From Hospital and Health Systems Group – June 2008
One example of provider relations going horribly wrong is the OrthAlliance experience. OrthAlliance is an orthodontic practice management company that follows a model common in the industry: the company first purchases the assets and leaseholds held by individual orthodontists or professional orthodontic corporations; then it enters into an agreement with the orthodontist or practice to
provide comprehensive practice management services; and finally, the practice
management company employs the orthodontist’s existing nonprofessional staff. It appears, however, that the arrangements were not as financially successful as several of OrthAlliance’s orthodontists had hoped, and the relationships between OrthAlliance and many of those providers eventually broke down. By 2001, approximatelyfifty-six OrthAlliance-affiliated practitioners and/or their professional corporations had filed lawsuits in eleven states.
2003 Penny v OrthAlliance
Corporate Dentistry Ruled Illegal
From Orthalliance 10-k Annual Report
On March 26, 2003, the U.S. District Court for the Northern District of Texas, in ruling on the plaintiffs’ motion for summary judgment in a case captioned Penny v. OrthAlliance, Inc. , held that, when construed together, the purchase agreements and service agreements between the plaintiffs and OrthAlliance and the employment agreements between the individual plaintiffs and their practices violated Texas statutes prohibiting the unauthorized practice of dentistry and were therefore invalid. In the court’s view, the interrelationship among these agreements allowed OrthAlliance to own, maintain or operate an office or place of business in which it employs or engages the plaintiffs to practice dentistry, in violation of Texas law. In reaching its conclusion, the court noted that OrthAlliance leases or owns and maintains the office space and tangible assets used in the plaintiffs’ practices and provides comprehensive practice
