Private Equity Dental Management Companies Come Under Fire

Private Equity Dental Management Companies Come Under FirePrivate Equity dental management companies are at the center of a U.S. Senate inquiry, audits, investigations and civil actions in six states over allegations of unnecessary procedures, low-quality treatment and the unlicensed practice of dentistry, according to a report released by Bloomberg News.

Federal lawmakers and state regulators are trying to determine whether a popular dental practice model funded by Wall Street is having a destructive influence on dentistry in the U.S.

The private equity dental companies only account for about 12,000, or 8%, of U.S. dental practices, according to Thomas A. Climo, a Las Vegas dental consultant.

In 2010, The Wealthy Dentist reported that All Smiles Dental Center Inc., a management company owned by Chicago-based Valor Equity Partners, filed for bankruptcy protection after a Texas Medicaid action cut off reimbursement payments because of their exorbitant amounts of orthodontic care at the expense of Texas taxpayers.

All Smiles was part of a state audit that discovered 90% of the Medicaid claims for orthodontic braces weren’t medically needed.

After years of criticism that the poor were being deprived of dental care under Medicaid, class-action lawsuits and public pressure forced Medicaid to change their health care reimbursements. As reported by The Wealthy Dentist in our story, Taxpayers Footing the Bill for Braces in Texas, some Texas’ dental practices went on to bill Medicaid $184 million for Medicaid orthodontics — more than the rest of the United States combined.

M. Alec Parker, executive director of the North Carolina Dental Society told Bloomberg News that the private equity industry stepped up its investments in dental management over the last 5 years partly because health care was one of the few areas that grew through the recession.

According to the Bloomberg report, Christine Ellis, a Dallas orthodontist, who testified before Congress in April of this year reported that the “flagrancy of the fraud” she found in audits she performed for Texas Medicaid “is truly unbelievable,” with only 10% of the paid claims she reviewed actually qualifying for Medicaid coverage.

Ellis told the U.S. House Committee on Oversight and Government Reform that Texas “has gained a lot of fraudulent orthodontic providers, including many private equity owned dental clinics engaged in the illegal practice of dentistry.”

Medicaid's Dental Boom - Bloomberg News

This May North Carolina is considering legislation that would subject agreements between dentists and the companies to state approval over concerns brought about by the the practices of private equity dental practices.

The Wealthy Dentist twice reported on the North Carolina Senate Bill 655 that would require the North Carolina Board of Dental Examiners to examine all business contracts entered into by dental practices in their state.

Our first article, Dentists Beware: The Government May Want To Tell You How To Manage Your Practice detailed information concerning inclusive authority over how dentists manage their business.

The second The Wealthy Dentist article, Dental Practice Management: North Carolina Senate Bill Wants Dentists To Do It Themselves discussed dentist responses to the impact this bill could have on their dental practices.

The measure has already passed the state Senate and has moved on to the House, where leaders have appointed a special interim committee to study the bill and its potential repercussions to dentists.

Reports have surfaced that the legislative proposal likely to be heard this month. The basics of the bill is intended to restrict contracts dentists can build with dental service organizations and give the Dental Board control of how dentists in North Carolina run their practices.

The North Carolina Dental Society supports the bill, stating that dental management companies often bill dental patients for unneeded care and opponents insist that passage of the bill will only drive up dental care costs.

What are your thoughts on private equity dental management practices?

For more on this story see: Dental Abuse Seen Driven by Private Equity Investments

Dental Practice Management Survey Reveals Dentists’ Resistance

Dental Practice Management Survey Reveals Dentists' ResistanceIn the latest The Wealthy Dentist survey dentists overwhelmingly agree that dentists should own and run dental practices.

When asked if they agree or disagree that “only dentists should own dental practices” 89% of the dentists responding to this survey answered, “I strongly agree. Dentists should be owners, not dental management companies or private investors.”

