Corporate dentistry bleeds Medicaid, vulnerable low-income childrenBy Debbie Hagan
January 8, 2015
Dentists yank healthy teeth, fleece Medicaid under pressure to optimize income
Abstract: Corporate-owned dental chains are exploiting the underserved market for low-income child Medicaid patients with large-scale fraudulent and abusive treatment. Most dental clinics are honest and forthright. But aggressive business models pressure some dental chains to fraudulently optimize volume treatment, ignoring the child’s medical needs. Children undergo useless and painful root canals, cavity fillings and extractions. The clinics impose mouthfuls of steel teeth the children don’t need. Medicaid likely is billed hundreds of millions of dollars a year in false dental treatment of children. Lawsuits and criminal actions are breaking up schemes. Still needed are more enforcement by dental boards, and education of parents about the warning signs of a scam.
Lower-income children staggered from their dental chairs. Many reached dangerously high heartbeat rates and were returned to their parents trembling, crying and clothes soiled. They were scared and traumatized by the painful surgeries they’d just received, and begged their parents never to bring them to the dentist again.
Their parents took their kids for routine checkups, expecting caring and minimal treatment. Instead many left with a mouth full of frightening steel-capped teeth. Others had a dozen or more perfectly healthy teeth pulled without medical necessity. Children routinely were tightly strapped from head to toe onto a papoose board to prevent them from struggling when surgical instruments were shoved into their mouths without anesthesia.
These are the common horror stories of children receiving Medicaid dental care around the U.S. Most are from vulnerable, low-income families. Foster care children of military families also are abused.
Many and likely most Medicaid-serving dental clinics provide caring and valuable service. Yet large, corporate-owned dental chains have literally and figuratively extracted large and illicit profits by focusing on this underserved market of the nation’s poor. Epidemic insurance fraud and abuse of little patients drive the business models pursued by some large chains that have erected networks of high-production Medicaid mills.
The nation’s state-federal Medicaid partnership covers 60 million lower-income Americans, with spending of $450 billion annually.1 The program’s sheer size places Medicaid at considerable risk of fraud and abuse. Medicaid child dentistry is among the highest risks. No composite figures track the insurance-dollar losses to defrauding of young Medicaid patients. The figure likely runs to hundreds of millions of dollars a year.
Texas state Medicaid investigators, for example, have paid more than $550 million for medically unnecessary orthodontic and dental services between 2007 and 2011.2
Criminal prosecutions, news exposes, hundreds of lawsuits plus congressional investigations are rocking dental chains as allegations of civil and criminal malfeasance keep surfacing.
Lower-income children are generally underserved, and thus form an inviting market for profit-trolling equity funds.
Fewer than half of Medicaid-enrolled children received dental care in 22 states, reveals a 2013 report by the respected Pew Charitable Trusts. More than 14 million Medicaid children didn’t receive dental care in 2011. This creates a lucrative market for corporate-owned dental chains to fill.3
Medicaid dental practices also are less-regulated than physician groups, and patients often see their dentist more often than their doctor.4
And several states continue raising reimbursement rates to successfully attract more dentists. Plus the tragic 2007 death of a Medicaid child attracted great national attention to the program’s problems. The child died from a brain infection caused by an untreated tooth abscess. Regulators upgraded Medicaid to make the program safer and attract more participants.
Thus we have these owners or portfolio managers: Big Smiles is in the portfolio of Morgan Stanley. Small Smiles was purchased for $435 million by a consortium of investment firms, including the Carlyle Group, Arcapita Corporate Investments and American Capital. Valor Equity Partners owns All Smiles in Texas. FFL Partners owns the largest national chain — Kool Smiles.
Medicaid became an especially inviting investment in Texas in 2007 when a lawsuit settlement dramatically increased Medicaid fees. Corporate dental chains soon descended onto the federal insurance program.5
One was the Atlanta-based Kool Smiles. It is the largest Medicaid dental chain in the U.S., serving about two million children with 130 offices in 17 states.
Connecticut Medicaid also noticed a spike in children receiving stainless-steel crowns. The crowns didn’t fit and teeth underneath were decaying. The company eventually satisfied Medicaid that it had corrected the problems.
The problem of Medicaid fraud, however, is larger than Kool Smiles. High volume and rapid patient turnaround of assembly-line surgeries form the lynchpin of a business model that has dangerously commoditized dental care of thousands of Medicaid kids.
