Thursday, June 25, 2015

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

June 25, 2015

By: Michael W. Davis, DDS

By Michael W. Davis, DDSDr. 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:

Dr. Kevin CainDr. 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:

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.


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.Capture
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.

Thursday, June 18, 2015

NY Attorney General says Aspen has to change it’s ways; or did he?

What apparently escaped the NY Attorney General is that the parent company is the actual owner of the dental practices and the "owner dentist” doesn’t own diddly-squat. 

Hey NY AG! The  "Dental Management Companies" hires individual dentists as salaried employees who then pretend to "own" the clinics!  But you know that, right?

In the case of Small Smiles, the original "owner dentists" paid $10.00 per clinic or less. But when we caught on the price went up to a whopping $100. That's a pretty sweet,,, "owning" a business that generates millions of dollars a year, for $100.  Sign me up!

June 2016 New York State Attorney General Settlement Order With Aspen Dental

Tuesday, June 09, 2015

Wondering how the Small Smiles Dental Malpractice Settlement Stands?

This pretty much covers where the settlement is today.

Small Smiles Settlement as it stands June 2010

Friday, June 05, 2015

Basic Economic Models of Large Scale Corporate Dentistry

Basic Economic Models of Large Scale Corporate Dentistry
By Michael W. Davis, DDSBy: Michael W. Davis, DDS
June 5, 2015

The first misnomer and misrepresentation which must be addressed is dental service organizations (DSOs). These are primarily business structures designed to circumvent state laws relating to ownership of dental practices. Most state statutes require only licensed dentists in their states may lawfully own a dental practice. DSOs falsely allege they restrict management to non-clinical areas.

In reality, the corporate entity DSOs own the dental practices they manage. Doctors in those practices are merely employees, whose employment may be terminated at the will of their employer, the DSO. The DSO fully controls the bank accounts of each and every clinic they manage, with accounts usually swept into Delaware banks at least bi-weekly. They establish monetary production quotas and bonuses for patient services. They establish the hours of operation and staff. They usually dictate office equipment, patient clinical supplies, and dental laboratories for patients. They supervise and control patient scheduling. They also dictate numbers of clinical protocols bypassing the doctor/patient relationship, such as mandating crowns over fillings, often unnecessary and more costly “deep cleanings”, antibiotic therapy into alleged “deep gum pockets”, etc.

Most “owner” doctors in these larger corporate practices are sham figureheads. They provide the corporate managers a layer of liability protection, for their unlicensed and unlawful practice of dentistry (see: Federal Fifth Circuit ruling 07-30430). These alleged “owner” doctors are not allowed to freely sell their asset of the dental practice, under their contract service agreements with the DSO. They aren’t as “owners” allowed discontinuing services with the DSO, and must retain the DSO’s services into perpetuity. In effect, the doctor owner(s) represent a façade of nominee ownership. The valid beneficial owner of the dental practices is obviously the DSO.

Wednesday, June 03, 2015

ADSO and Gryphon Investors: OneSmile to buy existing dental practices.

We are all F’d!

June 3, 2015

Gryphon Investors and dental industry vets launch OneSmile

Gryphon Investors has teamed up with dental industry veterans Steven C. Bilt and Bradley E. Schmidt to form OneSmile. No financial terms were disclosed. OneSmile will initially focus on buying existing dental practices in the western U.S.


June 3, 2015, San Francisco –Gryphon Investors (“Gryphon”), a San Francisco-based private equity firm, announced today that it has formed a partnership with Steven C. Bilt and Bradley E. Schmidt to establish OneSmile, LLC (“OneSmile”). The new company will initially focus on acquiring existing dental practices and groups in the western United States, as part of a strategy to build a comprehensive Dental Services Organization (“DSO”) platform.

Mr. Bilt, a seventeen-year veteran of the dental industry, is OneSmile’s CEO. He previously served as the president and CEO of Smile Brands, Inc., one of the largest providers of support services to general and multi-specialty dental groups in the United States. Brad Schmidt will be OneSmile’s CFO, a position he previously held at Smile Brands, Inc. Together with Gryphon’s financial backing, Mr. Bilt and Mr. Schmidt built that company from inception to over 250 locations with revenues of over $350 million before Gryphon sold a majority of its shares in 2005. The executives continued to lead the company for subsequent investors, eventually expanding it to more than 400 locations and over $500 million in revenues.

Mr. Bilt, who is a founding member and former director and president of the Association of Dental Support Organizations (ADSO), said, “There is a compelling opportunity to build a leading DSO in the Western U.S., and I look forward to working with Gryphon again in this exciting new venture. Their experience helping to build Smile Brands’ predecessor starting in 1998, along with their financial and operational support, will benefit us as we establish a unique model bringing comprehensive general, pediatric and specialty dental care and healthy, happy smiles to millions of people.”

Monday, June 01, 2015

Dentist the Menace Reader Quiz, June 1, 2015

June 1, 2015 Dentist the Menace Reader Quiz
Designed to test readers knowledge and add a bit of humor while educating others

By: Debbie Hagan and  Michael W. Davis, DDS

The dental profession has a good number of abusers to the public welfare. Dentist the Menace readers are well aware of these violators, the companies they represent or work for, and complicit state and federal regulators. This quiz will test your knowledge of the dirty dark underbelly of the dental profession.

Multiple Choice Questions
1.    The following is true for Dr. Eddie DeRose of Pueblo, CO:
A.    He has a history of gambling junkets on private jets to Las Vegas to visit his goomarahs and play a Vegas gambling “whale”.
B.    His favorite clinic quote in reference to female staff is, “I could train monkeys to do a better job than you girls.” This led to wild speculation that Dr. DeRose’s Italian ancestors may have been trainers of organ grinder monkeys.
C.    As a dentist primarily treating low-income disadvantaged Medicaid children, he also owned a stake in DD Marketing, which placed junk food and soda pop vending machines in low-income public schools.
D.    All of the above.

2.    The following is true for Dr. Michael DeRose of Pueblo, CO:
A.  He has special-needs & mentally challenged younger brother, who formerly played football for the LSU Tigers. This formed the basis for the Adam Sandler movie, Water Boy.
B.   As part of a consent agreement with the State of North Carolina for alleged Medicaid fraud, Dr. DeRose agreed to surrender his dental license and agreed to pay the State of North Carolina several million dollars.
C.   This is an individual who enjoys the simple things in life, and today continues to live         in the modest 3-bedroom home he purchased 20-years ago.
D.  All of the above.

3.    The following is true for criminal defense law firm of Waller Lansden Dortch & Davis LLC of Nashville, TN:
A.    They are an industry member of the Association of Dental Support Organizations (ADSO).
B.    This law firm has previously represented Dr. Richard Malouf, an alleged Medicaid fraudster of Dallas, TX notoriety.  
C.    This law firm has previously represented Church Street Health Management (d/b/a Small Smiles Dental, today bankrupt & disgraced), with law partner, Sheila Sawyer formerly acting as Chief Administrative Officer.
D.    All of the above.

2004 Cease and Desist Letter from Colorado Dental Board: Michael A. DeRose, Eddie DeRose, William (Bill) Mueller

I've heard the Michael DeRose out there in Pueblo under oath say he did not "train" dentists. They were simply there to "observe" for a few days.  Yet, here is the 2007 C & D letter from the Colorado dental board where he admits the dentists performed general dentistry and it was the program offered by his father, Eddie DeRose and William Mueller as well as himself.