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Wall Street-Owned Dental Management Companies At Center Of Senate Inquiry

This is a rhetorical question, but here it goes, anyway: Is there anything these Wall Street bastards won't pervert and destroy with their all-important profit motive? Is there any line they won't cross? Isaac Gagnon stepped off the school

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This is a rhetorical question, but here it goes, anyway: Is there anything these Wall Street bastards won't pervert and destroy with their all-important profit motive? Is there any line they won't cross?

Isaac Gagnon stepped off the school bus sobbing last October and opened his mouth to show his mother where it hurt.

She saw steel crowns on two of the 4-year-old’s back teeth. A dentist’s statement in his backpack showed he had received two pulpotomies, or baby root canals, along with the crowns and 10 X-rays -- all while he was at school. Isaac, who suffers from seizures from a brain injury in infancy, didn’t need the work, according to his mother, Stacey Gagnon.

“I was absolutely horrified,” said Gagnon, of Camp Verde, Arizona. “I never gave them permission to drill into my son’s mouth. They did it for profit.”

Isaac’s case and others like it are under scrutiny by federal lawmakers and state regulators trying to determine whether a popular business model fueled by Wall Street money is soaking taxpayers and having a malign influence on dentistry.

Isaac’s dentist was dispatched to his school by ReachOut Healthcare America, a dental management services company that’s in the portfolio of Morgan Stanley Private Equity, operates in 22 states and has dealt with 1.5 million patients. Management companies are at the center of a U.S. Senate inquiry, and audits, investigations and civil actions in six states over allegations of unnecessary procedures, low-quality treatment and the unlicensed practice of dentistry.

Allegations like Gagnon’s “are not representative” of the more than 500 cases handled by ReachOut affiliates in Isaac’s school district, said Mickey Mandelbaum, a company spokesman.

ReachOut is one of at least 25 dental management-services companies bought or backed by private-equity firms in the last decade. Dentists contract with the companies for marketing, scheduling, staff recruitment, supplies and other services. The companies account for about 12,000, or 8 percent, of U.S. dentists, according to Thomas A. Climo, a Las Vegas dental consultant.

Some of them have been riding a boom in Medicaid outlays on dentistry, which rose 63 percent to $7.4 billion between 2007 and 2010, outstripping the 4.9 percent growth in other dental spending. ReachOut and several of its private equity-backed rivals seek patients like Isaac Gagnon, who are covered by Medicaid, the federal-state insurance program for the poor and disabled.

On May 2, All Smiles Dental Center Inc., a management company owned by Chicago-based Valor Equity Partners, filed for bankruptcy protection. Its hand was forced in part by a Texas Medicaid action cutting off payment to some of its clinics because of allegedly “excessive” and “inappropriate” orthodontic care, according to an All Smiles executive’s affidavit included in the filing. All Smiles was part of a state audit in which 90 percent of Medicaid claims for orthodontic braces were found to be invalid because they weren’t medically needed, according to Christine Ellis, one of the auditors.

In North Carolina, Senate Bill 655 is under attack. Opponents say it will drive family dentists out of business, while supporters say the state is already underserved and that these new dental management companies will bring dental access to the rest of the state:

North Carolina law says only dentists can own, manage and control a dental practice. The question is what constitutes control. An increasing number of dentists are turning to management companies to operate the business side of the practice, from accounting and human resources to lab work. Others are asking management companies to help build offices and buy equipment.

About 50 dental practices in North Carolina, covering about 150,000 patients, use management companies in a state with 4,600 dentists. But industry trends suggest the number could grow, especially if the legislation is defeated or the current rules are weakened.

The state’s dental examiners board is charged with determining whether the management companies violate the law. It approves all contracts under rules established a decade ago, but the board’s attorney says loopholes give the companies too much latitude.

“What the board has seen over the years with these agreements is that they have morphed from true vendors of services to these really complicated, multiple-page agreements ... that would be considered de facto control and ownership,” said Ken Burgess with Poyner Spruill in Raleigh.

[...] The legislation would put the current rules into state law and add provisions to address these recent cases. Among other things, the law would prohibit management companies from owning all the equipment at a practice, determining patients and enforcing non-compete clauses on the dentists, and it would give the board broad authority to investigate management companies.

“Some very good, lawful management companies are doing business, but others are crossing that line,” said Dr. Ron Venezie, an Apex dentist and member of the Dentist Society, which is pushing the legislation. “Only a dentist has the education and the training to make dental care decisions working with the patient.”

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