Dentists embedded in dishonest chains seek the largest Medicaid payments possible from a given procedure, regardless of medical need. Worthless tooth extractions, steel crowns and cavity drillings heist far more insurance money than honest, low-cost cleaning and preventative care.
The equity owners typically hand over business operations to so-called dental management firms that they own. The management companies publicly purport that they are mere vendors, providing dental clinics with back-office administrative services such as billing, payroll, staff hiring and other non-treatment, non-medical decisions.
In truth, the management companies illegally control the chains. They install dentists as straw clinic owners. False ownership skirts laws in most states that ban corporate ownership of medical clinics, and require dentists to own and operate the clinics. The illegal arrangements are hidden in a complicated maze of service agreements, straw corporations and limited-liability corporations.
The management firms also hire dentists and support staff. More important, they control Medicaid income production. Dentists are required to produce so much income that fraudulent treatment and abandonment of clinical judgment are inevitable byproducts of work to meet such aggressive goals. Lucrative bonuses for meeting production goals reinforce the assembly-line treatment model.
The Medicaid mills thus falsely charge Medicaid for crowns, root canals, bridges and other expensive procedures when the children — often just babies — only need routine checkups, cleaning or filling of a small cavity. Bungled and medically useless surgeries often require expensive and traumatic remedial surgery and hospitalization.
The contracts of hired dentists tend to be restrictive, almost like handcuffs, and reinforce the aggressive treatment strategy. High production demands often are embedded in employment contracts.
Medicaid mills often treat 80-100 patients per day, with required billings of $500-$1,000 per patient that are tracked daily. The goal typically is to gouge as much Medicaid money as possible from the child’s first visit, and avoid lesser follow-up procedures that slow the billing flow.
Foreign dentists form a large component of business models. They comprise up to 30 percent of the Small Smiles dentists, for instance. Overseas dentists need steady work to legally remain in the U.S. Clinic chains such as Small Smiles and Kool Smiles offer that gainsaying employment.
High treatment quotas impose a strong incentive to over-treat and defraud Medicaid just to stay employed. Once caught in the trap of insurance fraud, they are virtually forced to continue defrauding or risk being deported if they lose their jobs for missing quotas.
Recent graduates of U.S. dental schools also are recruited. They face considerable student debt plus difficulty in securing mortgages or other loans. The attractive salaries and easy employment give these graduates a quick leg up in life.
Contracts also tether dentists to the chain outlets, further entrapping them in a web of fraud. Small Smiles contracts, for example, stated that dentists must give 90 days notice before leaving or pay a fine of $500 per day. Some Small Smiles contracts had non-compete clauses restricting dentists from providing care to Medicaid children — at any other clinic — within the service area.
Dentists installed as straw owners have their own, often strange, contractual restrictions. The Small Smiles contract said the straw owners will lose their owner status — and lucrative income — if they divorce. The clinic would be contractually considered a marital asset and the dentist would have to sign over the illicit “ownership” to whoever is designated, usually for just $100.
Children often are strapped to so-called papoose boards. These and other restraining devices prevent the child from resisting and allow dentists to finish painful production-line surgeries faster. Years later children often clearly remember the abuse and trauma, which reinforces their reluctance to seek dental treatment as adults.
Here are several examples of children treated by a Texas chain. The names are changed to protect the little victims. Note that a typical pediatric root canal and crown take about 30 minutes per tooth. A filling takes 15 minutes per tooth, Dr. Norman Tinanoff, a University of Maryland professor, said as a witness in a 2014 civil suit against Small Smiles in New York.
“Small Smiles contract said the straw owners will lose their owner status — and lucrative income — if they divorce. The clinic would be contractually considered a marital asset”Stolen insurance money enriches the winners with princely lifestyles. Sprawling mansions, private jets, luxury boxes at football games, expensive vacation homes and other trappings of the rich and famous come to the overseers. Taxpayers foot the bills.
All Smiles founder Dr. Richard Malouf owns two jets and a $14-million mansion that includes a bowling alley and water park.6
An alarmed U.S. Senate and House have launched investigations as complaints, lawsuits and news articles documented abuses.
Small Smiles was prominent among the chains singled out in a June 2013 report by the U.S. Senate Finance Committee.
