DSOs are facing a new challenge this year that could threaten their operations and ability to grow: increased scrutiny and oversight from providers and legislators.
Several states have introduced legislation to limit corporate entities’ ownership of dental practices and their influence on clinical decision-making. Driving these initiatives is increased scrutiny from clinicians, patients and legislators seeking to protect patient care and clinical autonomy.
Kentucky recently modified its Dental Practice Act to bar individuals who are not licensed to practice dentistry or entities that establish reimbursement rates from controlling clinical decisions. A new Illinois law also expands oversight of healthcare investments by requiring PE firms to provide 30 days’ advance notice to the state attorney general before closing certain transactions. Meanwhile, a new Maine law gives the state authority to approve certain transactions involving private equity firms and hedge funds, as well as certain MSOs that are connected to private equity or hedge fund ownership.
Similar initiatives have also reached a national level. In December, the American Economic Liberties Project released model legislation that would strengthen corporate practice of dentistry laws. The model legislation not only prohibits non-dentists from owning practices, but bans common workarounds such as DSOs.
In addition to putting patient access at risk, some DSO leaders argue these efforts are overreaching, and could increase compliance costs and operational hurdles.
The Association of Dental Support Organizations most recently filed a legal challenge against the Colorado Dental Board over an amendment that bars DSOs from owning practices. In addition to prohibiting DSOs from serving as proprietors of practices, the amended rule states that a dentist who works at a DSO may be subject to disciplinary action, bars DSOs from leasing office space or equipment to practices, and requires the disclosure of financial and business records.
The ADSO argued that the board “overstepped its authority in rulemaking,” and that the restrictions threaten access for Medicaid patients in the state. The Colorado Dental Board voted Aug. 24 to temporarily block enforcement of the rule, allowing time for the courts to consider the rule’s validity.
North Carolina also ended a prior requirement for DSOs and dental practices to submit management agreements to the state dental board last month. Previously, management agreements needed approval from the state Board of Dental Examiners or a deemed compliance letter. The process of gaining board approval often delayed deals and increased costs for DSOs and practices.
Despite the potential roadblocks these initiatives could create for DSOs, some leaders are confident that DSOs will prosper. Joshua Elliss, DMD, the CEO of Encanto Dental Group in Deming, N.M., told Becker’s that such legislation will likely not hold up against legal challenges, and that states should instead focus on regulations for enhancing patient safety.
“State legislatures are wasting valuable time trying to outlaw specific corporate business models,” he said. “Instead, their focus should be on passing laws that strictly penalize healthcare provided below the standard of care and impose heavy financial penalties on entities that prioritize profit margins over patient outcomes.”
Thomas von Sydow, CEO of Cornerstone Dental Specialties in Irvine, Calif., agreed these regulations will ultimately fail. He added that specific accusations of corporate entities deciding treatment plans or clinical judgement are false, and that organizations have legal resources available to ensure dentists maintain clinical control.
“There is absolutely no reason that private individual practice models cannot coexist with DSOs,” he told Becker’s. “The market should decide, including dentists who want to practice in either model, with the patient ultimately making the final choice.”
This new era of scrutiny could be an opportunity for DSOs to increase transparency and become more disciplined with their operations. Samir Qureshi, president of Viper Partners, said she believes increased oversight could strengthen the DSO sector, particularly for organizations that prioritize clinician-led governance.
“The key is avoiding regulation that unintentionally restricts the non-clinical efficiencies DSOs can provide,” she said. “If policymakers preserve that distinction, DSOs can continue helping practices expand capacity, invest in technology, recruit providers and improve access to care — while ensuring that diagnosis, treatment planning and other clinical decisions remain where they belong: with the dentist.”
At the Becker's 5th Annual Future of Dentistry Roundtable, taking place September 14-15 in Chicago, dental leaders and executives will gain insights into emerging technologies, practice growth strategies and the evolving landscape of dental care delivery, with a focus on innovation, patient experience and operational excellence. Apply for complimentary registration now.
