How to Structure a Management Company’s Relationship with a Dental Practice
By Matt Dickstein
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In this article, I explain how to structure the relationship between a management service company and a dental practice under California law.
Here’s the law: Unlicensed persons (“laypersons,” including a management service company) may not practice dentistry or hold themselves out to the public as practicing dentistry . By this prohibition, unlicensed persons may not:
* Hire dentists to practice dentistry
* Have an ownership or profit share in a dental practice
* Receive any compensation that might look like a profit share
* Take any action or decision that might affect or influence the provision of dental services
* Advertise the availability of dental services, including websites, except on behalf of a dentist.
The policy behind the law is to prevent unlicensed persons from controlling the provision of dental services or interfering with a dentist’s professional judgment. The dentist must have sole control over all decisions that might affect health care.
The Dentist is the Boss
The basic concept is this– The dentist must own, operate and control the dental practice. The dentist may only hire the management company to perform specific administrative tasks. The roles may not be reversed. The dentist must be the boss, and be irreplaceable, while the management company must be an administrative service provider who can be replaced.
The owner / dentist must collect all income of the practice, and pay all expenses of the dental practice including the service fees of the management company. It’s OK for the management company to be an agent for the dentist, and in that capacity, collect the income of the practice. The management company, however, must deliver to the dentist all of the income received from patients, without deduction. The dentist can later pay to the management company its service fees by separate invoice. In brief, the dentist collects and controls the money, and the management company is just one more expense that the dentist pays.
The owner / dentist must staff the doctors, hygienists and other health care providers who work at the office. The doctors and other health care providers on staff must be employees or contractors of the dentist.
The management company should only provide receptionist and other administrative services to the dentist, and perhaps rent office space to the dentist. The dentist should pay a fair market rent for the office and fair rates for the administrative services; the management company should not take a percentage of the gross income of the practice. Further, every single dollar and/or benefit that passes between the two parties should be tied to written contracts at fair market value.
Advertising can be problematic. California law does not clearly state the permissible boundaries when a management company runs advertising on behalf of dentists. I advise that you be ultra-conservative; do not push the envelope of the law.
Under CA law, you practice dentistry when you advertise for dental services or hold yourself out as providing dental services. A website that offers dental services constitutes the practice of dentistry, and therefore the website must be owned and controlled by a dentist. Any advertising by the management company of the availability of dental services may lead to a finding that the management company is illegally holding itself out as a licensed professional or is engaging in the practice of dentistry.
The dentist should control the website and other advertising, and be featured in that website and advertising. Solely the dentist may hold himself out as providing dental services, which means that solely the dentist and the dentist’s brand name, not the management company’s brand name, may appear in the website and advertising.
You must be very careful to use the management company solely in a background administrative capacity, such as acting as webmaster or arranging for the publication of advertising that the doctor has prepared. The dentist should be responsible for the content of all advertising, the look-and-feel, plus all decisions about the where and when of the advertising. The management company should only carry out the decisions made by the doctor.
Well, I hope this article was as enjoyable for you as for me. Writing is easy when you just tell people what not to do.