Blog Post
Golden Ticket Or Black Hole? High Valuations From DSOs Can Blind Practice Owners To The High Risk Of Losing Everything
Jordan Uditsky • Sep 21, 2023
To paraphrase the warning we all see in our cars’ side mirrors, “Numbers in an offer may be larger than they appear.” Those are the cautionary words every dental practice owner should keep top-of-mind when a dental services organization (DSO) makes what appears at first glance to be a generous offer to purchase their practice. Shiny top-line figures such as high practice valuations and purchase prices and promises of substantial returns on equity investments, all fueled by the flood of private equity into the dental industry, can blind practice owners to the significant – and potentially catastrophic – financial risks that come with handing over the keys to a DSO.
That was the harsh lesson learned by a group of dentists who sold their practices to one of the nation’s largest DSOs. As alleged in a recently filed lawsuit, the owners all received equity interests in the DSO in lieu of a portion of the purchase price, as is usually the case in practice acquisitions. As is also common, the DSO they sold their practices to was subsequently acquired by another DSO. The management of that DSO then made decisions that significantly decreased and diluted the value of their ownership interests in the DSO. The dilution of their equity interests decimated the dentists’ retirement and left them with little, if any, recourse.
Undoubtedly, these dentists sold their practices after receiving robust practice valuations and being told that the sale would make them multimillionaires. Instead, they find themselves embroiled in litigation and an existential case of seller’s remorse.
This case underscores the importance of looking behind the attractive numbers thrown around by DSOs to understand what you actually stand to receive when you sell your practice – as well as what you stand to lose.
Taking Equity In a DSO Means Taking Away Any Control Over Your Investment
In the race to expand, some DSOs offer to pay five to nine times practices' earnings before interest, taxes, depreciation, and amortization (EBITDA). These numbers can be extremely attractive compared to the lesser amounts offered by a private purchaser.
But, as noted, many DSOs require that a portion of the purchase price be paid in the form of an equity investment in the DSO. But what exactly are you investing in, and when – if ever – will you see returns on your equity investment?
For example, a selling dentist with a $1M valuation may be required to “rollover” 20% of the purchase price into DSO equity. In effect, that dentist is making a $200,000 investment in the DSO. But what the valuation is of the DSO and whether that is a “good” investment is the big question. The reality is that you are making something of a leap with very little control over your investment and minimal information on the DSO you are investing in.
As happened in the case above, the DSO can dilute your shares, and the DSO can change hands multiple times. This means you could be stuck in a relationship with a company you have never dealt with and that may have priorities and practices that do not align with yours.
The Value of Hold-Backs and Earn-Outs Can Be As Illusory As Equity
Individual purchasers of dental practices typically pay the full purchase price at closing, cashing out the seller with no contingencies. On the other hand, many DSO purchase offers include “hold-back” or “earn-out” provisions in which the DSO retains a portion of the purchase price, typically around 20% until and unless specific targets are met. Receipt of that remainder of the purchase price is usually contingent on either the seller’s future performance or a pre-determined post-closing collection threshold.
In addition to significant tax considerations regarding earn-outs, selling dentists need to understand that these contingent payments may never materialize or that they may need to put considerable time and effort to reach whatever revenue or other thresholds must be met to get their money. For dentists looking to retire in the near future or who want to throttle back the hours they put in, the loss or delay of a significant portion of the sale price and the need to continue working may be a deal-breaker, even when that price is substantially higher (in theory) than what a private buyer would offer.
No Way Out
Dentists who relinquish their practices to DSOs largely put themselves at the mercy of distant corporate decision-makers with whom they have never dealt, as well as economic downturns or shifts in the dental industry landscape that could impact their financial security down the line. Additionally, DSO contracts typically include various terms and conditions that can change over time. These clauses can encompass anything from non-compete agreements to unexpected fee adjustments, further limiting the dentist's ability to make financial decisions in their best interests.
For all of these reasons, dental practice owners who are considering offers from DSOs should proceed with caution and in consultation with experienced counsel who can see the risks, costs, and other potential issues that lie behind high practice valuations and promises of a secure financial future that could prove to be illusory.
