DSO Business Model Includes Violating State Labor Laws

 
Dr. Michael W. Davis maintains a general dental practice in Santa Fe, NM. He serves as chairperson for Santa Fe District Dental Society Peer-Review. Dr. Davis also provides a fair amount of dental expert legal work for attorneys. He may be contacted via email: MWDavisDDS@comcast.net.





David Sohn is the principal attorney at SOHN LEGAL GROUP, P.C., which prosecutes and defends employment and business disputes on behalf of individuals, small businesses, and non-profit organizations.  Prior to starting his own law firm, David worked at several prominent national law firms in San Francisco.  He received his bachelor’s degree in Economics from Stanford University and his law degree from Harvard Law School.  Due to the successful results he has achieved for his clients, David has been recognized as a Northern California Super Lawyer by Super Lawyers Magazine. David can be reached at 415-421-1300 and david@sohnlegal.com.
 
INTRODUCTION
David Sohn is an attorney in San Francisco specializing in employment litigation matters. Last year, he represented a dentist in his wage and hour lawsuit against Western Dental Services, Inc. (“Western Dental”) for misclassifying him as an exempt employee and not paying him overtime wages and providing proper meal and rest breaks, among other things. Mr. Sohn tried this case in San Francisco Superior Court against an army of big law firm lawyers hired by Western Dental – and prevailed. As a result of his trial victory, the overwhelming majority of dentists in California are now misclassified. They should be receiving overtime wages, proper meal and rest breaks, and all of the benefits and protections of California’s employment laws.
The case is entitled Nanda v. Western Dental Services, Inc . (Case No. CGC-13-529601).

Dr. Davis: Mr. Sohn, I sincerely thank you for taking the time and effort to address matters of this case. I understand much of your legal work involves labor workplace rights. The public may not appreciate how even a licensed dentist may have their rights violated in the workplace. Could you give our readers an overview of the merits of this case and how your client was damaged? 

Mr. Sohn: Thank you, Michael, for giving me an opportunity to discuss with you and your readers my trial victory against Western Dental. This is a very important, game-changing case that all dentists and to-be-dentists need to know about so that they understand what their workplace rights are.

When I decided to take on this case back in 2013, I didn’t know anything about the dental industry. I took it on because I saw a very interesting legal question. That question was: are dentists employed by Western Dental compensated in the form of a “salary?” Western Dental compensates its dentists by a fixed daily rate and/or a percentage of their production. They are not guaranteed in advance a minimum weekly or monthly amount of compensation.

This legal question is important because in order for dentists and other licensed professionals to be exempt from all of the benefits and protections of California’s employment laws – such as overtime wages and proper meal and rest breaks – they must be paid in the form of a “salary.” If they are not, they must be provided these benefits and protections.

California law does not provide a definition for the term “salary.” Instead, California courts look to federal regulations for the definition of “salary.” The pertinent federal regulation, 29 C.F.R. § 541.602(a), states that an employee is paid on a “salary basis” if he or she “regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee's compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.” This same federal regulation also explains that if an employee is ready, willing, and able to work, but he or she does not work due some reason occasioned by the employer, he or she is not being paid on a “salary basis.”

At the conclusion of trial, the judge held that the dentist I represented was not paid in the form of a “salary.” The dentist never received on a weekly, or less frequent basis, a predetermined amount of compensation which was not subject to reduction based upon variation in the quality of quantity of work performed. He was only paid for the days that he worked and on occasion received a percentage of the production he generated. On numerous occasions, even though he wanted to work, if he was not called into work, he was not paid. Given these circumstances, he was entitled to overtime wages and proper meal and rest breaks like other non-exempt staff employed by Western Dental.

As a result of the judgment issued in my case, all dentists – and for that matter any licensed dental healthcare professional (such as orthodontists, periodontists, etc.) – in California paid on any basis other than a salary basis are “non-exempt” employees who are entitled to overtime wages, and proper meal and rest breaks.   

