Month: November, 2018

Dental Practice and Private Equity-backed Dental Support Organization Settle With Government Regarding Allegations of Improper Billing and Violations of the Corporate Practice of Dentistry

ImmediaDent of Indiana, LLC (“ImmediaDent”), the operator of nine dental care practices in Indiana, and Samson Dental Partners, LLC (“Samson”), the provider of administrative support services to ImmediaDent, have agreed to pay $5.1 million to settle allegations of improper Medicaid billing and violations of the Indiana corporate practice of dentistry.  As part of the settlement, the two companies will pay approximately $3.4 million to the federal government and $1.78 million to the State of Indiana.

ImmediaDent owns and operates thirty-three dental locations in Indiana, Kentucky, and Ohio.  Kansas-based Samson provides management, administrative, and other support services to ImmediaDent, but does not have an ownership interest in ImmediaDent.

The U.S. Attorney’s Office intervened in this matter after Dr. Jihaad Abdul-Majid filed a qui tam, or whistleblower, suit in February 2013 against ImmediaDent and Samson in federal court.  According to the complaint, Dr. Abdul-Majid worked for ImmediaDent from July 2011 to March 2012.  His efforts to speak out against the alleged false billing practices he witnessed resulted in the termination of his employment.

Allegations constituting improper Medicaid billing by the two entities included billing tooth extractions as surgical extractions and billing for “deep cleanings” that were never performed or were not medically necessary.  Further, Samson was accused of violating Indiana’s law prohibiting the corporate practice of dentistry, Ind. Code §25-14-1-23.  See also Orthodontic Affiliates, P.C. v. OrthAlliance, Inc., 210 F. Supp. 2d 1054, 1059 (N.D. Ind. 2002).  Specifically, it was alleged that Samson improperly influenced ImmediaDent’s medical professionals and staff by rewarding employees for reaching production goals, disciplining employees for failing to meet production objectives, and exerting influence over staff in a manner that compromised their clinical judgment.

According to the U.S. Attorney’s Office, both companies refused to enter into corporate integrity agreements, which would have required oversight of the company by the United States Department of Health and Human Services, Office of Inspector General (“OIG”).  Corporate integrity agreements typically last for a period of five years and require companies to hire additional compliance staff, develop compliance training, have annual external reviews performed, and submit performance reports to the OIG.  Due to both entities’ refusal to enter into corporate integrity agreements, the OIG has determined that ImmediaDent and Samson “pose a continuing high risk to the federal health care programs and their beneficiaries.”

There is a small, but growing trend, of federal and state governments filing claims against management companies of medical and dental practices, and, in some instances, the private equity firms that invest in these management companies, for the alleged misdeeds of the billing providers.  Even though the firms do not have direct equity interests in the providers themselves, federal and state governments are more closely scrutinizing the influence that the firms have in the providers through the management relationships and trying to argue that such influence is so great that the management companies and the firms should also be liable for the liabilities of the providers.  It is important that management companies and private equity firms take great care in their relationships with health care providers to remain at arms’-length, so as to try to avoid being implicated in these actions.

Beware of the Corporate Practice of Medicine Doctrine In Pennsylvania

Like many states, Pennsylvania has an established a corporate practice of medicine (“CPOM”) doctrine.  Like many states, Pennsylvania has particular details in its prohibition that can be traps for the unwary.

Pennsylvania’s CPOM doctrine originally grew out of the Neill v. Gimbel Brothers, Inc. case.  In that case, a department store leased space to a partnership, which operated the store’s optical department.  The rent payable to the store included a portion of the optometry practice’s revenue, the store could terminate the practice’s employees, including the optometrists, and the store set and collected the practice’s fees.  The Pennsylvania Supreme Court determined that this effectively allowed the department store to practice the profession of optometry.

The theme of the CPOM doctrine in Pennsylvania is similar to that of other states:  namely, physicians cannot be employed by non-physicians, and an entity that practices medicine may only be owned by licensed physicians.  There are, of course, some exceptions.  One particular exception permits health care practitioners to practice medicine as an employee or independent contractor of a health care facility or an affiliate of a health care facility established to provide health care.  A similar exception exists in other states as well, but it is important to keep in mind what can be considered a “health care facility.”

The CPOM doctrine is still alive in Pennsylvania today as evidenced by some recent case law.  While the case law is in the dental field, it is logical to think that the same pronouncements by the court in recent case law would carry over to the medical field.

In Apollon v. OCA, the Eastern District of Louisiana, applying Pennsylvania law, determined that a business services agreement between a dental practice and a management company was illegal due to the sharing of its profits by the dental practice with the management company under the agreement.  The court reasoned that the sharing of profits was akin to establishing a partnership between the practice and the management company, which would be illegal since only licensed persons, under Pennsylvania law, could own shares in a professional corporation.

Business service agreements between professional practices and non-licensee owned management companies are quite common across the country.  Many states have laws (statutes, regulations, case law, opinions, advisory opinions or otherwise) that govern the contents of these types of agreements.  Pennsylvania is clearly no exception.  Thus, it is crucial that parties entering into arrangements in Pennsylvania that may implicate the CPOM doctrine pay careful attention to the details of their relationships.