If you are a dental professional considering a sale or merger, please contact us at ddslawyers.com at (630) 833-5533 or contact us online to arrange for your complimentary initial consultation.
We focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you.
Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices, and this blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.
Speak to an Attorney
Related Posts
For decades, businesses of all stripes and across all industries and professions – including dental practices - have used non-competition agreements to limit the ability of former employees to go head-to-head against their former employers. Over the past decade or so, however, there has been a concerted effort at the state and federal levels to either prohibit or significantly limit the use of such provisions. Those efforts have culminated with the U.S. Federal Trade Commission’s April 23, 2024 approval of a Final Rule that effectively bans all non-competes, except those for “senior executives” or related to the sale of a business. The ban was met with stiff resistance from the business community when the FTC first proposed it in January 2023, and, indeed, a federal lawsuit challenging the validity of the Final Rule was filed by the U.S. Chamber of Commerce and others within hours of its approval. Short of judicial intervention, the rule will become effective 120 days after its publication in the Federal Register. Accordingly, practice owners who currently use such agreements or provisions to protect their business interests need to prepare for a post-non-compete world and understand exactly what the new rule prohibits, and what it still allows. What Does The Final Rule Prohibit? With the two notable exceptions discussed below, the Final Rule renders all existing "non-compete clauses" null and void and forbids their use in the future. As defined in the rule, a prohibited “non-compete clause” is "a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from: Seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or Operating a business in the United States after the conclusion of the employment that includes the term or condition." For purposes of the Final Rule, "term or condition of employment" includes, but is not limited to, a contractual term or workplace policy, whether written or oral. Non-Disclosure and Non-Solicitation Provisions Are Fine – As Long As They Don’t Act As a Non-Compete Non-disclosure or non-solicitation clauses and agreements are still permitted and enforceable under the Final Rule, so long they do not act as a non-compete as a practical matter. If any such agreement effectively "prohibits," "penalizes," or "functions to prevent a worker from" seeking or accepting work after the end of their employment, it may be deemed to be a prohibited non-compete. The FTC states that whether any given provision constitutes a "non-compete clause" is a "fact-specific inquiry." All Workers Other Than “Senior Executives” Are Covered by the Non-Compete Ban Other than "senior executives," as discussed below, the rule bans all non-competes for employees, independent contractors, externs, interns, volunteers, apprentices, sole proprietors who provide a service to a person, and a person who works for a franchisee or franchisor but does not include a franchisee in the context of a franchisee-franchisor relationship. Ban Does Not Apply to "Senior Executives" or if Connected to the Sale of a Business One significant change between the proposed and final rules is that the final version does not void any existing non-competes involving "senior executives." However, it prohibits employers from entering into or enforcing new non-competes with senior executives after the Final Rule's effective date. A "senior executive" is defined as a worker in a "policy-making position" who earns an actual or annualized sum of $151,164 (through salary, bonuses, and/or commissions, but excluding fringe benefits, retirement contributions, and medical/life insurance premium payments). A "policy-making position" means a business entity's president, chief executive officer, or the equivalent, any other officer with policy-making authority, or any other person with policy-making authority for the business, similar to an officer with policy-making authority. Importantly, for dentists who are considering purchasing or selling their practice, the Final Rule does not apply to a non-compete clause entered into by a person selling their ownership interest in a business entity, or of all or substantially all of a business entity’s operating assets. Buyers of a dental practice can therefore still use reasonable non-compete provisions to limit the seller’s activities after the consummation of the transaction. Employers Must Notify Workers That Their Non-Compete Is No Longer Enforceable The proposed rule would have required employers to legally modify existing non-competes by formally rescinding them. The Final Rule streamlines these obligations, and employers must now simply notify any worker subject to a non-compete that it will not be enforced against them in the future. To aid employers' compliance with this requirement, the FTC included model language in the final rule that employers can use to communicate with workers. Regardless of the rule's ultimate fate in pending litigation, dental practice owners who rely on non-competition provisions to protect their business interests should engage counsel to review any non-competition language in their employment agreements and consider other options for protecting trade secrets and confidential information. If you have questions or concerns about the FTC’s Final Rule, or if you need a review of your employment agreements, please call Grogan Hesse & Uditsky at (630) 833-5533 or contact us online to arrange for your free initial consultation.
