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Paul Zimmerman
pzimmerman@mrllp.com
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New York Attorney General Pursues Dental Management Company for Corporate Practice Violation

Attorney General (AG) Eric Schneiderman announced a settlement With Aspen Dental Management (ADM). The Settlement Agreement requires ADM to pay $450,000 in Civil Penalties, after the AG found that the company was engaged in the unauthorized practice of dentistry and dental hygiene. In New York, seven dental practices, operating a total of 40 “Aspen Dental” offices, had entered into contractual agreements with ADM to provide them with business support services and rights to use the “Aspen Dental” trade name.

The investigation found that it did not merely provide arms-length, back-end business and administrative support to independent dental practices, but also:

  1. Illegally split patients’ fees with the clinics through profit sharing;
  2. Exercised excessive control over the dental practices that directly impacted patient care, professional decision-making and product and service recommendations;
  3. Incentivized and otherwise pressured staff to increase sales of dental services and products;
  4. Implemented revenue-oriented patient scheduling systems, and the hiring and oversight of clinical staff, including associate dentists and dental hygienists;
  5. Wielded undue control over the clinic’s finances by controlling all of the dental practices’ bank accounts through a single consolidated account to which the clinic owners themselves did not have access;
  6. Subjected the dental practices to non-competition and non-solicitation agreements that effectively prevented the practices from competing with any other dental practice affiliated with ADM, regardless of location.

Under the agreement, ADM will:

  1. Cease to exercise any control over dental practices’ clinical decision-making;
  2. Not communicate directly with practices’ clinical staff concerning the provision of dental care, or sales of services or products to patients, or the amount of revenue generated by services or products;
  3. Not be the employer of the practices’ clinical staff;
  4. Not place limitations on dental practice owners’ practice of dentistry;
  5. Not share in the dental practices’ fees for professional services rendered;
  6. Keep the practices’ finances separate from its own;
  7. Allow the practices to have full and complete control over their revenues, profits, incomes, disbursements, bank accounts, and other financial matters and decisions;
  8. Reform its marketing practices, making clear to consumers on its website and elsewhere that ADM provides only administrative and business support services to dental practices that are independently owned and operated by licensed dentists; and
  9. Ensure that the dental practices to which it provides services post their own legal name so it is easily visible by patients who enter those practices.

This action makes it crystal clear that management services organizations and practices must enter into legally compliant management agreements and conduct themselves accordingly. Competent healthcare legal counsel should be consulted in both structuring and implementing the relationship, including both financial and business terms.