DSOs and the Corporate Practice of Dentistry: Aspen Dental Settlement in California Illustrates The Dangers to Practice Owners of DSO Overreach

The prohibition on the corporate practice of dentistry is one of the profession’s most fundamental and well-established ethical and legal rules. Codified in state statutes such as the Illinois Dental Practice Act (the “Act”), the principle precludes, in most cases, non-dentists from having ownership interests in a dental practice. As the Act states, the reason for this prohibition is “to prevent a non-dentist from influencing or otherwise interfering with the exercise of independent professional judgment by a dentist, dental hygienist, or other entity which can provide dental services under this Act.”

But the rapid rise and expansion of private equity-backed dental service organizations (DSOs), which assume a wide range of management, operational, and clinical responsibilities for the practices they purchase, has created novel issues for regulators and raised concerns that DSOs can and do cross the corporate practice of dentistry line.

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The consequences of such transgressions were recently illustrated by a $2.4 million settlement entered into by the state of California and Aspen Dental Management (Aspen), a DSO that provides business management and administrative services to dental offices operating under the “Aspen Dental” name and branding. The settlement arose from allegations that Aspen violated the state’s ban on the corporate practice of dentistry and engaged in false or misleading advertising by, among other things, “interfering with and unlawfully directing the practice, ownership, and management of dentistry in California.”

How Aspen Allegedly Engaged in the Corporate Practice of Dentistry

Since its founding in 1998, Aspen has expanded to more than a thousand offices across the country. It entered California in 2019 and has since opened 19 offices and served tens of thousands of patients. According to California Attorney General Rob Bonta, Aspen went far beyond business management and administrative tasks for its California practices. In his announcement of the settlement, Bonta discussed the many alleged ways Aspen violated California’s ban on the corporate practice of dentistry and otherwise ran afoul of the law. Specifically, the state alleged that:

• When it expanded into California, Aspen did not contract with existing dental offices; rather, it selected, purchased, staffed, and advertised its offices without clearly identifying an independent dentist-owner. For example, Aspen designed, built out, and furnished all its offices and made detailed decisions about each location, down to the artwork in the bathrooms. It also selected, purchased, and installed all dental equipment across offices.
• Aspen also encouraged the sale of particular products and services through direct incentives to practices’ clinical employees. For example, Aspen developed and implemented an incentive program for hygienists to encourage the sale of clear aligners. Business practices of this kind limited dentist-owners, restricted staff, misguided patients, and purportedly violated California’s ban on the corporate practice of dentistry and California’s Unfair Competition Law.
• Many advertisements that Aspen created contained misleading and/or false representations, including misleading testimonials, ambiguity, misleading cost claims, and inexact pricing language. Some Aspen Dental advertisements claimed that its offices accepted all insurance or no insurance. However, Aspen Dental offices did not accept state or federally funded insurance programs. Other advertisements described low prices for certain products or procedures without clearly disclosing the factors that affect the price or what’s provided.

As part of the settlement, which still requires court approval, Aspen agreed to pay $2 million in penalties, $300,000 in restitution, and a range of restrictions on its future activities in the state.

What This Means For Dental Practice Owners

For dental practice owners, the most important takeaway from the Aspen settlement is that state regulators are increasingly scrutinizing the line between legitimate business support services provided by DSOs and their control over clinical decision-making, such that it constitutes the corporate practice of dentistry. While DSOs can legally provide administrative support, marketing, payroll, technology, and other non-clinical services, regulators may intervene if those organizations appear to influence patient care, treatment recommendations, or professional judgment. Incentive structures tied to treatment volume or product sales may attract particular scrutiny.

Practice owners should use this development as an opportunity to review their management agreements, compensation structures, and operational policies. Ask the following questions when doing so:

•  Who controls the hiring and firing of clinical staff?
• Who determines treatment protocols?
•  Who approves advertising content?
• Are financial incentives tied to clinical recommendations?

If the answer to any of these questions includes the three letters “DSO,” consult with experienced counsel who can advise you if any action needs to be taken to avoid any potential regulatory scrutiny. 

We Focus on You So You Can Focus on Your Patients

At Grogan, Hesse & Uditsky, P.C., we focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you.

Please call us at (630) 833-5533 or contact us online to arrange for your free initial consultation.

Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices, and this blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.