Rare is the dental practitioner who enjoys the paperwork, bureaucracy, and other time-consuming hassles of dealing with and obtaining reimbursement from their patients’ dental insurers. Ask any dentist whether they would prefer having more patients or whether they would rather make more money providing fewer patients with more attentive, responsive, and personalized care, and the odds are pretty good they would take the latter option. This appealing combination of fewer insurance burdens, better patient care, and greater revenue is why an increasing number of practices are offering “concierge dentistry” programs in addition to or instead of the traditional pay-for-service model. Concierge dentistry, sometimes called boutique or retainer dentistry or “in-office membership care” practices, involves a direct financial relationship between patients and dentists in which patients typically pay an annual fee, membership fee, or retainer to a practice in exchange for enhanced, specified services, personalized care, and increased access. While this seems like a win-win for practices and patients alike – and often is – dentists interested in launching a concierge dentistry practice need to understand the unique legal issues and considerations involved in doing so. While you should consult with experienced counsel before offering concierge services, here are some of the issues raised by such arrangements: Legal and Regulatory Requirements Obviously, the most important consideration when starting a concierge practice is ensuring that doing so does not violate any applicable state and federal laws and regulations. While concierge dentistry is generally allowable, many of the same laws that apply to traditional fee-for-service care financed through health insurance are equally applicable to concierge practices, including anti-kickback and Stark Law (for any Medicare/Medicaid billing), HIPAA, and prohibitions on the corporate practice of dentistry. In 2019 Illinois, for example, passed a law specifically addressing and allowing for what it defines as “in-office membership” agreements and services in dentistry. The primary purpose of the In-Office Membership Care Act was to clarify that such arrangements do not constitute insurance and, therefore, are not a violation of nor subject to the Illinois Insurance Code. Other states may have similar laws. The Act sets forth detailed requirements as to what patient membership agreements must contain. Specifically, the agreement must identify: the dental care provider or providers and the patient or patients; the general scope of services as well as the specific services to be provided by the dental care provider as part of the in-office membership care agreement; the location or locations where services are to be provided; the amount of the direct fee and the time interval at which it is to be paid; and the term of the in-office membership care agreement and the conditions upon which the dental care provider may terminate it. The Act also requires in-office membership care agreements to be terminable at will upon written notice from the patient and that the dental care provider may refund to the patient all unearned direct fees associated with the covered services under the in-office membership care agreement. Insurance and Third-Party Payer Considerations Since one of the significant upsides of a concierge practice is the lack of insurance involvement, most are set up to only accept direct payments from patients. However, some practices may want to continue accepting insurance for covered services while charging patients for other non-covered aspects of concierge care. Similarly, while some practices may switch to a concierge model exclusively, others will want to establish a program alongside their traditional practice. In all of these cases, practice owners need to consider the implications that adopting a concierge model may have on any existing provider participation agreements and other policies of third-party payors. For example, many participation agreements mandate that providers must accept payment for covered services from the insurance company as “payment in full” and cannot seek prepayments “of any kind” from patients. Practices should have counsel review any participation agreements to ensure that their concierge efforts do not run afoul of their terms or threaten their relationships with insurers. Patient Abandonment If a dental practice decides to transition from a traditional pay-for-service practice to a concierge model, it must provide existing patients with adequate notice of the change and ensure continuity of care for those patients who elect not to join their concierge program. Additionally, practices can accommodate patients who may not be able to afford a concierge membership by offering a limited-time discounted rate so that they have more time to locate a new provider. As noted, concierge dental arrangements offer dentists the opportunity to increase the rewards and reduce many of the burdens involved in practicing. But taking this leap without thoughtful consideration and consultation with counsel could result in avoidable legal issues. If you would like to discuss or need assistance with establishing a concierge practice, please contact Grogan Hesse & Uditsky today. We focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you. Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices, and this blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.
