 3D printing, and AI-driven monitoring promise efficiency, but they also require capital investment and ongoing subscription costs. Similarly, cyber security, data protection, and regulatory compliance now carry measurable financial overheads.
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General overheads: Utilities, rent, and insurance premiums have all increased, with electricity alone rising by more than 15% in some metropolitan areas between 2023 and 2025.
The combined effect is a “cost stack” that has quietly but persistently squeezed margins, even in practices where patient volumes have held steady.
Profitability in Perspective
According to benchmarking data from the Australian Taxation Office (ATO) and industry analysts, efficient orthodontic practices traditionally operated with overheads of around 65% to 68% of revenue. In 2025, that figure has crept above 70% for many operators.
For practices that rely heavily on manual workflows or lack financial visibility, this compression is often invisible until it shows up in cash flow strain or reduced owner drawings. EBITDA margins, once comfortably in the mid-20s, are now averaging closer to 18% to 20% in smaller independent clinics.
The key takeaway is clear: without active management of both cost and productivity levers, rising input prices will continue to erode the financial resilience of orthodontic practices.
Where the Pressure Bites Most
- Labour utilisation - Labour costs have risen, but chair-time utilisation has not always kept pace. Many practices have returned to pre-pandemic staffing ratios even as appointment demand remains uneven. A 5% drop in utilisation can offset the benefits of a full fee increase, leaving practices with higher costs and flat revenue.
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Discounting and financing- With patients still price sensitive, some practices have leaned on extended payment plans or discretionary discounts to secure starts. While this maintains volume, it often delays cash flow and reduces realised yield per case.
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Technology adoption without integration - The shift to digital workflows and in-house printing has clear long-term benefits, but when implemented piecemeal it can increase short-term cost without reducing chair time or reliance on external labs. True savings require process redesign, not just new hardware.
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Corporate competition - Larger groups continue to use scale advantages to negotiate lower supplier costs and spread marketing spend across multiple locations. Independent orthodontists must therefore find efficiencies elsewhere through lean operations, differentiated patient experience, or superior conversion systems.
Strategies to Protect and Improve Margins
- Measure relentlessly - Track key metrics monthly: EBITDA, chair utilisation, case conversion, fee yield per start, and average treatment cycle times. Visibility drives action, and even small percentage improvements compound quickly
- Benchmark performance - Compare overhead ratios and cost categories against industry averages. Identify outliers such as consumables, marketing, or rent, and take corrective steps. Benchmarks also provide context for pricing discussions and future investments.
- Optimise staff structure - Align team capacity with demand. Use part-time or flexible staffing models to smooth peak and off-peak loads. Consider cross-training administrative staff in treatment coordination or patient follow-up to maximise value per employee.
- Link technology to ROI - Before adopting new digital tools, map how they will reduce cost or improve throughput. For example, remote monitoring can release chair time if it replaces rather than supplements physical reviews.
- Strengthen financial discipline - Review payment plan performance, direct debit compliance, and aged receivables regularly. Streamlined billing processes and clear financial communication reduce defaults and protect working capital
- Revisit pricing structure - Transparent “per week” models not only improve patient affordability but also support steadier cash flow. Combine this with modest, data-supported fee reviews tied to case complexity and inflation trends.
The Role of Leadership and Culture
Ultimately, a practice’s ability to manage cost inflation depends as much on culture as on numbers. Teams that understand financial targets, track performance openly, and share accountability for efficiency are more adaptive and resilient. Encouraging staff to identify small process improvements, from stock management to scheduling, creates cumulative gains that directly impact profitability.
Moreover, a focus on patient experience through timely communication, flexible scheduling, and consistent service enhances word-of-mouth referrals and reduces marketing dependency, helping offset rising acquisition costs.
Looking Ahead
The economic outlook for 2026 is cautiously optimistic, with GDP growth expected to lift and interest rates trending lower. However, the structural cost increases seen since 2020 are unlikely to be reversed. Orthodontic practices that invest in financial clarity, operational discipline, and technology integration will emerge stronger and more profitable, even in a higher-cost environment.
Margins may be under pressure, but they are not beyond repair. The practices that thrive in this new environment will be those that treat efficiency as a continuous discipline, not as a reaction to economic downturns.
Takeaway: Rising costs are reshaping orthodontic practice performance, but they also offer an opportunity. By focusing on data, systems, and patient experience, orthodontists can restore profitability and build more resilient, future-fit practices.