North Carolina Department of Justice
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Reply to: Gayl M. Manthei Health & Public Assistance Tele: (919) 716-6855 Fax: (919) 716-6758

September 3, 1999

Stanley L. Fleming, D.D.S., President Delma H. Kinlaw, D.D.S., Secretary/Treasurer Christine Lockwood, Executive Director

N.C.
State Board of Dental Examiners 3716 National Drive, Suite 221
P.
O. Box 32270 Raleigh, NC 27622-2270

RE: Advisory Opinion: Dental Care and Business Services;

N.C.G.S. § 90-29(b)(11)

Dear Dr. Fleming, Dr. Kinlaw and Ms. Lockwood:

This letter responds to your request for an Attorney General’s opinion dated July 19, 1999. You ask whether an arrangement whereby a business entity provides services to a dental practice constitutes the unlawful practice of dentistry if payment to the business entity under such arrangement is based in whole or in part on the revenues of the dental practice or one or more individual dentists.

It is unlawful for a non-dentist to own, manage, supervise, control or conduct an enterprise which is engaged in the practice of dentistry. N.C. Gen. Stat. 90-29(b)(11). As we have opined in the past, a dentist may contract with a business entity to provide the dentist with an array of business services. See letter opinion to Senator C.R. Edwards, dated August 23, 1996 (1996 WL 925123). That opinion, however, was predicated on the fact that compensation for the services would be based on the amount and nature of the services utilized by the dentist and not upon revenues of the dentist.

Where a business entity is compensated based upon the value of the services rendered by the business entity, the dentist retains control of the practice and the amount and quality of service rendered. That control is compromised, however, when the business entity shares in the dentist’s profits. At that point, the business entity becomes a participant in the practice rather than a provider Stanley L. Fleming, D.D.S., President Delma H. Kinlaw, D.D.S., Secretary/Treasurer Christine Lockwood, Executive Director Page 2 September 3, 1999

of services to the practice and runs afoul of the prohibition against non-dentists engaging in the practice of dentistry.

You also ask whether a dental practice can give complete control over its operations to a business entity in light of the prohibition against the unlicensed practice of dentistry. If not, you ask that we advise you regarding how the Dental Board should analyze management arrangements between a business entity and a dental practice to determine whether the business entity has improper control over the dental practice or its dentists.

A contract between a dental practice and a business entity may not assign to the business entity control of the dental practice. Some clauses which we believe would evince improper control are:

  1. Ownership of patient records by the business entity;

  2. Restrictive covenants limiting the ability of dentists who own or are employed by the dental practice to practice in competition with the business entity;

  3. An agreement that gives the business entity control over or input into the clinical practice of the dental practice or its dentists;

  4. An agreement that gives the business entity direct or indirect control over the hiring and firing of clinical personnel;

  5. An agreement that gives the business entity authority to approve any contract between the dental practice and dentists for professional services, or requires the business entity’s approval of such contracts or arrangements; or

  6. An agreement that gives the business entity control over the transfer of ownership interests in the dental practice, e.g., a stock transfer agreement limiting the ability of the dentists to sell or otherwise transfer shares of the dental practice or permitting the business entity to require the dentists to sell such shares to other individuals to be named by the business entity.

The foregoing is not an exhaustive list. Any clauses which alone, or in combination, affect the professional decision-making of a dental practice are problematic. A clause in a contract which purports to reserve to the dentist all decisions regarding patient care may not redeem the contract if Stanley L. Fleming, D.D.S., President Delma H. Kinlaw, D.D.S., Secretary/Treasurer Christine Lockwood, Executive Director Page 3 September 3, 1999

the remainder of the contract assigns to the business entity improper control. In determining whether the business entity has improper control over the dental practice or its dentists, the Dental Board should look at the entire relationship and should consider the potential impact of the relationship on patient care. These decisions must be made on a case by case basis.

Very truly yours,

Ann Reed Senior Deputy Attorney General

Gayl M. Manthei Special Deputy Attorney General