Over the years, countless healthcare companies and practitioners have been fined, sanctioned, or even jailed for fraudulent or illegal billing practices involving Medicare and Medicaid or equivalent state programs. Such transgressions against government payors are vigorously prosecuted by the U.S. Department of Justice and their state-level counterparts, primarily under the federal False Claims Act (FCA). However, the FCA only applies to fraud against the government, not activities that defraud private insurers. Unlike care and services provided by other practitioners, most of the services offered by dentists are not covered by Medicare or Medicaid, meaning that the vast majority of their billing and reimbursement activities involve private payors. Given the government’s focus on the FCA and fraud against Medicare and Medicaid, dentists may be under the mistaken impression that they can be less vigilant and compliant and more lax in their practices when billing private insurers. This can be a costly, disruptive, and damaging misconception. Just like whistleblowers can report provider billing fraud and initiate actions under the FCA, those who discover and identify fraudulent billing practices by dentists involving private insurers can do the same under state specific laws, such as the Illinois Insurance Claims Fraud Prevention Act in Illinois. Of course, insurers themselves have their own contractual and other remedies for billing misconduct by dentists under their participation agreements. Many, if not most, insurance billing mistakes by dental practices are just that – errors made without any fraudulent or nefarious intent. But, as is often said, ignorance of the law is no excuse. Such is the case with insurance billing by dentists. Here are six of the most common billing errors by dentists when making claims or seeking reimbursement from private payors: Billing For Services Not Rendered/Double Billing Billing fraud doesn’t get any simpler than submitting claims for reimbursement for services that were never provided to the patient. Similarly, billing the insurer twice for the same services is Fraud 101. Inadequate Documentation One prevalent mistake made by dentists is insufficient documentation of procedures and patient records. Proper documentation is crucial for insurance claims, and failure to maintain detailed records can lead to claim denials or even allegations of fraud. Dentists should ensure that each patient's file includes comprehensive details about the diagnosis, treatment plan, and any communication with the insurance company. Upcoding and Unbundling of Services Dentists and other practitioners may try to maximize their reimbursements by improperly coding and billing procedures and services. Upcoding occurs when a dentist inflates requests for reimbursement by submitting false medical codes—that is, billing for diagnoses and services that are more serious and expensive than the services rendered. Another form of improper medical coding and fraud is unbundling, also referred to as “fragmentation.” This occurs when a dentist fragments or unbundles billing codes to receive a higher aggregate reimbursement amount. Both upcoding and unbundling are illegal under federal and state laws and regulations and can result in hefty fines, loss of licensure, and even criminal charges. Dentists should carefully review billing codes to ensure accurate representation of the provided services. Ignoring Preauthorization Requirements Some dental procedures necessitate preauthorization from insurance companies before treatment. Ignoring these requirements and proceeding without obtaining preauthorization may lead to denied claims and disputes. Dentists should familiarize themselves with the specific preauthorization requirements for various procedures and ensure compliance to avoid legal complications. Billing Inaccuracies Submitting inaccurate or false information on insurance claims is a serious legal offense. Whether intentional or due to oversight, inaccuracies in billing can lead to allegations of fraud, resulting in severe consequences such as fines, imprisonment, and damage to professional reputation. Dentists must implement rigorous quality control measures to ensure the accuracy of all billing information. Waiving of Coinsurance or Copayments If you think it is savvy or generous to waive patients’ deductibles and copays, you could quickly find that it is neither. Dentists cannot waive patients’ deductibles or copayments as it drives up premium costs for policyholders and could encourage patients to request unnecessary treatments. This practice constitutes illegal overbilling and is considered fraudulent. Contact Us With Any Insurance Billing Questions or Concerns As noted, most of the acts that lead to legal and contractual problems with billing private insurers are mistakes, not attempts to game the system and commit fraud. But unforced errors can be just as costly as intentional misconduct. If you have any questions or concerns about your billing practices or would like assistance establishing policies and protocols to minimize the chances of billing problems, please give us a call. At Grogan, Hesse & Uditsky, P.C., we focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you. Please call us at (630) 833-5533 or contact us online to arrange for your free initial consultation. Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices, and this blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.
