State Laws

Introduction - Although federal laws are generally aimed at curbing fraud, waste, and abuse with regard to government sponsored insurance plans, states have adopted similar laws that apply more generally to private payment and commercial insurance situations. Like the federal fraud, waste, and abuse, these laws restrict a dentist’s ability to offer consideration for referrals or enter into particular business arrangements. Applicable laws can vary widely from state to state – what may be permissible in one state, may be unlawful across the border. Accordingly, it is important for a dentist to understand what laws may apply to his or her particular practice.

1. State FCA, AKS, and Self-Referral Laws - Many states have adopted their own versions of the FCA, the AKS, and Stark Law that apply to a broader set of scenarios. For example, some states have adopted laws based on the FCA that prohibit the submission of fraudulent claims to commercial insurance carriers.²⁶ Other states have adopted statutes that prohibit the payments of kickbacks in contexts outside of Medicare and Medicaid.²⁷ Similarly, some states have adopted laws that regulate a dentist’s ability to invest in ancillary services that fall outside of the designated health services identified by the Federal Stark Law – accordingly, it is important a dentist understand the requirements before investing in, or agreeing to compensation from, an ancillary health service like a licensed facility or dental laboratory.²⁸

a. Case Study: An Oklahoma dentist agreed to pay more than $500,000 to the State of Oklahoma following an investigation under the State False Claims Act, in which it was revealed that the dentist was double-billing and upcoding patient encounters, billing excess units of general anesthesia and billing for tobacco cessation counseling for non-tobacco users.²⁹

2. Fee-Splitting - Many states have also adopted rules that prevent dentists from accepting or tendering rebates or splitting fees with other dentists and healthcare professionals.³⁰ Specifically, the American Dental Association considers fee-splitting to be unethical.³¹ Fee-Splitting can occur in a variety of contexts including paying referral fees to unlicensed individuals, joint ventures with unlicensed entities, leasing office space and equipment tied to patient referrals, and shared revenue arrangements with other healthcare providers. Similarly, advertising services paid on a commission, rather than flat fee, basis could potentially violate fee-splitting prohibitions.³²

a. Case Study: In 1988, a New York Court held that a dentist engaged in prohibited fee-splitting by paying a percentage of his gross revenue to lease a fully equipped dental office.³³

3. Corporate Practice of Dentistry - States have adopted rules that restrict the ability of non-licensed individuals and business entities from owning or operating dental practices. Depending on state law, a corporate entity owned by unlicensed individuals that provides dental or other dental services and employs licensed professionals may be engaged in the unlawful corporate practice of dentistry.⁵ Alternatively, a business arrangement in which a business entity does not own a dental practice outright, or employ dentists, may result in such an entanglement of affairs that the business entity may be engaged in the de facto unlawful practice of dentistry.³⁵ The policy underlying the doctrine of the corporate practice of dentistry is based on personal responsibility: anyone who practices a profession is responsible directly to his patient rather than to commercial interests.³⁶ While not all business arrangements may violate the corporate practice of dentistry, it is incumbent on the dentist to ensure compliance with state laws.

a. Case Study: In 2015, the Office of the Attorney General of the State of New York entered in a settlement with a large, national dental support organization, that concluded that the support organization exhibited “extensive control” over affiliated dental practices. The investigation determined that the support organization: (1) had direct and exclusive control over practice bank accounts; (2) hired and oversaw clinical staff, including associate dentists and hygienists; (3) incentivized and pressed staff to increase sales of dental services and products; (4) trained non-clinical staff to discuss treatment plans and assist in decision making about treatment alternatives; (5) took a pre-set percentage of each dental office’s monthly gross profit, violating the state fee-splitting prohibition; and (6) subjected the dental practices to non-competition and non-solicitation agreements that prevented the practices from competing with other organization-affiliated practices, regardless of location.³⁷

4. Credit Balances – Patient credit balances represent a debt owed to each patient, but additional requirements apply. Generally, if a credit has remained on a patient account for a period of time prescribed at law, it is deemed “unclaimed property” under state law and must be escheated to the State. For example, a dormancy period may be three years – if a credit remains on a patient’s account for more than three years, it must be returned to the state.³⁸ Failure to properly address patient credit balances may result in penalties.³⁹ Given the foregoing, it is important that a dental practice regularly track all patient credit balances, refund balances within a reasonable time, and report any dormant credit balances to the state.