Dr. Davis:  The defendant in this case, Western Dental, is the largest employer of dentists in the state of California. They also operate dental clinics in Nevada and Arizona. They are the largest provider of dental Medicaid services for California. As large of a dental industry operation as is represented by Western Dental, is it reasonable to speculate on the pervasiveness of dentist/employee workplace labor violations (both in Western Dental and the dental service organization (DSO) industry, as a whole)?   

Mr. Sohn: During the course of my case against Western Dental, I discovered that Western Dental’s approach to how it compensates its dentists is not unique. I spoke to a number of dentists and specialists who worked for other practices large and small, including other DSOs and small private practices, and the impression I received was that the overwhelming majority of dentists and specialists in California – and in the country – are paid on a similar non-salary basis. That’s when I realized my case could have significant industry-wide consequences.

CDMO, Inc and CDET, LLC v. Comfort Dental Lawsuit Rages On

150908 Doc 109 CDMO & CDET v Comfort Dental Response to Opp

 

150908 Doc 109-1 CDMO & CDet v Comfort Dental Declarations

Sending A Message to Texas Gov. Greg Abbott

They need 75 more signatures guys, let's make this happen. Texas is the worst state in the nation for dental fraud and lack of action by it's dental board. It's the state where criminal dentists thrive in administrative protection! Remember for every $1 of fraud in Texas, .50 is stolen from taxpayers of the other 49 states.

Another one of those “studies” paid for by Kool Smiles parent company suggests more Medicaid money is needed for dental benefits to serve children in Texas!

I know it’s hard but try to stop laughing and read this ridiculous press release.
(Benevis was formerly NCDR (Kool Smiles), owned by private equity firm FLL Partners.)

Study Finds Only 26.5% Of Texas Children Eligible For Medicaid Dental Coverage Frequently Visit Dentist.

PRNewswire (7/30) carries a release announcing that a new survey by the Benevis Foundation, conducted by Kennesaw State and Emory University researchers, finds that “only 26.5% of Texas parents with children eligible for Medicaid dental coverage consistently bring their children to the dentist as frequently as they should,” with parents citing financial hardships as the primary barrier to more frequent dental visits. Geoffrey Freeman, spokesperson for the Benevis Foundation, said, “This suggests that parents may not be aware of the complete coverage of their benefit, or that there may be secondary costs – such as transportation or unpaid time off work – that keeps these families from visiting the dentist as often as they would like.”

2015 Texas State Dental Board Continues Massive Failure to Protect Citizens

Aired WFAA July 20, 2015

Grassley Seeks Key Agency Updates on Medicaid Pediatric Dental Fraud

These answers should be interesting don’t’ ya think? I can answer. Little to nothing to “prevent” and even less to “punish”.

 

Jul 02, 2015

WASHINGTON – Sen. Chuck Grassley is asking key government agencies what they’re doing to prevent and punish Medicaid dental fraud, including billing for unnecessary treatments for children, in light of inspector general audits and related media reports documenting worrisome practices.

“Some dentists are clearly performing unwanted and unneeded medical procedures on children without the consent of parents and bilking Medicaid for the privilege,” Grassley wrote to Attorney General Loretta Lynch and Department of Health and Human Services Inspector General Daniel Levinson. 

Grassley’s letters cited Health and Human Services Office of Inspector General audits of questionable billing practices for Medicaid pediatric dental services in four states: California, New York, Louisiana and Indiana.  All of these audits identified questionable billing practices that suggest Medicaid dental providers are performing medically unnecessary procedures on children.  Grassley wrote that this conclusion has been echoed by a variety of news sources that have reported on troubling practices performed by dentists treating children in Medicaid, including a Florida-based dentist who allegedly subjected hundreds of children to unneeded tooth extractions, improper dental fixtures, and other troublesome procedures.

