Lawyer for Dentists, Dental Corporations
and Group Dental Practices
How a non-licensed person can work with a dental practice,
including the use of an administrative / management services
company.
Thank you for finding my suite of articles on
the basic corporate, business and contract law issues for
dental corporations and group dental practices in
California. The articles in this suite are:
In this article I discuss how a
non-licensed person can work with a dental practice,
including the use of an administrative / management service
company. Here is my conclusion up-front: A non-licensed
person can work with a dental practice so long as there is
NO ownership in the practice, where ownership includes not
only stock in a dental corporation but also a share in
revenues.
Scenario
Over the years I’ve received more than a
few phone calls from non-dentists who want to financially
participate in a dental practice, whether by investment or
the sharing of profits. Usually these people are related to
the dentists or work closely with them. Sometimes they are
the accountants for the dental practice. The fit seems
natural and beneficial for all concerned because the
dentists only want to focus on patient care (not admin or
marketing) while the non-dentists only want to work on the
business side of the practice.
The Law
Only dentists who are licensed in
California may own shares in a dental corporation or be a
partner in a dental practice (with certain minor
exceptions).
The policy behind the law is to prevent
unlicensed persons from interfering with the dentist’s
professional judgment. The dentist must have sole control
over all health care decisions. This includes obvious
decisions such as the need for referrals outside the
practice, and it also includes less obvious decisions such
as: (1) how many patients the dentist must see in an hour;
(2) how many hours a day the dentist must work; (3) hiring
and firing of dental associates, technicians and assistants
(at least as concerns their clinical competency); (4)
setting the parameters for insurance contracts; (5) coding
and billing procedures for patients; (6) selecting dental
equipment and supplies; (7) content of advertising for the
practice.
The dentist may not delegate any of these
decisions to an unlicensed person, including to a management
service company. The dentist may consult with unlicensed
persons in making these business decisions, but the dentist
must have ultimate responsibility for the decisions.
Many people question whether this law
still makes sense in today’s world, but irrespective of all
that, it’s the law and you must comply. If you violate the
law, you put your license at risk.
Working with the
Dental Practice without Breaking the Law
With these concepts in mind, let’s turn to
how a non-licensed person (usually an administrative /
management service company) can participate in a dental
practice. The key is to provide goods and services to the
dental practice without tripping any of the prohibitions
above. For example, the non-licensed person can lease
office space and certain equipment to the dental practice,
or provide back-office administrative services including
accounts payable and billing services, or help with
traditional marketing, or provide staffing of non-licensed
personnel. None of these functions, in themselves, involve
ownership or profit-sharing in the dental practice.
No Profit-Shares
It is extremely important that the
non-licensed person (and the administrative / management
service company) receive compensation that is directly
related to the goods and services provided, for example,
flat lease rentals or hourly billing amounts. The dental
practice may not pay any percentage or portion of its gross
or net profits to a non-licensed person, as this would
constitute a form of ownership in the dental practice. A
share in revenues constitutes a partnership share, and
that’s ownership.
Corporate Structures
The management service company is a common
structure that non-licensed persons use to participate in a
dental practice. Here non-licensed persons perform the
administrative and back-office functions permitted by law
(see above), thereby freeing the dentists to spend more time
on patient care. Usually the dentists provide patient care
through a professional dental corporation that they wholly
own, while the non-licensed persons provide their services
through an ordinary corporation or an LLC that anyone can own. The two sides use contracts to
link the management service company with the dental
corporation and to provide the terms of service and
compensation.
I hope this article has been useful to
you.
Call me to schedule a
legal consultation: 510-796-9144
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