Small Smiles was one of the nation’s largest pediatric dental chains and most flagrant abusers, the Senate concluded. Small Smiles then was controlled by Church Street Health Management (CSHM), the purported dental service provider.
The chain had 70 clinics in 21 states at its height. Small Smiles treated more than a million children, and 400 dentists did six million procedures in 2010. The dentists were ill-trained to treat children; none was a pediatric specialist.
Nearly one-third of Medicaid billings by Small Smiles was unjustified, the Senate determined. “Larger sampling at this and other clinics could reveal massive overpayments,” the Senate concluded.7
A child at a Small Smiles clinic in Oxen Hill, Md. had this experience: “Screamed and fought the entire time ... She vomited approximately halfway through the procedure. The dentist immediately turned the patient on her side and suctioned her mouth and throat,” the Senate report said.
“This child’s airway was in jeopardy because the mouth prop opened her mouth so wide it restricted her ability to swallow and protect her airway.”8
Investigators found no medical necessity for treatments. The U.S. Department of Health and Human Services (HHS) found similar breaches at a Small Smiles unit in Youngstown, Ohio. The federal agency imposed a $100,000 penalty.
“Treatment was provided to restrained children who were fighting, crying and basically hysterical, using large mouth props that over-extended their mouths, compromising their ability to swallow and protect their airways,” the Senate report noted.9
Faced with federal sanctions, Small Smiles declared Chapter 11 bankruptcy in 2012. HHS finally banned Small Smiles from Medicaid for five years in April 2014. The order took effect September 30, 2014 and effectively denies the chain access to its main revenue stream. CSHM also must divest its management contracts with Small Smiles.
“CSHM failed to report serious quality-of-care reportable events, take corrective action, or make appropriate notifications of those events to the State dental boards as required ...” the federal Office of Inspector General says.10
“CSHM also failed to implement and maintain key quality-related policies and procedures, comply with internal quality and compliance review requirements, properly maintain a log of compliance disclosures, and perform training as required by the CIA. Finally, CSHM submitted a false certification from its Compliance Officer. ...”
Small Smiles still faces a staggering legal burden. It agreed to a separate $24-million federal civil settlement in January 2010. That resolved allegations that the company operated as a fraudulent scheme to bill Medicaid hundreds of millions of taxpayer dollars for unnecessary, inappropriate, unsafe and excessive dental procedures on young children.
The verdict set the tone for a huge backlog of other lawsuits against Small Smiles. The money to fund settlements comes from a trust fund created as part of CSHM’s dissolution. The chain faces about 100 civil actions around the U.S., including 30 actions in New York. They all allege that Small Smiles gave children damaging treatment.
Small Smiles aside, New York has been such an overall hotbed of Medicaid dental chicanery that HHS issued a separate report on the state in March 2014. Some 29 dentists “received extremely high payments per child; provided an extremely large number of services per child; or provided certain selected services, such as pulpotomies or extractions, to an extremely high proportion of children,” the report said.
“Additionally, almost a third of the general dentists were associated with a single dental chain that had settled lawsuits for providing services that were medically unnecessary ... Our findings raise concerns that certain providers may be billing for services that are not medically necessary or were never provided.”11
Texas is another epicenter of corruption, prompting an investigation by the U.S. House of Representatives. The number of dentists treating Medicaid patients spiked nearly two-thirds after the 2007 consent decree raising Medicaid reimbursements. Fraud followed in large volume, with much emphasis on outfitting kids with medically worthless braces.12
Most children don’t need braces, yet Texas Medicaid spent more on braces in 2010 than the other 49 state Medicaid programs combined. Just a handful of orthodontists billed Texas Medicaid more than Florida’s entire Medicaid program spent on orthodontics.13
“More than 90 percent of orthodontic reimbursement requests by All Smiles (unaffiliated with Small Smiles) were invalid,” revealed a Texas Medicaid audit. The state sued varied All Smiles entities, alleging the chain billed Medicaid for needless and phantom services. All Smiles closed 13 offices in the Dallas area after the investigation. That left 12,000 Medicaid patients to scramble for a new dentist.14
Turning the corner on this national epidemic must take place at many levels. Assertive enforcement is one key.
At least eight states have formed independent offices of Medicaid inspector general. They gather and refer criminal cases to state Medicaid Fraud Control Units, most of which are housed in the state attorney general’s office.
