Page 4 - Commercial Litigation

S4 | MONDAY, AUGUST 10, 2015 | Commercial Litigation
| NYLJ.COM
Dental Service Organizations
Face Unintended Consequences From Government Scrutiny
and patient financing practices; and the upselling of unnecessary dental services. After its investigation, the NY AG concluded that Aspen Dental was violating New York law, including the corporate practice of dentistry, by influencing the provision of dental care by dental practices, sharing profits with the dental practices, and creating an illusion of a single provider with common clinical goals, policies and procedures and dental standards of care.
Of note is that while consumer fraud com- plaints are within the jurisdiction of the NY AG, state regulatory oversight of the corpo- rate practice of dentistry doctrine (and the corollary corporate practice of medicine doc- trine) and any violations thereof is primarily the responsibility of the Office of the Profes- sions within the New York State Education Department (NY SED), whose involvement in this settlement is not readily apparent. Regardless, as a result of the NY AG findings, Aspen Dental entered into a settlement with the NY AG whereby it agreed to pay $450,000 in civil penalties, be subjected to an exter- nal monitor and curtail most, if not all, of its administrative services as discussed below.
Curbing Inappropriate DSO Activities
Some of the concerns addressed in the set- tlement (which Aspen Dental neither admits nor denies given the nature of the settlement) include the prohibitions of percentage-based management fees and the bundling of pay- ments, which are consistent with New York’s professional fee-splitting laws.3 Similarly, the NY AG took a predictable position on Aspen Dental’s ability to restrict the dental practices with non-competition, patient non-solicitation and patient record control covenants in agree- ments. DSOs do not practice dentistry and therefore could not enforce such limitations in court. Additionally, NY AG’s limitations on marketing of the dental practices to ensure that consumers recognize there is not one single “Aspen Dental” provider is consistent with New York franchise and other similar state laws. DSOs should not be holding them- selves out to the public as providing dental services, or recommending the prioritization of certain expensive patient procedures over others. As described in more detail in the set- tlement, this type of clinical decision-making should remain with the dentist or professional practice entity at all times.
However, the “abusive” practices often cited by opponents of DSOs—mainly incen- tivizing the dentist to drive profits through inappropriate payment and operational con- structs such as mandatory patient quotas and establishing limits on time spent with patients on procedures—are not curtailed by limiting the DSOs ability to perform non- clinical tasks on behalf of the practice, such as hiring non-clinical personnel or assisting with accounting policies and procedures, as addressed in the next section of this article.
Curbing Appropriate DSO Activities
A majority of the prohibitions set forth in the Aspen Dental settlement unduly restrict a DSO’s ability to provide its core adminis- trative services without approval from the dental practice. As a result, the settlement will
BY DEBORAH L. GERSH, CHRISTINA M. BERGERON AND JOHN C. SARAN
T he recent settlement between the New York State Office of the Attorney General
1 (NY AG) and Aspen Dental Management
has the potential to create unintended con- sequences on dental service organizations (DSOs) operating in New York and the benefits and support they offer to dental practices. DSOs have been active in the dental industry
DEBORAH L. GERSH is a partner, and CHRISTINA M. BERGERON and JOHN C. SARAN are associates, at Ropes & Gray. Associate BRETT FRIEDMAN assisted in the preparation of this article.
for over 20 years, but have recently come under increased scrutiny from state govern- ments, notably in North Carolina and Texas, with respect to so-called corporate practice of dentistry violations.2 The corporate prac- tice of dentistry prohibits corporations from employing, or influencing the clinical judg- ment of, licensed health care professionals, such as dentists and dental hygienists.
Although there are issues in the DSO indus- try that must be effectively addressed, certain state government enforcement actions have the unintended effect of curtailing important business services provided by DSOs that improve the ability of dental practices to furnish high quality patient care, including assisting the dental office with obtaining and maintaining modern, state-of-the-art dental equipment and technology, as well as assist-
ing with certain non-clinical administrative tasks, such as accounting and the hiring of non-clinical staff. By performing these admin- istrative tasks, DSOs enable the dentist to focus on his or her patients, as opposed to the time consuming, and often costly, adminis- trative tasks involved in running a successful dental practice.
Overview of the Settlement
The Aspen Dental settlement is the most recent example of government action that restricts beneficial DSO activities instead of focusing solely on the problematic DSO behavior at issue. Notably, the catalyst for the NY AG’s investigation against Aspen Dental was patient complaints the NY AG received regarding: quality of care; billing
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