For decades, businesses of all stripes and across all industries and professions – including dental practices - have used non-competition agreements to limit the ability of former employees to go head-to-head against their former employers. Over the past decade or so, however, there has been a concerted effort at the state and federal levels to either prohibit or significantly limit the use of such provisions. Those efforts have culminated with the U.S. Federal Trade Commission’s April 23, 2024 approval of a Final Rule that effectively bans all non-competes, except those for “senior executives” or related to the sale of a business. The ban was met with stiff resistance from the business community when the FTC first proposed it in January 2023, and, indeed, a federal lawsuit challenging the validity of the Final Rule was filed by the U.S. Chamber of Commerce and others within hours of its approval. Short of judicial intervention, the rule will become effective 120 days after its publication in the Federal Register. Accordingly, practice owners who currently use such agreements or provisions to protect their business interests need to prepare for a post-non-compete world and understand exactly what the new rule prohibits, and what it still allows. What Does The Final Rule Prohibit? With the two notable exceptions discussed below, the Final Rule renders all existing "non-compete clauses" null and void and forbids their use in the future. As defined in the rule, a prohibited “non-compete clause” is "a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from: Seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or Operating a business in the United States after the conclusion of the employment that includes the term or condition." For purposes of the Final Rule, "term or condition of employment" includes, but is not limited to, a contractual term or workplace policy, whether written or oral. Non-Disclosure and Non-Solicitation Provisions Are Fine – As Long As They Don’t Act As a Non-Compete Non-disclosure or non-solicitation clauses and agreements are still permitted and enforceable under the Final Rule, so long they do not act as a non-compete as a practical matter. If any such agreement effectively "prohibits," "penalizes," or "functions to prevent a worker from" seeking or accepting work after the end of their employment, it may be deemed to be a prohibited non-compete. The FTC states that whether any given provision constitutes a "non-compete clause" is a "fact-specific inquiry." All Workers Other Than “Senior Executives” Are Covered by the Non-Compete Ban Other than "senior executives," as discussed below, the rule bans all non-competes for employees, independent contractors, externs, interns, volunteers, apprentices, sole proprietors who provide a service to a person, and a person who works for a franchisee or franchisor but does not include a franchisee in the context of a franchisee-franchisor relationship. Ban Does Not Apply to "Senior Executives" or if Connected to the Sale of a Business One significant change between the proposed and final rules is that the final version does not void any existing non-competes involving "senior executives." However, it prohibits employers from entering into or enforcing new non-competes with senior executives after the Final Rule's effective date. A "senior executive" is defined as a worker in a "policy-making position" who earns an actual or annualized sum of $151,164 (through salary, bonuses, and/or commissions, but excluding fringe benefits, retirement contributions, and medical/life insurance premium payments). A "policy-making position" means a business entity's president, chief executive officer, or the equivalent, any other officer with policy-making authority, or any other person with policy-making authority for the business, similar to an officer with policy-making authority. Importantly, for dentists who are considering purchasing or selling their practice, the Final Rule does not apply to a non-compete clause entered into by a person selling their ownership interest in a business entity, or of all or substantially all of a business entity’s operating assets. Buyers of a dental practice can therefore still use reasonable non-compete provisions to limit the seller’s activities after the consummation of the transaction. Employers Must Notify Workers That Their Non-Compete Is No Longer Enforceable The proposed rule would have required employers to legally modify existing non-competes by formally rescinding them. The Final Rule streamlines these obligations, and employers must now simply notify any worker subject to a non-compete that it will not be enforced against them in the future. To aid employers' compliance with this requirement, the FTC included model language in the final rule that employers can use to communicate with workers. Regardless of the rule's ultimate fate in pending litigation, dental practice owners who rely on non-competition provisions to protect their business interests should engage counsel to review any non-competition language in their employment agreements and consider other options for protecting trade secrets and confidential information. If you have questions or concerns about the FTC’s Final Rule, or if you need a review of your employment agreements, please call Grogan Hesse & Uditsky at (630) 833-5533 or contact us online to arrange for your free initial consultation.
