Another One Bites the Dust: Benevis - Kool Smiles Files For Chapter 11 Bankruptcy

August 3, 2020

Two years after agreeing to pay $23.9 million, plus interest to settle Medicaid fraud allegation Benevis (formerly NCDR, LLC) has filed for Chapter 11 Bankruptcy in the Southern District of Texas. (See Amended Petition here) (See LT Smiles Petition here)

In January 2018 Benevis and it's Kool Smiles branded dental clinics agreed to the settlement after the Department of Justice found the company  "knowingly submitted" false claims for payment to state Medicaid programs for medically unnecessary pediatric dental services.

Benevis and it's Kool Smiles clinics were featured on the first episode of CBS Whistleblower TV program that aired July 13, 2018. (see trailer here)

 

MARIETTA, Ga.--(BUSINESS WIRE)--Aug 3, 2020--

LT Smile Corporation, along with its subsidiaries Benevis Holding Corporation, Benevis Corporation, Benevis, LLC, Benevis Affiliates, LLC and Benevis Informatics LLC (“Benevis” and “Company”), announced that it has filed voluntary petitions for relief in the Southern District of Texas under Chapter 11 of the United States Bankruptcy Code to effectuate a recapitalization and sale of the business, and to improve its balance sheet and operating position. Benevis and its employees will continue their normal operations and their support of high-quality dental care at supported dental practices throughout the process. None of the Company’s supported dental practices are part of the Chapter 11 filing.  https://www.businesswire.com/news/home/20200803005461/en/Benevis-Enters-Voluntary-Chapter-11-Reorganization

 This is the same scenario as it was with the Small Smiles chain: Chapter 11 first then Chapter 7 soon followed. 

Benevis Corp., which provides back-office services to 150 dental offices, has filed for bankruptcy, saying its revenue fell more than 60% recently due to the coronavirus pandemic. https://www.wsj.com/articles/benevis-provider-of-support-services-to-dentists-files-for-bankruptcy-11596487729

Benevis claim to provide "back-office" services and that is true, but they also own and operate the clinics using company executives, such as dentists Dale Mayfield, David Veith, and Tu Tran as so called "owner-dentists". Dr. Tran may tried to claim he has nothing to do with the company but he is still being shown as "owner" and "incorporator" of Winchester Dental, PSC d/b/a Ruby Dental and Braces whose address just happens to be the same as Benevis'. Other current and/or past owner-dentists have included dentists Thien Pham and David Strange, Jr.

 Since these places operate on volume and overtreatment (this my own opinion of course, but the DOJ agreed with me) the Corvid-19 pandemic has severely hit their bottom line.

According to Scott Mell's Declaration in the court filings, the companies new Chief Restructuring Officer, the company approximately 70% of the company's income was generated from state Medicaid and CHIP programs.

In the bankruptcy filings:

 The company listed assets and liabilities of as much as $500 million each in its bankruptcy petition. Benevis provides support services to almost 200 dental practices across the U.S., according to its website.

Benevis has lined up as much as $30 million in financing from current lenders including New Mountain Finance Corp., according court papers. New Mountain has also agreed to serve as the stalking horse bidder for the company. https://news.bloomberglaw.com/bankruptcy-law/pe-backed-dental-services-company-files-bankruptcy-eyes-sale

Benevis has secured committed financing from its current lenders; including New Mountain Finance Corporation and several of its credit investing affiliates, to bolster liquidity and enhance ongoing operations during the reorganization process. https://www.businesswire.com/news/home/20200803005461/en/Benevis-Enters-Voluntary-Chapter-11-Reorganization

Scott Hornbuckle, Chief Financial Officer for Benevis stated, “The additional financing and the reorganization process will help us strengthen our balance sheet and solidify our path to future success. We look forward to continued investments in the future and the continuation of our long history of supporting outstanding dental care.”

Benevis’s legal advisor for the reorganization is Jackson Walker. Conway Mackenzie and Lincoln International LLC are serving as financial advisors to the Company. https://www.bakersfield.com/ap/news/benevis-enters-voluntary-chapter-11-reorganization/article_459a597a-b83e-50a0-bf5c-a198781a15f1.html

Admittedly I nearly choked and puked on the "outstanding dental care" statement. 

Below is the corporate structure according to Scott Mell and was included in his Declaration on page 4.

Maybe it's just me, but I think there might be a few things left out of this little stick drawing. 

In the Amended Petition it lists the 30 largest unsecured creditors.  Henry Schein, Inc., holds the number one spot with Benevis owing them $3,671,336.72!  WHOA!  

LT Smiles Bankruptcy Petition shows the Equity Security Holders as this. To save you some time, that address is New Mountain Capital.

New Mountain Capital SEC Filings

Another familiar name I noticed on the creditors list is Tailwind Capital. They are the PE firm that bought Lone Peak Management Group located in Utah and their Smiles 4 Kids clinics, mostly located in the Northwest. In 2018 a whistleblower came forward with serious allegation against the company and it's leadership.

