The Scoop On Dental Service Organizations (DSOs): Key Consideration

Dental Service Organizations (DSOs) have become an increasingly popular model for dentists to effectively handle and manage administrative duties associated with running their dental practices. In fact, according to data from the ADA Health Policy Institute, thirteen percent (13%) of practicing dentists in the U.S. have affiliated with a dental service organization. Simply put, a DSO is an entity which contracts with dental practices to provide non-clinical, business management services. DSOs offer newly licensed dentists the opportunity to jump start their practice after successfully completing dental school.

Such an arrangement can allow dentists to focus completely on providing quality dental care in a clinical setting for their patients without worrying about fulfilling the time-consuming, administrative functions of their dental practice. DSOs can assist dentists with scaling their practice and achieve greater efficiencies. This article will highlight some key considerations to evaluate before proceeding with transitioning their dental practice over to a DSO model in Florida.

Key Benefits Offered to Dental Practices by DSOs:

Providing Dental Equipment

DSOs often provide its dentists with the newest dental equipment and technology via lease agreements. This provides another option for dentists who may not have the funds or the desire to personally finance or purchase all of the equipment necessary to be used in the practice. DSOs may range in size, either handling a group of several practices or managing a system of hundreds of practices.

Access to Capital

The DSO model effectively funnels capital to dentists to fund and scale their practice while allowing the dentist to streamline operations for the benefit of the practice and its patients. The capital provided by a DSO provides dental practices with the ability to expand and grow their practice to meet the needs of their patients and remain competitive. This arrangement can appeal to newly licensed dentists looking to start their own dental practice or veteran dentists who are interested in growing their practice.  

Facilitate Savings

DSOs allow for dental practices to scale easier by having favorable contractual relationships with suppliers, service providers, and insurance providers. Managers of DSOs assume responsibility of negotiating these contracts to allow its dentists to focus their attention solely on patient care. This boosts the operating margins for dental practices within the DSO. As such, reduced costs lead to improved productivity and efficiency in the clinical setting.

Easy Exits from Practice

Just as DSOs make it easy for dentists to start up their practice fresh out of dental school or early on their careers, the same can be said for older dentists contemplating retirement. Dentists can wind down their practice by selling their practice to the DSO if they wish to do so if the State that they are providing services in, does not have Corporate Practice of Dentistry prohibitions.

Drawbacks of the DSO models:

Competing Interests

Because DSOs are business entities, their management will certainly make decisions related to the administration of the dental practice with profit margins as the main priority. To that end, financial performance of the dental practice may supersede the objective of providing quality dental care for its patients. This is particularly common where DSOs manage hundreds of dental practices, which in effect becomes a franchise operation. Dentists may have to draw line between achieving performance metrics and maintaining a high standard of patient care.

Loss of Control over Dental Personnel

Although dentists take the lead in creating and implementing dental treatment plans for their patients, dentists also rely on the skill and assistance provided by their support staff to ensure treatment plans proceed seamlessly. A dentist in charge of their own practice would make all determinations with respect to the roles and responsibilities of dental personnel. However, a dentist who joins a DSO would have to surrender control over this aspect of their practice if they are operating in a state that doesn’t have the Corporate Practice of Dentistry prohibition. DSOs typically introduce their own dental personnel, so it is imperative for the dentist to communicate how the dental practice operates to the support staff provided by the DSO. The lack of control when running the dental practice can make it challenging.

Legal Aspects to Consider Prior to Proceeding with Establishing a DSO

Given that the healthcare industry is one of the most heavily regulated industries in the United States, it is important for dentists and DSO operators to acknowledge the proper legal framework under which these entities can lawfully run dental practices.

1. Importantly, Florida Statute 466.0285 prohibits a non-dentist, including a professional corporation which is not composed of licensed dentists, from directly employing a dentist (read here for more info). Among the restrictions, the non-dentist or professional corporation may not pay the dentist a salary or establish a revenue sharing plan, but the dentist may work as an independent contractor. A dentist may also separately engage the non-clinical, business management services of the non-dentist or professional corporation through their own entity, commonly referred to as practice management services. In sum, a dentist employed by a non-dentists would face disciplinary action and likely suffer a suspension of their license.
2. Florida law also prohibits DSOs composed of non-dentists from interfering with the clinical judgment of the dentist. A dentist must retain absolute control and discretion over patient treatment plans and clinical decisions. To that end, a non-dentist may not influence a dentist’s independent professional judgment in a clinical setting.
3. HIPAA mandates that all patient data and medical records be stored internally and transmitted to external parties in a secure manner. Such storage and transmission of sensitive patient data is crucial to avoid breaches punishable by monetary fines.

In short, DSOs can be a great option for dentists looking to expand their dental business without the hassle of managing the business and administrative duties. The prevalence of the DSO model is expected to expand nationwide. Dentists should be knowledgeable of the advantages and disadvantages of building their practice through a DSO model. Feel free to contact our experienced health law attorneys at Jones Health Law to discuss whether a DSO model is proper for your practice and career needs.

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It should be noted that I am not your lawyer (unless you have presently retained my services through a retainer agreement). This post is not intended as legal advice, it is purely educational and informational, and no attorney-client relationship shall result after reading it. Please consult your own attorney for legal advice. If you do not have one and would like to retain my legal services, please contact me using the contact information listed above.

All information and references made to laws, rules, regulations, and advisory opinions were accurate based on the law as it existed at this time, but laws are constantly evolving. Please contact me to be sure that the law which will govern your business is current. Thank you.