Grassley asked Lynch for the number of criminal and civil fraud referrals from the Health and Human Services Office of Inspector General related to Medicaid dentistry chains in the past five years, with a listing of the referrals by state and how each criminal and civil case was resolved; details of the number of ongoing Department of Justice Medicaid dental chain fraud investigations by state; and a description of the Department of Justice’s plan to address the findings by the Health and Human Services Office of Inspector General that indicate health care fraud in the context of dental procedures provided to children in Medicaid. 

Grassley asked Levinson for the steps the inspector general’s office will take, or has already taken, to increase the auditing of dentistry offices that are recipients of federal dollars; the number of criminal and civil fraud referrals from the inspector general’s office to the Department of Justice relating to Medicaid dentistry chain activity in the past five years; details of the Medicaid dentistry audits the office performed by state in the past five years, with a note on whether the audit resulted in criminal or civil referral to the Department of Justice; the number of ongoing Medicaid dental fraud investigations by state; and a description of the progress on following up on billing fraud and unnecessary procedures in Medicaid pediatric dental services. 

In 2013, following a year-long investigation, Grassley and then-Finance Committee Chairman Max Baucus of Montana issued a report and recommendations urging the administration to ban dental clinics from participating in the Medicaid program if the dental clinics circumvent state laws designed to ensure only licensed dentists own dental practices to prevent substandard care.  In 2014, the inspector general moved to disqualify a firm from Medicaid.  

Grassley’s latest letters are available here and

EXCLUSIVE: Dental Service Organizations (DSO’s): Truth Revealed by Financial Insider

June 25, 2015

By: Michael W. Davis, DDS

Dr. Michael W. Davis maintains a private general practice in Santa Fe, NM. He chairs the Santa Fe District Dental Society Peer-Review Committee. Dr. Davis is active in dental care for disadvantaged citizens, and expert legal work. His publications and lectures are on ethical and whistleblower issues within the dental profession, as well as numbers of clinical research papers. He may be contacted at: MWDavisDDS@comcast.net

Dr. Kevin Cain is an Assistant Professor of Management in the James M. Hull College of Business and guest lecturer in practice management in the College of Dental Medicine at Georgia Regents University. He teaches courses on strategy and entrepreneurship and does academic research in the fields of strategic management, organizational theory, and healthcare management. He also serves on a task force with the Georgia Dental Association and teaches continuing education courses focused on the business of dentistry. Additionally, he is a co-founder and board member of several companies serving the dental industry. He earned a PhD in Business Administration at the University of Georgia, an MBA from Wake Forest University and a BA in Economics from the University of North Carolina at Chapel Hill. He can be contacted at: kevin@kevinwcain.com.
 

Introduction from Dr. Michael Davis-

Dr. Kevin Cain has an interesting and established history in study of the dental industry, and particularly dental service organizations (DSOs). He does research and has given lectures on the risks this business model presents against the public welfare and the integrity of the dental profession. Dr. Cain effectively counters the private equity spin of unlicensed corporate managers keeping at arm’s length from clinical decisions, within the doctor/patient relationship. He confronts DSO industry misrepresentations, of which there are many, head on.

