Big Brother Is Watching: Changes in Dental Support Organizations

September 28, 2015

Dental Support Organizations (DSOs), also referred to as corporate dentistry, are businesses typically owned by non-dentists that provide management services to dental practices. Specifically, DSOs contract with dentists to provide business services such as payroll, leasing, staffing, and a handful of other necessary services to run a practice. Corporate dentistry, though a prominent player in the Texas dental industry, has long had a precarious place with the unclear state of the law. On the one hand, the corporate practice of dentistry law on its face could be interpreted to prohibit corporate dentistry. A few Texas cases with abusive arrangements have found DSO’s as illegal. On the other hand, corporate dentistry is prevalent throughout Texas and has been recognized by dentists and others in the industry as important to the delivery of effective and efficient dental care.

Texas legislators have made it a top priority to keep business and corporate influence away from patient care decisions. This has been especially true in the dental community, evidenced by the strong language in the Texas Dental Practice Act (TDPA). The TDPA clearly states that a person cannot engage in the practice of dentistry unless they are licensed to do so. It continues by stating that a person is deemed to be in the practice of dentistry if he owns, maintains, or operates a place of business that employs or engages under any type of contract with another person to practice dentistry. Other than a few court rulings negating particularly egregious management relationships, DSOs have been relatively unaffected by the corporate practice of dentistry.

With this unsettled background in mind, it may not be a surprise that the state has created regulatory obligations for DSOs. The surprise, however, may be found by the fact that significant legislation has recently passed with little to no fanfare. Senate Bill Number 519 is a little discussed or noticed bill passed by the recent 2015 Texas Legislature that has major ramifications for the corporate dentistry world. The bill, which became effective on September 1, 2015, will require all DSO’s conducting business in Texas to register with the Secretary of State on a yearly basis beginning in February of 2016.

SB 519 is the culmination of what has been a two year effort by the Texas Legislature to pass a bill concerning oversight of dental support organizations. First, the bill adds a new Chapter 73 to Business and Commerce Code, titled “Registration of Dental Support Organizations”. SB 519 establishes the annual registration requirement for DSOs and any parties through or with which the DSO provides support services. The registration requires information to be provided regarding the names of the dental practices that are contracted with the DSO for management services, services that are being provided, and ownership information for the DSO. The registration information, along with a fee, must be submitted by January 31 or each year (or 90 days after qualifying to register if qualification occurs after February 1). The second part of SB 519 changes the TDPA definitions to bring them in line with the new ones contained in the Business and Commerce Code.

The final part of SB 519 is the requirement that the Secretary of State will share all information it collects with the State Board of Dental Examiners (the “Board”). This will allow the Board to have greater access to information and be able to use its enforcement protocols more effectively. But while this new bill increases oversight, it also in some respects appears to be the government acknowledging the need and existence of DSOs in the Texas dental industry. SB 519 was supported by the Texas Dental Association and the Association of Dental Support Organizations as an effort to allow the Board to enforce existing law against bad players while also cleaning up misconceptions about the industry.

It is imperative for dental support organizations to ensure that all contracts and arrangements are in compliance, both in form and substance, with preexisting law. ByrdAdatto is working with its DSO clients to audit their current contracts and agreements in anticipation of the increased visibility that will come with the registration process.

For information on DSO compliance and registration, and structuring or auditing arrangements with dental practices, please contact Michael S. Byrd at mbyrd@byrdadatto.com or 214-291-3202. Thank you to law clerk Robert Fisher for assisting with the legal research for this article.

ByrdAdatto founding partner Michael Byrd

Michael S. Byrd

As the son of a doctor and entrepreneur, ByrdAdatto attorney Michael S. Byrd has a personal connection to both business and medicine.