Legal Misalignment

How Corporate Practice Doctrines Bite Against Sleep Doctors and Sleep Dentists

by Daniel B. Brown, Esq.

Nobody goes to dental school to become a durable medical equipment supplier. And few dentists seek employment at a medical practice to ply their trade.

But dentists who practice dental sleep medicine find themselves in just this position. Payors characterize the oral appliance service as an item of durable medical equipment (DME). So a dentist needs to call himself a DME supplier to get paid. But getting a commercial insurance company to cover a dentist’s work for providing DME can be a difficult maze.

Reimbursement for the DME service could be easier if a physician billed the service under his or her provider contract with the payor. So, it seems like a sound business proposition for the dentist to be part of the sleep doctor’s practice.

Assume a dentist seeks employment or an independent contractor arrangement with a sleep physician practice. The physician might ask the staff dentist to fabricate and fit an oral appliance to treat the practice’s obstructive sleep apnea (OSA) patient. The practice could bill the patient’s insurance for the DME service, and the practice could share a portion of the collected fee to compensate the dentist for his work.

Though it’s a solid economic and clinical proposition, it is also illegal in states that follow the corporate practice of medicine (COPM) doctrine.

The corporate practice of medicine doctrine walls off persons licensed to practice one profession (law, medicine, dentistry, etc.) from any person who does not also hold a license to practice the same profession. The doctrine generally allows individual doctors or dentists to practice in the corporate or limited liability company form, but only if all of the shareholders or owners of the legal entity are members of the same profession.

Subject to certain exceptions, the COPM prohibits lay entities (ie, those owned in any part by non-doctors or non-dentists) from employing or contracting with licensed practitioners to provide professional services for or on behalf of the lay business. In addition, most COPM laws permit entities to perform only one profession. This means that doctors and dentists in COPM states cannot own a single practice from which each can perform his or her own profession.

The rationale is to keep lay persons from interfering with the professional’s exercise of independent medical or dental judgment.  The concern is that the professional will be induced to chase profits to benefit the unlicensed business owner instead of choosing efficient cures for the patient.

Though several states have abandoned the doctrine in light of changing technologies, a majority of states still recognize the doctrine. Some of the more strict followers of COPM include California, New Jersey, New York, North Carolina, Ohio, Colorado, Illinois, Maryland, Tennessee, and Texas.

The Texas’ Professional Entity law, Tex. Bus. Org. Code 300.001, et seq. is representative. The law says that physicians, dentists and certain other professionals may practice their profession under a limited liability vehicle (i.e., a corporation, limited liability company or other association) only if all of the owners of the entity are practitioners of the same profession. The professional entity is limited to practice only one profession.

Other than hospitals and certain other specified health care entities, businesses not owned 100% by physicians or 100% by dentists may not employ or contract a physician or a dentist, respectively, to perform their professional services for or on behalf of the lay company.

Dentists have even more stringent Corporate Practice of Dentistry (COPD) restrictions. Dental Boards across the country protect their licensees by making sure that their dentists aren’t answering to non-dentists or sharing dental fees with non-dentists.

Colorado is particularly strict in this regard. Not only are Colorado dentists prohibited from practicing dentistry in any entity not owned 100% by dentists, Colorado dentists are allowed to share dental fees only with another licensed dentist or a dental hygienist with whom the dentist is lawfully associated in the practice of dentistry. See, Mason v. Orthodontic Ctrs. of Colorado, Inc., 516 F. Supp. 2d 1205 (D. Colo. 2007). See also, Weinbach v. Orthodontic Ctrs. of Colorado, Inc., 2007 WL 2786426, at *3 (D. Colo. 2007)

One business model bandied about is for a well-established DME supplier to hire a local dentist to fit and fabricate OAT for OSA patients referred to the supplier. The supplier would bill the OAT service under the supplier’s long-standing DME payor provider agreements. The supplier would share a portion of the insurance reimbursement with the dentist.

COPD forecloses this arrangement as well. As a lay entity, the DME supplier cannot hire the dentist to perform dentistry (OAT fitting and fabrication) for the supplier.

Penalties for violating corporate practice doctrines vary by state. However, doctors and dentists who violate a state’s corporate practice rules may be subject to disciplinary action. Some state dental boards penalize persons who promote the unlawful practice of dentistry. So a physician who seeks to hire a dentist in a COPD state could face trouble from a state dental board. A key financial risk is that, upon audit, the insurance company payor of the oral appliance could claim that all payments made to a physician or DME supplier for OAT in violation of state law are subject to recoupment and must be repaid.

Joint Practice Permitted

Recall that most states authorize licensed professionals to practice only one profession in the professional entity. Even strict states permit some professionals to practice under one roof, such as doctors and nurses. Georgia recognizes the practices of architecture, professional engineering, and land surveying as the practice of only one profession for this purpose.

In light of these corporate practice restrictions, is it ever possible for a doctor and dentist to practice in the same professional entity, where the physician can determine sleep apnea and the doctor can hire a dentist to fabricate and fit the oral appliance therapy?  In rare cases the answer is yes.

One instance could be Utah, where there is no COPM or COPD. Another outlier is California. The first part of California Corp Code § 13401.5 generally says that only licensed physicians can become employees of a medical professional corporation. But a later section more recently adopted takes it back by saying that the section does not limit employment by a professional corporation of persons who hold certain types of other health care licenses. Dentists appear on the list of approved professionals. This means that a California professional medical corporation can employ a dentist to render professional dental services at and for the medical professional corporation.

Like any new venture in health care, the regulatory traps are everywhere.

But that is not the end of the story. Doctors and dentists must comply with applicable fee splitting and anti-kickback laws. These laws limit how and how much, if any, a person can pay the other for referring patients. Exceptions exist for employed persons in certain instances, so a review by knowledgeable health care counsel is critical.  However, there is likely no exception under the Stark law for a physician who owns a sleep or other practice to refer oral appliance therapy to a dentist employed at the practice if the appliance and service is reimbursable by Medicare.

The Stark law prohibits a physician from referring a designated health service (DHS) reimbursable by Medicate to an entity in which the referring physician (or an immediate family member) has a financial interest. Here the physician refers the oral appliance to the staff dentist to furnish. Stark law exceptions do exits to permit physician referrals of certain DHS furnished within a single group practice. The exception does not apply with respect to almost all items of DME. Because oral appliance therapy, like CPAP, is an item of DME, the joint-practice entity cannot bill Medicare for oral appliance therapy if the physician-owner of the practice referred the services to the practice’s staff dentist. Some states have “little Stark” acts that could apply to these referrals even in the absence of Medicare reimbursement. Have your attorney check these laws as well.

Like any new venture in health care, the regulatory traps area everywhere. Know the scope of COPM and COPD rules in your state before getting too far along in your business planning. Next time, we will visit some of the legal issues surrounding being a part of dental service organization for a sleep dental practice.

Note: This article is for informational purposes only and does not constitute legal advice.