Some states such as Oklahoma also require inter-agency cooperation and collaboration on Medicaid cases.
Liberal doses of profit-draining lawsuits by governments and private citizens will continue undermining the cheaters financially. These actions can bankrupt some cheaters out of existence or force them to clean up their operations. This speaks to the value of state and federal laws authorizing civil suits of this nature.
Some chains also are transitioning to accept only patients with private insurance, but revenue-generating procedures remain a priority goal.
Enforcement of state dental practice acts and strengthening current laws by state dental boards also is a key to rooting out bad actors. The North Carolina State Board of Dental Examiners, for example, passed regulations in 2012 that monitor and curtail the fraud-minded Medicaid business model.15
Parents also should be educated about potential dental scams and how to manage the dental relationship. Parents should be informed, for example, that they can be present during procedures and ask questions. A Patient’s Bill of Rights would be useful.
Dental boards and associations can play lead roles in family education. State regulations could require it. Plentiful material should be prominently displayed for patients at dental clinics, and sent to Medicaid recipients once a first appointment is made.
Dental students should be warned about scams, restrictive contracts and illegal business models as part of their dental schooling. Dental students are taught little about business operations. This increases their vulnerability to predatory dentistry recruiters. More student loan forgiveness and/or loan assistance would also reduce their susceptibility to entrapping contracts.
Dental Medicaid thievery involving children is a persistent scam that stoutly resists efforts to eradicate and make the dental treatment a safe haven for all low-income children. The solution rests in continuing to raise awareness that spurs lawsuits, regulatory action and other counter-steps. It’s a long process, but worth resolutely pursuing for the sake of vulnerable children and their parents who trust that their Medicaid dentist will adhere to the Hippocratic oath, “First, do no harm.”
About the author: Debbie Hagan is a Kentucky-based citizen blogger and investigative journalist who covers dental fraud through her blog, Dentist the Menace.
 Fighting Medicaid Fraud, State Legislatures Magazine, April, 2013.
 Company That Approved Unnecessary Orthodontia Kept Its State Contract, The Texas Tribune, May 1, 2014, July 18, 2014. https://www.texastribune.org/2014/05/01/company-okd-medicaid-billing-keeps-its-contract
 In Search of Dental Care, The Pew Charitable Trusts, June 23, 2013. http://www.pewtrusts.org/en/research-and-analysis/reports/2013/06/23/in-search-of-dental-care
 Private Equity Firms Eye Big Profits in Dentistry, DrBicuspid.com, May 2012. Web. 17 July 2014. http://www.drbicuspid.com/index.aspx?sec=log&URL=http%3a%2f%2fwww.drbicuspid.com%2findex.asp%3fse%3dser%26sub%3ddef%26pag%3ddis%26ItemID%3d310662
Texas Drills Down on Medicaid Dental Fraud, The Wall Street Journal, August 19, 2012, July 17 2014. http://online.wsj.com/news/articlesSB10000872396390444233104577591243154716520
 Dentist in Medicaid Suit Adding a Water Park to His Mansion, WFAA Wfaa.com, July 12, 2012, July 18, 2014. http://www.wfaa.com/news/investigates/Medicaid-Mansion-Expansion--162280556.html
 Small Smiles Wins 1st Case Alleging Mistreatment of Kids, DrBicuspid.com, October 9, 2013, July 18, 2014. http://www.drbicuspid.com/index.aspx?sec=sup_n&sub=pmt&pag=dis&ItemID=314430
 Joint Staff Report on the Corporate Practice of Dentistry in the Medicaid Program, Committee on Finance, United States Senate, June 2013.
 OIG Excludes Pediatric Dental Management Chain From Participation in Federal Health Care Programs, Office of Inspector General, U.S. Department of Health and Human Services, April 3, 2014. https://oig.hhs.gov/newsroom/news-releases/2014/cshm.asp
 Questionable Billing for Medicaid Pediatric Dental Services in New York, Department of Health and Human Services, Office of Inspector General, March 2014. http://oig.hhs.gov/oei/reports/oei-02-12-00330.pdf
 Uncovering Waste, Fraud, and Abuse in the Medicaid Program, Committee on Oversight and Government Reform, U.S. House of Representatives, April 25, 2012.
 Management arrangements, North Carolina State Board of Dental Examiners, July 18, 2014. http://www.ncdentalboard.org/management_arrangements.htm
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