9% responded that they “somewhat agree that practice owners should generally be dentists, but there are exceptions” with 2% stating that they “somewhat disagree and it’s okay for others to own practices, but it’s good when dentists do.”

Dental Practice Management Survey Reveals Dentists' Resistance Survey graph

A Texas dentist wrote, “The ethics of the practice become that of the management company, not that of the dentist. This is very dangerous to the profession.”

Even though dental management companies allow dentists to focus more on dental patients, some dentists are resistant to the idea of this dental practice model.

Dental practices who partner with corporate dental management companies typically serve areas where there is limited dental care and patients haven’t visited a dentist in years.

Even so, in this survey, many dentists are resistant to the corporate dental management model –

“Corporate dentistry is here but only a dentist should be allowed to own a practice/corporation as they will more likely to put the patients best interest first before corporate profits to shareholders/investors if push comes to shove.” (California dentist)

“This is the destruction of the profession–making a trade to be regulated. The younger members do not realize it. Is this what they signed up for when applying for dental school?” (Indiana dentist)

“Some dentists are just not cut out to be business people and should just stick to clinical treatment.” (Colorado dentist)

“I have worked under the thumb of an accountant in a dental mill. He had no concern for the welfare of the patients- only the clinic’s bottom line. It is OUR licenses that are at risk. We damn well better own the show. Otherwise, the corporate suits will put us and our precious dental license at risk increasing their bottom line by any and all means possible.” (Georgia dentist)

“Dentistry will soon look like Walmart. The era of privately owned dental practice will soon be over. This is a tragedy for our patients and dentistry in general!” (Oklahoma dentist)

“The dentist is ALWAYS ultimately responsible, and therefore MUST have complete control over the business.” (General dentist)

But one Texas dentist did write to sing the praises of dental management companies, “Working with a dental management company was the best decision I ever made!”

Dentists, what are your thoughts on dental management companies?

Dental Practice Management Company Faces Lawsuit

Dental Practice Management Company Faces LawsuitDental practice management by private equity firms is being legally challenged in U.S. court.

Last week, a class action complaint was filed in New York against Aspen Dental Management and private equity firm Leonard Green and Partners LP for allegedly illegally operating dental clinics in 22 U.S. states that engage in aggressive, misleading, profit-driven practices that cause patients economic harm, reports ABC News.

The lawsuit further contends that Aspen Dental Management violates laws that require clinics to be owned by dentists performing dental treatments at the clinics.

Attorneys for 11 people in 11 states filed the lawsuit in U.S. District Court in Albany, but are looking to receive class action status so that they can include thousands more patients in the lawsuit. The lawyers allege that Aspen Dental Management dental practices placed a premium on securing expensive dental treatments from dental patients by using aggressive sales techniques which ultimately resulted in “unlawful fee-splitting with non-dentists.”

Court documents assert that Aspen Dental Management’s corporate structure and business model engages in the unlawful corporate practice of medicine, and in doing so, induces consumers into purchasing dental services and products.

They further claim that many of the dental practices involved are “owned” by sham owner-dentists who do not engage in the practice of dentistry through the professional corporations they formed. The attorneys in the case state that this type of dental practice management violates New York’s law against “unlawful corporate practice of medicine” as outlined by the ABC News report.

In 2011, Aspen Dental Management dental practices recorded more than 2.2 million patient visits, including visits from more that 490,000 new patients. Court documents reveal that their business model only “allows dentists to focus on providing great clinical care to their patients, with the support of a team of experts who offer back-end business and administrative support,” including “training and professional development, benefits administration, dental marketing and advertising, insurance processing, procurement, facilities and equipment.”

According to Robert Fontana, president and CEO of Aspen Dental Management, “the business services ADMI offers dentists enables them to focus on patient care and relieve them from the everyday business requirements of the practice.”