Interview

Dr. Davis: Dr. Cain, please relay the personal story of your mother, a practicing nurse, and the degradation of her once honored profession by corporate health care. How did that affect you personally and influence your fields of academic research?
Dr. Cain: My mother has been a nurse within the same healthcare organization (and its predecessor hospitals) for 40 years. Since the late 1980s, she’s seen her role increasingly shift from being a caretaker to being part of a production line. The healthcare group she works for – mind you its a not-for-profit – sets performance benchmarks for pre- and post-operative care that her and her colleagues must meet. Additionally, her organization implemented EPIC Systems as its EMR provider last year and the time it takes to document patient care further decreases the quality of care she can provide patients.
She is no longer a happy nurse, and actually tried to dissuade my sister from majoring in nursing. At the center of her frustration with her company is its inability to treat patients as idiosyncratic. There are aspects of her job that, if not performed adequately, can jeopardize patient lives. However, her company pushes for efficiency and sets limits on the amount of time allocated for intake. When you generalize patients to the extent that her company has, and minimize the time nurses have to gather information about patients, it is inevitable that those nurses will miss something critical.
My mother’s frustrations with her organization have really shaped my perspective of the dental industry. She and many other healthcare professionals I have spoken with are disillusioned by the current state of their industry. The drive for growth and profitability in healthcare has superseded the drive for quality care, and I do not want to see the dental students I have the pleasure of interacting with here face the same disillusionment for their entire careers. It is imperative that the dental community protects the general dentist from becoming marginalized in the same manner as the primary care physician.
My research on the dental industry is driven, primarily, by the desire to help dentists remain clinically autonomous. In order for the dental profession to maintain its clinical autonomy, practitioners need to understand how institutional forces shape industries. In my field, we study institutional isomorphism – that organizations within an institutional environment look the same – because it helps explains how mimetic, coercive, and normative forces influence those organizations. There are currently no coercive (regulatory) forces preventing the DSO model from becoming the de facto dental model in the U.S., and there is very little normative pressure coming from private practice dentists to change that course.
With regards to mimetic forces, you have baby-boomers selling their practices to DSOs because a friend did and got more money than they would have in a private transition, and you have dental students – year after year – going to work for DSOs because they have been told that the high guaranteed salary is the quickest way to pay off student debt. Meanwhile, a few “business savvy” – or opportunistic – dentists are building their own DSOs and acquiring other practices because they see founders of the large DSOs driving twenty-five million dollar classic Ferraris and want in on that kind of wealth. These mimetic forces are shaping the industry, and the confluence of these forces is leading dentistry down a familiar path (i.e. optometry, pharmacy, primary care medicine).
 
Dr. Davis: We continually hear and read the misrepresentations from DSO private equity managers and their hired supporters that they keep at arm’s length from the practice of dentistry. Yet, we know they establish production quotas and bonuses upon employee dentists. Every doctor’s production metric is monitored on a daily basis. Each clinic’s bank account is swept clean, at least two to three times weekly. They determine clinic scheduling, staffing, as well as purchases for dental materials, dental laboratories, and dental equipment. State regulatory dental boards and even the Federal Trade Commission (FTC) seemingly have bought into these outlandish misrepresentations. (1) What private equity firm, whose sole responsibility is towards its shareholders and not patients, would not logically control every aspect of its business, inclusive of the practice of dentistry? (2) Why do we see so little regulatory enforcement for the unlicensed and unlawful practice of dentistry? Is it a matter of laziness, corruption, or some other factor?
Dr. Cain: The short answer is that private equity (PE) firms routinely leave control of their investments to the top management of those companies, but charge those managers with generating the best possible returns. The pressure of those expected financial returns can drive decision-making by managers of those companies, which is where you would see diffusion of pressure from top managers to the level of the organization at which revenues are generated. In the DSO model, that level is the dentist. To think that PE investments in the practice of dentistry, or the legal structure – where the DSO and the professional corporation that employs the dentists are connected only via a management service agreement (MSA) – keep DSO dentists immune to this pressure for financial returns is naïve. I would venture to guess that most dentists working for a DSO would tell you that they are not told to do certain procedures or pressured based on performance, but the psychology of seeing their production and their office’s production ranked against other associates and offices in the DSO probably provides enough of a catalyst to pressure driven, competitive individuals (generalizing here based on current crops of dental students) to alter treatment plans. That pressure might cause the best-intentioned dentists to compromise their training and ethics in order to climb rankings or achieve desired results (or bonuses). Because continuing education for DSO dentists is provided at corporate headquarters in some companies, treatment plans, labs, and materials used across the company probably begin looking very similar – and profitable – over time.