Rare is the dental practitioner who enjoys the paperwork, bureaucracy, and other time-consuming hassles of dealing with and obtaining reimbursement from their patients’ dental insurers. Ask any dentist whether they would prefer having more patients or whether they would rather make more money providing fewer patients with more attentive, responsive, and personalized care, and the odds are pretty good they would take the latter option. This appealing combination of fewer insurance burdens, better patient care, and greater revenue is why an increasing number of practices are offering “concierge dentistry” programs in addition to or instead of the traditional pay-for-service model. Concierge dentistry, sometimes called boutique or retainer dentistry or “in-office membership care” practices, involves a direct financial relationship between patients and dentists in which patients typically pay an annual fee, membership fee, or retainer to a practice in exchange for enhanced, specified services, personalized care, and increased access. While this seems like a win-win for practices and patients alike – and often is – dentists interested in launching a concierge dentistry practice need to understand the unique legal issues and considerations involved in doing so. While you should consult with experienced counsel before offering concierge services, here are some of the issues raised by such arrangements: Legal and Regulatory Requirements Obviously, the most important consideration when starting a concierge practice is ensuring that doing so does not violate any applicable state and federal laws and regulations. While concierge dentistry is generally allowable, many of the same laws that apply to traditional fee-for-service care financed through health insurance are equally applicable to concierge practices, including anti-kickback and Stark Law (for any Medicare/Medicaid billing), HIPAA, and prohibitions on the corporate practice of dentistry. In 2019 Illinois, for example, passed a law specifically addressing and allowing for what it defines as “in-office membership” agreements and services in dentistry. The primary purpose of the In-Office Membership Care Act was to clarify that such arrangements do not constitute insurance and, therefore, are not a violation of nor subject to the Illinois Insurance Code. Other states may have similar laws. The Act sets forth detailed requirements as to what patient membership agreements must contain. Specifically, the agreement must identify: the dental care provider or providers and the patient or patients; the general scope of services as well as the specific services to be provided by the dental care provider as part of the in-office membership care agreement; the location or locations where services are to be provided; the amount of the direct fee and the time interval at which it is to be paid; and the term of the in-office membership care agreement and the conditions upon which the dental care provider may terminate it. The Act also requires in-office membership care agreements to be terminable at will upon written notice from the patient and that the dental care provider may refund to the patient all unearned direct fees associated with the covered services under the in-office membership care agreement. Insurance and Third-Party Payer Considerations Since one of the significant upsides of a concierge practice is the lack of insurance involvement, most are set up to only accept direct payments from patients. However, some practices may want to continue accepting insurance for covered services while charging patients for other non-covered aspects of concierge care. Similarly, while some practices may switch to a concierge model exclusively, others will want to establish a program alongside their traditional practice. In all of these cases, practice owners need to consider the implications that adopting a concierge model may have on any existing provider participation agreements and other policies of third-party payors. For example, many participation agreements mandate that providers must accept payment for covered services from the insurance company as “payment in full” and cannot seek prepayments “of any kind” from patients. Practices should have counsel review any participation agreements to ensure that their concierge efforts do not run afoul of their terms or threaten their relationships with insurers. Patient Abandonment If a dental practice decides to transition from a traditional pay-for-service practice to a concierge model, it must provide existing patients with adequate notice of the change and ensure continuity of care for those patients who elect not to join their concierge program. Additionally, practices can accommodate patients who may not be able to afford a concierge membership by offering a limited-time discounted rate so that they have more time to locate a new provider. As noted, concierge dental arrangements offer dentists the opportunity to increase the rewards and reduce many of the burdens involved in practicing. But taking this leap without thoughtful consideration and consultation with counsel could result in avoidable legal issues. If you would like to discuss or need assistance with establishing a concierge practice, please contact Grogan Hesse & Uditsky today. We focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you. Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices, and this blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.
