DSOs are facing a new hurdle this year as states look to increase oversight of their activity and transactions or ban their practice ownership altogether, threatening their ability to affiliate with practices and expand access to dental care.
Several states have introduced or passed legislation to limit corporate entities’ ownership of dental practices and their influence on clinical decision-making. Kentucky, for example, recently modified its Dental Practice Act to bar individuals who are not licensed to practice dentistry or entities that establish dental reimbursement rates from controlling clinical decisions. A new Illinois law also expands oversight of healthcare investments by requiring PE firms that own or control a healthcare entity — including DSOs — to provide 30 days’ advance notice to the state attorney general before closing certain transactions.
The Association of Dental Support Organizations recently filed a legal challenge against the Colorado Dental Board over an amendment that bars DSOs from owning practices. The ADSO is arguing that the board “overstepped its authority in rulemaking,” and that the restrictions threaten dental access for Medicaid patients in the state.
Driving these initiatives is increased scrutiny from clinicians, patients and legislators seeking to protect patient care and clinical autonomy. In addition to putting patient access at risk, some DSO leaders argue that these efforts could increase compliance costs as well as operational hurdles. Others are confident that these efforts will ultimately fail or even strengthen the DSO field.
Three dental industry stakeholders recently spoke with Becker’s to share their thoughts on these regulatory initiatives and how they will ultimately impact DSO operations.
Note: Responses were lightly edited for clarity and length.
Joshua Elliss, DMD. CEO of Encanto Dental Group (Deming, N.M.): While I am not an attorney, healthcare policy is governed by complex business law and state constitutional frameworks. In many states, the drivers behind restrictive DSO legislation are practicing dentists who often lack a deep background in corporate law. As a result, many of these proposed bills are poorly drafted, resulting in statutes that experienced attorneys will inevitably bypass or that courts will strike down altogether.
State legislatures are wasting valuable time trying to outlaw specific corporate business models. Instead, their focus should be on passing laws that strictly penalize healthcare provided below the standard of care and impose heavy financial penalties on entities that prioritize profit margins over patient outcomes. Ultimately, consumer choice and market dynamics rather than legislative overreach should determine whether DSO support structures benefit society, while regulatory bodies focus strictly on protecting patient safety.
Samir Qureshi. President of Viper Partners: I think these efforts will require DSOs to be much more disciplined about where the line is drawn between business support and clinical decision-making, but they do not fundamentally undermine the DSO model. The core value of a DSO is its ability to provide dentists with infrastructure — technology, recruiting, procurement, billing, compliance and other administrative support — so clinicians can spend more time caring for patients. Clinical decisions, however, need to remain with licensed dental professionals.
In the near term, increased state oversight will likely create additional compliance costs and require some organizations to revisit their ownership structures, management agreements, governance and operating procedures. We are already seeing regulators scrutinize whether support organizations have crossed from providing administrative services into directing clinical care.
Longer term, I believe this can actually strengthen the DSO sector. Clearer rules can distinguish responsible organizations from models that place financial considerations ahead of clinical independence. DSOs that build genuine dentist-led clinical governance into their organizations should still be able to achieve scale and efficiency while preserving the doctor-patient relationship.
The key is avoiding regulation that unintentionally restricts the non-clinical efficiencies DSOs can provide. If policymakers preserve that distinction, DSOs can continue helping practices expand capacity, invest in technology, recruit providers and improve access to care — while ensuring that diagnosis, treatment planning and other clinical decisions remain where they belong: with the dentist.
Thomas von Sydow. CEO of Cornerstone Dental Specialties (Irvine, Calif.): In my opinion, these regulations will ultimately fail. These types of rules were tried in many states years ago. In addition, the types of structures are very closely aligned with outpatient medical MSOs. As someone who has spent 18 years in the DSO space, these accusations of nonclinical management deciding treatment plans or clinical judgement are false. Have there been any bad actors over 30 years? Probably. One could also make the argument that private practices have zero oversight, so bad actors exist as well. Every DSO I have worked directly or indirectly with does not cross that line. They have clinicians mentoring and coaching clinicians, but the practicing dentist makes the clinical call. In addition, these organizations have very sophisticated legal, compliance and clinical boards to ensure dentists control their own decisions. There is absolutely no reason that private individual practice models cannot coexist with DSOs. The market should decide, including dentists who want to practice in either model, with the patient ultimately making the final choice.
At the Becker’s 5th Annual Future of Dentistry Roundtable, taking place September 14-15 in Chicago, dental leaders and executives will gain insights into emerging technologies, practice growth strategies and the evolving landscape of dental care delivery, with a focus on innovation, patient experience and operational excellence. Apply for complimentary registration now.
