Aspen Dental Management, Inc. Settles California Corporate Practice of Dentistry Enforcement Action for $2 Million

The California Attorney General (“AG”) recently announced it reached a settlement with Aspen Dental Management, Inc. (“Aspen”) to resolve allegations that Aspen violated the state’s ban on the corporate practice of dentistry and engaged in false or misleading advertising. As part of the settlement, Aspen agreed to pay $2 million in penalties and $300,000 in restitution funds, as well as an unprecedented set of injunctive terms.

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Corporate Practice of Dentistry; False/Misleading Advertisements

The AG alleged that Aspen unlawfully interfered with and controlled the practice of dentistry by its contractually affiliated dental practices. Among other things, Aspen allegedly offered direct payments to practices’ clinical employees in order to facilitate sales of products and services.

Separately, the AG alleged that Aspen circulated false and/or misleading advertisements. Aspen allegedly used deceptive language to provide misleading testimonials and inexact pricing. Aspen purportedly failed to disclose details that could affect prices or what services are provided. Aspen also allegedly used misleading advertisements regarding which insurance programs were accepted at the practices.

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Injunctive Corporate Practice of Dentistry Terms

According to the AG, Aspen agreed to injunctive terms, which prohibit it from doing certain acts in the state, including:

• Cannot require practice owners to surrender offices/equipment upon termination; departing owners may assume leases and buy equipment at fair market value.
• Cannot own the real property for any practice.
• No noncompete provisions with any licensed clinician and no overly restrictive non-solicitation provisions.
• Service fees cannot be tied to practice revenue, sales, or profits.
• Cannot prevent practices from buying products and lab services from any vendor.
• Practice owners must be free to choose their own denture laboratories.
• Cannot suggest, direct, or encourage any licensed clinician, other than a practice owner, to sell or increase revenue for any service or product.
• Cannot compensate its employees based on practice sales or revenue.
• No practice employees may be paid based on incentives tied to sales, revenue, or profits.
• Cannot use any contractual provision that restricts where any licensed clinician may practice or be employed.
• Cannot determine the salary or compensation of any practice employee.
• Cannot determine clinical staff work schedules.
• Cannot prohibit or require practices to accept specific insurance plans.

Aspen further agreed to adopt certain procedures in California, including:

• Must renegotiate services and fees with each practice owner annually, in writing.
• Must provide a written fee schedule for all products and laboratory services.
• Must register with the California Dental Board as a Dental Group Advertising and Referral Service.
• Must obtain practice owners’ quarterly preapproval in writing for marketing campaigns, promotions, and discounts.

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Advertising Requirements

Aspen agreed to adopt new advertising protocols, including:

• Must clearly and conspicuously identify the practice owner’s name in all advertisements.
• Advertised pricing must be exact and cannot contain vague claims, such as “starting at” or “as low as.”
• Any advertisements for free services must disclose all conditions and limitations.
• Any testimonials must come from actual patients and must include disclosures if from another practice location.

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Status and Next Steps

The settlement remains subject to court approval, and Dykema will continue to monitor developments accordingly. While this settlement should not threaten the general viability of the DSO model, it confirms that DSOs must carefully review their contractual arrangements and protocols with affiliated dental practices to ensure compliance with state corporate practice of dentistry laws and advertising regulations. If you would like legal counsel on whether your DSO or practice is compliant with such laws, please contact Dykema as soon as possible.