Dentists who own and operate private practices are responsible not only for performing clinical services, but oftentimes also for numerous administrative tasks including managing human resources, real estate, billing, and marketing.
Because of these non-clinical responsibilities, many dentists have opted to sell the non-clinical aspects of their practices to Dental Support Organizations (“DSOs”). DSOs are a business structure where the dentist continues to perform the clinical work, but the DSO handles the non-clinical administrative functions of the practice.
Although affiliating with a DSO can simplify the process of patient care by allowing dentists to focus more time on patients, there are a number of legal issues surrounding this structure that dentists need to know. Dentists must ensure that the DSO does not cross into the corporate practice of dentistry in states where this is prohibited. DSO arrangements should generally be structured so that DSOs do not exercise control over any clinical decisions in the practice. The separation of non-dentist ownership support and clinical work is legally necessary. In order to ensure this requirement is met, both dentists and DSOs should structure the business in a way that is beneficial to both parties while complying with legal necessities by entering into detailed service agreements that carefully delineate the parties’ respective rights and responsibilities. Such service agreements should specify that dentists make all clinical and patient related decisions and ensure that the compensation structure for the DSO is legally permissible.
State laws and regulations concerning DSOs are still evolving. Many states have statutes that make it unlawful for dentists to be part of an arrangement that interferes with their independent clinical judgment. These regulations have come about, in part, due to DSOs becoming much more visible as they are an increasingly popular investment for private equity firms and management companies. However, these regulations also arose because of negative publicity surrounding these business arrangements. Regulators have implemented rules to address concerns that DSO arrangements will result in mandating a number of patients that need to be seen or certain amounts of dental work that need to be performed in order to meet profit goals or production quotas at the risk of good patient care. These fears, however, can usually be avoided through carefully structured legal agreements between the DSO and dentists. Even with air-tight service agreements, dentists must monitor compliance since they are ultimately responsible for the clinical practice and have independent duties as licensed professionals.