Fontana points out in the complaint that, “In communities with an aging population, access to dental care can be a true challenge. Because Aspen-served practices are conveniently located, work with most private dental insurance plans, are open all weekdays and select evenings and Saturdays, and charge affordable fees, they are an attractive option for patients.”

Fontana insists that dentists own and control all of the ADMI practices nationwide.

Dentists, what are your thoughts on large dental practice management companies?

For more on this story see: Lawsuit: Aspen Dental Clinics Operating Illegally 

To review the formal complaint, click here.

Are Private Equity Firms Good for Dental Practice Management?

Are Private Equity Firms Good for Dental Practice Management?Dental practice management companies are popular among dentists because they allow dentists to focus on dental procedures over office administration.

Many dentists prefer to spend their time working with dental patients instead of dealing with the everyday hassles of managing a business.

Dentists argue that working with a dental management company makes them better dentists.

Thomas A. Climo, a dental consultant and past professor of economics in England, feels the use of widespread dental practice management companies in dentistry is inevitable due to the economies of scale and centralization of management.

As healthcare and dental treatment costs continue to rise, dental management companies argue that their model can streamline billing, payroll and marketing costs, thus keeping dental practices viable. This model is what attracts private equity investors to dental practice management.

Mr. Climo calls attention to the fact that private equity firms are more inclined to invest in dental practice management over a solo practitioner because of the mostly unprofitable nature of solo-owned dental practices. He suggests that there is very little genuine net income in solo dental practices anymore.

“Dentists put a lot of effort into building their practices,” Climo states in his recent article in Dentistry IQ, “and only with proper management can this effort be translated into business valuation dollars that make sense.”

Climo bristles at news reports that private equity investors influence the practice of bad dentistry, pointing out that private equity investors choose health care for its usually steady yield and low-risk — not to push unnecessary procedures on vulnerable dental patients in the name of profits.

Large dental chains can actually offer dental treatments at a lower cost.

The idea that private equity investors would promote pushing unnecessary dental treatments and bad dentistry is crazy to Climo because of the risk of lawsuits and litigation, something that interferes with the “low-risk” model that private equity firms look for in an investment.

Many dentists point out that the dental practice management model is similar to what dental patients already experience in other medical services and believe it will be the future model for providing affordable dental care to the public.

And Mr. Climo would argue that’s good for everyone.

To read more on this subject by Mr. Climo, see: The Emergence of the Dental Practice Management Company

Dentists, what are your thoughts on dental management companies?

Dental Practice Management Still Alive in North Carolina

Dental Practice Management Still Alive in North CarolinaThe North Carolina Senate agreed on a compromise in dental legislation approved by the House regarding Senate Bill 655, a controversial bill aimed at tightening rules on dental management organizations in N.C.

The newly compromised legislation will require the State Board of Dental Examiners to adopt rules giving greater regulatory oversight of the contracts that dentists reach with the management companies in the future.

Part of the measure will require dental management contracts to include warnings encouraging dentists to obtain legal advice before signing them.

The compromise between the parties involved was reached after months of negotiations involving lobbyists, political leaders, and heavy spending on TV ads. Other states with similar dental management organizations have been watching how North Carolina would rule on this bill.

The Senate hopes the bill will clarify the existing dental law in N.C. and reduce litigation with the state dental board, which currently reviews all dental management contracts that dentists sign in North Carolina.

However, the bill still neglects to state exactly how dental management agreements would be scrutinized further.

A six-member task force, which includes two representatives from dental management companies, have been selected to make recommendations to the N.C. dental board, but the board still doesn’t have to follow their recommendations.

The task force is an attempt to ensure proposed rules will promote dentistry and alternate business models within the industry, according to Tom Fetzer, a former Raleigh mayor, ex-state Republican Party chairman.

The legislation is due to be signed by the N.C. Governor this week.

What are your thoughts on Senate Bill 655 and what has happened in North Carolina?

For more on this story see: NC Dentist Group, Office Managers Reach Agreement


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