Tuesday, October 25, 2011

“Owner Dentists” banded together and won $130 million

Had I read this in 2007 or even 2008 I might have believed the whole scenario laid out in the lawsuit between Park Dental Group and American Dental Partners. But knowing what I know today I think it’s a case of “owner dentists” going rogue, but I could be completely wrong. 
In 2007 a Minnesota jury awarded a group of dentist $130 million dollars.  The group alleged American Dental Partners, Inc. had overstepped its bounds when it came to the treatment of their patients.  Disappointingly, the jury failed to address the claims of a corporation/non-dentist practicing dentistry without a license.  However I suspect one could say the monetary award spoke volumes.

I guess it could be a case of the smaller dental group decided to become their own “management” company and screw the Wall Street folks. But as long as dentists own the clinics, are making the decisions and delivering the treatment I don’t see a need for real concern, do you?

Star Tribune
December 13, 2007

In a landmark verdict likely to draw praise from those opposed to the growing corporate presence in medicine, a jury ordered a Massachusetts company to pay $130.6 million to a group of Twin Cities dentists who claim the company interfered with their delivery of care to patients.

A Hennepin County jury ruled Wednesday in favor of PDG PA, a professional association of 115 dentists who operate the Park Dental and Dental Specialist clinics. The dentists had accused American Dental Partners Inc., a public company to which they had outsourced most of the administrative side of the business, of overstepping its legal authority and granting itself grossly excessive fees.

[I’m wondering exactly what that grossly amount was, 100% as with CSHM]

The ruling and the mammoth award will have far-reaching implications for thousands of clinics and hospitals nationwide that in recent years have outsourced the management of their business operations to corporations that aren't owned by medical professionals, industry analysts said.

"It puts in sharp relief the tension that exists in the health care industry over who controls the practice of medicine and dentistry," said Joseph Anthony, an attorney with Anthony, Ostlund & Baer, which represented the dentists. "Will it be the doctors or will it be non-doctor-trained service providers?"

After a month long trial, American Dental and a subsidiary were found liable for, among other charges, breach of contract, breach of good faith and defamation. Late Wednesday, the jury ordered the company to pay $88.3 million in damages, then added $42.3 million in punitive damages on Thursday.

American Dental, based in Wakefield, Mass., said in a written statement that it is evaluating the verdict. Officials did not return repeated telephone calls. Shares of the company tumbled Thursday to $4.62 a share from $14.34 a share a day earlier.

The verdict stems from a dispute over a 1996 agreement in which an American Dental subsidiary, PDHC Ltd., agreed to provide the dentists with money for expansion as well as "non-dental administrative services," such as accounting, lab services and equipment maintenance. In return, the dentists agreed to pay a portion of their billing revenue to American Dental in the form of a "service fee."

[Honestly, I’ve got to give a huge thumbs up to whom ever “spun” this one.  There are lessons to be learned here, I’m sure]

Between 1996 and 2004, the arrangement worked as intended, with American Dental providing business services so the dentists could focus more on the practice of dentistry.

[How many times have I heard (or read) this line of horse hockey?]

However, according to a 2006 lawsuit filed by the dentists, PDHC began in 2004 to make decisions that overstepped its legal authority and interfered with the delivery of dental care. For instance, PDHC implemented a daily "sweep" of the dental group's bank account and refused to give the dentists access to their own funds, the lawsuit said. PDHC also interfered with patient scheduling and insisted on handling all patient complaints.

[I dunno, this kind of smells.  It is, however a refreshing twist on the operations of “owner dentist” and their roles in the whole scamming mess.] 

The dentists also accused PDHC of granting itself unreasonable service fees, while withholding money for new equipment. "PDHC and its non-dentist businesspeople have unilaterally extended [its] control and involvement in a manner that constitutes the practice of dentistry," the lawsuit said.

The interference also made it more difficult for the dentists to transition to become independent when in March, they exercised the right to terminate the service agreement.

[I wonder if the “service agreement” stipulated who the “owner dentists” could turn to if they decided to change “management companies”?]

However, PDHC interfered with this transition by refusing to provide the dentists with their electronic patient records, and by encouraging doctors to set up new dental clinics in the Twin Cities that are in direct competition with Park Dental, according to the lawsuit.

Dr. James Ludke, who practices at Forward Dental in Waukesha, Wisconsin, obtained his Minnesota dental license July 20, 2006, a couple of months after PDG began legal proceedings against ADP. Using Dr. Ludke's Minnesota dental license, ADP created James Ludke, D.D.S., P.L.L.C. PDG argued that ADP staff used targeted recruiting and signing bonuses to get PDG dentists to join the Ludke corporation and work in the Park Dental clinics. Ultimately, this competing professional corporation under Ludke's name was one of the issues that caused the jury to issue a jaw-dropping $130 million award in favor of the PDG dentists.

Though the clinics suffered financial damages as a result of this interference, the estimated 244,000 patients of the 31 Park Dental and Dental Specialist clinics were not harmed, said Anthony. "What it meant was that doctors had to work harder and longer to overcome the problems," he said. "And because of those doctors' efforts, not one patient suffered adverse care."

[ Really? How does one know if the patients suffered or not in this case, did anyone ask them?  Or was it simply the doctors who said no one was injured.  Of course they would not admit harm even if harm had occurred, they did have malpractice lawsuits to worry about after all]

Brooks O'Neil, a health care analyst with Dougherty & Co. in Minneapolis, said he attended every session of the trial and was "stunned" by both the verdict and the size of the jury award. He estimated that the $130 million award was more than 10 times PDG's annual net income.