Over the years, countless healthcare companies and practitioners have been fined, sanctioned, or even jailed for fraudulent or illegal billing practices involving Medicare and Medicaid or equivalent state programs. Such transgressions against government payors are vigorously prosecuted by the U.S. Department of Justice and their state-level counterparts, primarily under the federal False Claims Act (FCA). However, the FCA only applies to fraud against the government, not activities that defraud private insurers. Unlike care and services provided by other practitioners, most of the services offered by dentists are not covered by Medicare or Medicaid, meaning that the vast majority of their billing and reimbursement activities involve private payors. Given the government’s focus on the FCA and fraud against Medicare and Medicaid, dentists may be under the mistaken impression that they can be less vigilant and compliant and more lax in their practices when billing private insurers. This can be a costly, disruptive, and damaging misconception. Just like whistleblowers can report provider billing fraud and initiate actions under the FCA, those who discover and identify fraudulent billing practices by dentists involving private insurers can do the same under state specific laws, such as the Illinois Insurance Claims Fraud Prevention Act in Illinois. Of course, insurers themselves have their own contractual and other remedies for billing misconduct by dentists under their participation agreements. Many, if not most, insurance billing mistakes by dental practices are just that – errors made without any fraudulent or nefarious intent. But, as is often said, ignorance of the law is no excuse. Such is the case with insurance billing by dentists. Here are six of the most common billing errors by dentists when making claims or seeking reimbursement from private payors: Billing For Services Not Rendered/Double Billing Billing fraud doesn’t get any simpler than submitting claims for reimbursement for services that were never provided to the patient. Similarly, billing the insurer twice for the same services is Fraud 101. Inadequate Documentation One prevalent mistake made by dentists is insufficient documentation of procedures and patient records. Proper documentation is crucial for insurance claims, and failure to maintain detailed records can lead to claim denials or even allegations of fraud. Dentists should ensure that each patient's file includes comprehensive details about the diagnosis, treatment plan, and any communication with the insurance company. Upcoding and Unbundling of Services Dentists and other practitioners may try to maximize their reimbursements by improperly coding and billing procedures and services. Upcoding occurs when a dentist inflates requests for reimbursement by submitting false medical codes—that is, billing for diagnoses and services that are more serious and expensive than the services rendered. Another form of improper medical coding and fraud is unbundling, also referred to as “fragmentation.” This occurs when a dentist fragments or unbundles billing codes to receive a higher aggregate reimbursement amount. Both upcoding and unbundling are illegal under federal and state laws and regulations and can result in hefty fines, loss of licensure, and even criminal charges. Dentists should carefully review billing codes to ensure accurate representation of the provided services. Ignoring Preauthorization Requirements Some dental procedures necessitate preauthorization from insurance companies before treatment. Ignoring these requirements and proceeding without obtaining preauthorization may lead to denied claims and disputes. Dentists should familiarize themselves with the specific preauthorization requirements for various procedures and ensure compliance to avoid legal complications. Billing Inaccuracies Submitting inaccurate or false information on insurance claims is a serious legal offense. Whether intentional or due to oversight, inaccuracies in billing can lead to allegations of fraud, resulting in severe consequences such as fines, imprisonment, and damage to professional reputation. Dentists must implement rigorous quality control measures to ensure the accuracy of all billing information. Waiving of Coinsurance or Copayments If you think it is savvy or generous to waive patients’ deductibles and copays, you could quickly find that it is neither. Dentists cannot waive patients’ deductibles or copayments as it drives up premium costs for policyholders and could encourage patients to request unnecessary treatments. This practice constitutes illegal overbilling and is considered fraudulent. Contact Us With Any Insurance Billing Questions or Concerns As noted, most of the acts that lead to legal and contractual problems with billing private insurers are mistakes, not attempts to game the system and commit fraud. But unforced errors can be just as costly as intentional misconduct. If you have any questions or concerns about your billing practices or would like assistance establishing policies and protocols to minimize the chances of billing problems, please give us a call. At Grogan, Hesse & Uditsky, P.C., we focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you. Please call us at (630) 833-5533 or contact us online to arrange for your free initial consultation. Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices, and this blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.
2 Mid America Plaza, Suite 110
Oakbrook Terrace, IL 60181
P: 630.833.5533 | F: 630.833.6855
Get in touch
footer form
SCHEDULE A FREE CONSULTATION
NEWSLETTER SIGNUP
Contact Us
Created by Olive + Ash.
Managed by Olive Street Design. 