 

 

Tailwind Capital's Dental Service Organization Investments: Benevis and Lone Peak

Just an FYI, since I'm sure this information will be needed one day:

Smiles 4 Kids, which had been purchasing many old Small Smiles clinics and Kool Smiles are both now operated by Tailwind Capital.

Benevis is Kool Smiles and Resolution Dental

Lone Peak is Smiles 4 Kids as well as a few other names.

Financing for Benevis's sale to Tailwind seems to be, in part,  by New Mountain Finance and happened during the 1st quarter of 2018. Probably before the ink on the Kool Smiles settlement was dry. 

In a May 2018 conference call transcript New Mountain states:

Our new investments were highlighted by a larger-size directed origination of a unitranched loan for Benevis, several club deals including a loan to ACA Compliance and one addition to both our net leased portfolio and our SBIC investing program. We believe that the consistency of our deal flow in this competitive market shows the strength of the broad sourcing network that we have built.

(unintranched debt: debt is a type of structured debt that obtains funding from multiple participants with varying term structures.)

 

In their 2018 holdings report, Washington State Investment Board is invested is Tailwind and New Mountain.


Although Benevis still shows up on FFL Partners website's portfolio page,  it is listed under the "Former" tab on their website.

Tailwind Captial Portfolio
FFL Partners Portfolio

New Complaints About Lone Peak Management Group and Smiles 4 Kids Dental Clinics

Pediatric dental chain faces new complaints

By: Alison Grande
Updated: Nov 16, 2018

A new complaint was filed against a local pediatric dental chain, Smiles 4 Kids. The chain is managed by Dr. Justin VanBibber and owned by Lone Peak Management.

The latest complaint was filed by the Washington State Dental Association with the Department of Health and the Dental Quality Assurance Commission. The complaint alleges the dental offices in the chain, only refer patients to their other practices for oral surgery or orthodontia.

Dr. Chris Delecki is the president of the Washington State Dental Association.

"They're failing to disclose the fact the patient has other options besides their self-referrals to their own managed practices," said Dr. Chris Delecki, President of the Washington State Dental Association.

"Patients are often being asked to travel from Tumwater to Tacoma for their orthodontic care and these are Medicaid patients and for many of them transportation is one of the biggest things they face.
he complaint includes an email apparently sent by the Smiles for Kids Regional manager to office managers.

"Patients in your offices should NOT be given options as to where they would like to go for their wisdom teeth extractions -- referring patients anywhere else is sending OUR business and money away and is therefore, unacceptable."

Read the entire report here.

Washington State Dental Association: LOCAL DENTAL CLINICS OPERATED BY LONE PEAK MANAGEMENT ENGAGED IN DANGEROUS AND DECEPTIVE PRACTICES

Contact: Bracken Killpack
206.973.5227; bracken@wsda.org

LOCAL DENTAL CLINICS OPERATED BY LONE PEAK MANAGEMENT

ENGAGED IN DANGEROUS AND DECEPTIVE PRACTICES, COMPLAINTS ALLEGE

Practice at Smiles 4 Kids, Kids Dental, Family Orthodontics Put Patients at Risk

and Cost Low-Income Families

TACOMA – November 13, 2018 – The Washington State Dental Association (WSDA) has filed a new complaint with the Washington State Department of Health, alleging dental clinics operated by Lone Peak Management Group, LLC (Lone Peak) are engaging in dangerous and deceptive practices.
The WSDA complaint is just the latest complaint against Lone Peak, which operates more than a dozen clinics in Washington state, specializes in pediatric dentistry, and serves a high percentage of low-income, Medicaid-eligible patients.

The WSDA complaint was filed after research into Lone Peak practices. It alleges that the chain arranged a kickback scheme that generated nearly $170 for Lone Peak every time a patient was administered general anesthesia. Disguised as a “facility use fee” charged to the anesthesia provider, these payments far exceeded fair market value of the record-keeping Lone Peak provided the anesthesia provider, generating substantial additional profit for Lone Peak.

Dentists and staff in Lone Peak offices also were directed to engage in a system of self-referral to affiliated clinics for specialty dental services like oral surgery and orthodontia. This system ignored patient preferences and in many cases resulted in families traveling significant distances to affiliated clinics when other qualified providers were nearby.

Internal Lone Peak documents cited in the complaint clearly demonstrate the profit motive behind this policy: “Patients in your office should NOT be given options as to where they would like to go for their wisdom teeth extractions,” reads one email. “Regardless of how near/far the office … referring patients anywhere else is sending OUR business and money away and is therefore unacceptable.”

Previously, Seattle’s KIRO 7 TV reported on another whistleblower complaint against Lone Peak, filed by a former office manager who left the company after refusing to follow directives from company managers to re-use dental mouthpieces that are intended for single-use only.
Internal company emails cited in the whistleblower complaint show Lone Peak putting profits ahead of patient safety. In one email regarding the reuse of mouthpieces, a Lone Peak executive lamented the fact that “our expenses would go through the roof if we didn’t find a way around” the single-use requirement.