The verdict likely will embolden other medical practices across the country to file similar lawsuits, O'Neil warned. However, he questioned whether other juries would reach a similar verdict.


Here is an article published by the MN Dental Association updating members about the case at the time.

As Minnesota dentists wrestle with licensing of a mid-level oral health practitioner, last year a Hennepin County District Court heard a potentially landmark case that raised significant questions about the definition of the practice of dentistry in Minnesota. In the case (PDG, P.A. and The Dental Specialists of Minnesota, P.A. vs. PDHC, Ltd.), a group of dentists (PDG) from Park Dental sued its administrative management company, American Dental Partners (ADP). PDG alleged that, among other things, ADP - headquartered in Wakefield, Massachusetts A - was practicing dentistry in Minnesota without a license. Given the subject matter of the lawsuit, we thought it would be informative to update you on the facts and the outcome of the case.

Minnesota law requires a license to practice dentistry. An unlicensed person is illegally practicing dentistry if he or she is a manager, proprietor, operator, or conductor of a place where dental operations are performed. The rationale behind this type of law is to prevent business decisions from impeding patient care. Some states have similar laws, and other states permit non-dentist ownership of dental practices. In addition, the Minnesota Board of Dentistry has promulgated rules as to the level of licensed dentist supervision for both dental assistants and dental hygienists.

As detailed in the court filings, the events that created the basis for the lawsuit are as follow. In 1996, PDG sold the rights to provide non-dental administrative services for its dental clinics to ADP. The 40-year service agreement made PDG one of the first dental groups in the nation to seek a partnership with a dental management service organization. ADP purchased the name Park Dental, assumed all of the leases to the clinics, and employed the clinical and non-clinical staff, with the exception of the dentists. The service agreement had to comport with Minnesota law regarding the unlicensed practice of dentistry. To accomplish that end, the service agreement left the Park Dental dentists in a professional corporation, PDG, P.A., to provide direct patient care, hold contracts with third-party payers, and be the stewards of the patients' dental records. Dr. Greg Swenson, co-founder of Park Dental, served as the president of PDG and ADP's Minnesota affiliate.

In 2004, the relationship between PDG and ADP began to sour when Dr. Swenson was relieved of his duties at ADP. After Swenson left, PDG contended that ADP's Minnesota affiliate was operating the Park Dental clinics without direction from a Minnesota licensed dentist, or any dentist for that matter. PDG further argued that not only was ADP in violation of the Minnesota Dental Practice Act because it was acting as the manager, proprietor, or operator of a place where dental operations are performed, but also that the ADP clinical employees lacked direct dentist supervision. PDG also claimed that ADP began firing clinical and non-clinical staff that the PDG dentists wished to retain and hiring replacements without consulting the PDG dentists.

In January of 2006, PDG's board of directors authorized a lawsuit against ADP for breaches of the service agreement contract and violations of the Minnesota Dental Practices Act. In March of 2007, PDG gave notice of cancellation of the service agreement, with nine months notice for the parties to engage in an orderly transition. Since ADP owned the Park Dental name, the facilities, and the staff, it was PDG's intent to set up entirely new facilities to serve their patients. However, PDG claimed that as PDG looked to set up new clinics, ADP proceeded to interfere with PDG's potential landlords, dental suppliers, and PDG's associate dentists. It appears that ADP did not want to be left with 31 dental clinics and no dentists to staff them, so they created their own dental professional limited liability corporation using one of the dentists from another ADP affiliated clinic.

Dr. James Ludke, who practices at Forward Dental in Waukesha, Wisconsin, obtained his Minnesota dental license July 20, 2006, a couple of months after PDG began legal proceedings against ADP. Using Dr. Ludke's Minnesota dental license, ADP created James Ludke, D.D.S., P.L.L.C. PDG argued that ADP staff used targeted recruiting and signing bonuses to get PDG dentists to join the Ludke corporation and work in the Park Dental clinics. Ultimately, this competing professional corporation under Ludke's name was one of the issues that caused the jury to issue a jaw-dropping $130 million award in favor of the PDG dentists. The jury found that ADP breached several provisions of the service agreement contract. In addition, the jury found that ADP breached its fiduciary duties toward PDG; in other words, ADP failed to act in the best interests of their business partner, PDG. After the jury's verdict, the parties entered court-ordered mediation, and the resulting settlement returned 25 clinics to the PDG dentists. ADP kept six of the clinics where the dentists had signed with the Ludke corporation. ADP affiliated clinics in Minnesota include Metro Dentalcare, Valley Dental Group, Assure Dental, and Orthodontic Care Specialists, making the publicly-traded ADP the largest provider of dental care in Minnesota.

The case had the potential to clarify the definition of practicing dentistry in Minnesota as it relates to practice management organizations such as ADP. Unfortunately, the jury did not specifically address this issue in its verdict. Thus, as shown above, ADP and other practice management organizations are still operating in Minnesota, and many of the questions regarding practice management organizations and the definition of practicing dentistry still remain. The MDA is working with the Board of Dentistry and other entities to attempt to address these issues. The MDA will continue to monitor these arrangements and update you as needed.

*Dr. Wolff is a member of the Dental Marketplace Committee of the Minnesota Dental Association. He is a general dentist and an attorney practicing in Stillwater, Minnesota.

*Angela Lutz Amann is legal counsel for the Minnesota Dental Association and a shareholder in the law firm of LeVander, Gillen & Miller, P.A.,
South Saint Paul, MN. E-mail is aamann@levander.com