The emails also describe how Lone Peak ignored concerns raised by at least one clinic dentist about the reuse of single-use mouthpieces. Lone Peak agents directed dental office staff to deceive that dentist: “We should probably hide our open Isolites (mouthpieces) on the days we know she is coming in,” wrote a Lone Peak agent. “In the meantime, just make her happy when she is around, and then go back to business as usual when she leaves.”

“The concerns brought forward by the whistleblower and uncovered by our team are deeply troubling and represent a dangerous corporate intrusion in the doctor-patient relationship,” said Dr. Chris Delecki, president of the Washington State Dental Association. “This speaks to what can happen when corporations are allowed to directly or indirectly own dental practices. In this environment, corporations can direct, question and over-rule the decisions dentists make in how to best treat their patients. This is why our association has consistently advocated for state laws to prohibit this type of interference and why we have engaged in bringing these practices to light.”

Washington law prohibits corporations, including dental service organizations (DSOs), from practicing dentistry, which includes directing a dentist’s treatment plan; limiting or imposing requirements on how a dentists uses equipment or materials in the provision of treatment; or limiting or imposing requirements on the materials, supplies, instruments or equipment a dentist deems necessary to provide diagnoses or treatments consistent with the standard of care.

Lone Peak is a DSO headquartered in Colorado that manages approximately 50 dental clinics in 12 states, including Washington. Lone Peak is owned by Tailwind Capital, a private equity firm whose stated mission is to transition businesses to become “larger, more profitable enterprises.”

Documents received by WSDA indicate that certain executives of Lone Peak may also have been involved with the Small Smiles dental chain DSO, and a number of Lone Peak dental offices formerly may have been Small Smiles dental offices. Small Smiles was included in a scathing 2013 US Senate report that found the chain performed unnecessary services and that its business model deceptively gave managers rather than dentists control over the clinics. The report also recommended that Small Smiles be excluded from participating in the federal Medicaid program. 

Small Smiles and its parent company, Church Street Health Management (CHSM) have faced litigation before. In 2012, Small Smiles paid $24 million to settle allegations of Medicaid fraud brought by the U.S. Department of Justice. And in 2015, Small Smiles agreed to pay nearly $39 million in claims for alleged “unnecessary, inappropriate, unsafe, and excessive dental procedures.” Church Street Health Management has since declared bankruptcy.
 
The most recent complaints here in Washington also name Justin VanBibber, a Utah-based dentist who serves as the nominal head of the clinics engaged in the kickbacks and the mouthpiece reuse practice. He is listed as a practicing dentist on Lone Peak clinic websites in Washington, but the profile for his South Jordan, Utah practice lists him as a resident of Utah.
The Washington State Department of Health has opened active investigations into Lone Peak’s and VanBibber’s practices.


About the WSDA
The Washington State Dental Association’s 4,400 member dentists are committed to solutions that prevent disease and ensure quality oral health for all Washingtonians. WSDA empowers its members to advocate for and provide optimal oral health care.

Smiles 4 Kids Dental Clinics Under Investigation in Washington State

Smiles 4 Kids is “managed” by Lone Peak Management Group (LPMG), located in Colorado. Tailwind Capital.  In January 2017, Tailwind Capital purchased a controlling interest in LPMG for $55M.  Waller Law Group represented LPMG.  In press releases at the time, it was stated LPMG had nearly 50 clinics in 12 states.  As of March 2018 I counted 59 clinics and 73 known business entities. But as always, I could be wrong. (smile)

Let me just say this is only the tip of the iceberg about this company.

Below is the excellent report, by Alison Grande, that aired October 25, 2018 on KIRO7 News.

Whistleblower: Local pediatric dental chain reusing disposable tools

By: Alison Grande
Updated: Oct 26, 2018 - 6:19 AM

The Washington State Dental Quality Assurance Commission is investigating after a whistleblower complaint accused a local pediatric dental chain of re-using dental tools.

Lisa Walker quit her job as the office manager at the Smiles 4 Kids at Allenmore Hospital in Tacoma after she says the dentist overseeing the businesses, Dr. Justin VanBibber, told her to re-use disposable Isolite mouthpieces.

"That we re-use the Isolites, he asked that I put them in the cold sterile and re-use them on patients and I refused," said Lisa Walker.

The Isolite Mouthpiece package is clearly labeled "Disposable. Do not re-use. Re-use can result in the transmission of infections, pathogens."

Isolite mouthpieces are used to keep the airway clear during a dental procedure. "It suctions out the blood, the saliva, pus, tooth decay, you name it -it keeps the airway free of debris," described Walker.
"The worry for my kids and it was my worry for all kids is that,  I mean we have hepatitis B, hepatitis C, there's HIV, I mean there's numerous numerous diseases and long-term illnesses that can be contracted through blood."

Read entire story here.