Intro: [00:00:02] Broadcasting from the Business RadioX Studios in Atlanta, it’s time for Dental Law Radio. Dental Law Radio is brought to you by Oberman Law Firm, a leading dental-centric law firm serving dental clients on a local, regional, and national basis. Now, here’s your host, Stuart Oberman.

Stuart Oberman: [00:00:25] Hello everyone, and welcome to the show. I want to talk about one of the hottest topics in the industry today, DSOs. I can’t tell you how many calls we get as a firm, how do we grow? How do we scale? How do we get to five practices? How do we get to ten? How do we get to 20? Now, I got 20 practices, how am I going to sell? What’s my multiples? What’s my EBITDA? What’s the calculations?

Stuart Oberman: [00:00:51] But what we’re not hearing a lot about, which is a lot of undertow right now, is DSOs are coming under serious governmental scrutiny. And what’s happened is that, as DSOs grow – now, we’ve got to say what DSOs are. So, I’m going to say the middle market where you have a doctor that owns maybe five to ten practices, that’s a middle market. And they want to grow to be the grandfathers, if you will, of the DSOs.

Stuart Oberman: [00:01:21] So, the DSOs c, if you will. So, what’s happened is that we are seeing an enormous uptick in regulatory investigations, especially those that accept Medicaid and all other state and federal health care programs. So, what’s happened is that, as the governmental payers, state and federal, start auditing the payments to the practices. The OIG, Office of Inspector General, who you never, ever want to get a letter from, is also investigating these particular matters.

Stuart Oberman: [00:02:06] And what’s happening is that we’re seeing a lot of issues regarding Anti-Kickback Statute, improper payments, improper billing, coding. And as the OIG and HHS combined forces for regulatory matters, it’s made it clear that DSOs are, in fact, a target. If you have not discussed with your counsel or advisors how and what the regulatory issues are and what OIG is looking for, then I would suggest that you have a strong conversation over lunch yesterday.

Stuart Oberman: [00:02:45] So, what’s happening is that, as governmental regulatory matters are being investigated further and further by OIG, HHS, we’re seeing more and more companies, DSOs, if you will, enter into what we call CIAs. Now, that doesn’t mean it’s a criminal agency. It stands for Corporate Integrity Agreements. Again, if you are a DSO, if you are a doctor that owns multiple practices, if you are a doctor that has Medicaid or receives other state or federal health care reimbursement, I would strongly suggest you understand what the OIG does, how it tracks with it’s fellow agency, HHS, and what the CIA is, a Corporate Integrity Agreement.

Stuart Oberman: [00:03:40] So, what’s happened is that, as private equity becomes more and more prevalent. They used to say the most expensive thing to get is money. But, now, it’s the cheapest thing to get. So, there’s a huge upswing right now in Medicaid spending for dentistry. And what we’re seeing is that it’s starting to draw a lot of fire. So, what do we do? How do we do it? This conversation is probably a 90 minute conversation, if not a day long compliance conversation. But I want to run through maybe about eight things that we need to take a look at if you are, in fact, a DSO or if you are a doctor looking to scale a DSO.

Stuart Oberman: [00:04:29] So, if you have one practice, you better get your house in order as far as payments go, coding goes. Because as practices grow, they get sloppier with compliance. So, what’s happened is that, again, the first thing we got to realize is that the government is looking hard at DSOs. It’s coming under scrutiny. A DSO has to build a culture of compliance. It’s got to start from the top down.

Stuart Oberman: [00:05:02] So, what does that look like? So, you have to have – third topic – an effective compliance program to begin with in order to implement the policies and procedures that focus on both the quality of care in adherence to governmental regulations. That is a tall task.

Stuart Oberman: [00:05:25] The fourth thing we want to take a look at is – without a doubt, I don’t care if you got one practice or 800 – you have to have a chief compliance officer. And that doesn’t mean that is your front desk person. It doesn’t mean that is your hygienist who moonlights as your office manager, as your front desk, as your consultant. You have to have a chief compliance officer. There’s absolutely no way that as a doctor, you will know what the proper coding is, what the correct procedures are for payment, what the OIG is looking at as far as guidance goes, as far as what the hot buttons are as far as audits go.

Stuart Oberman: [00:06:21] So, how do you do this? So, a lot of DSOs – again, I’m going to use, you know, our DSOs between 2 to 20 practices and maybe even 30 – they have to have a training program for policies and procedures in place. And they can’t do it once. They have to have a continuous review, training, and compliance program.

Stuart Oberman: [00:06:46] Now, I will say that the large-scale DSOs really have a good overall compliance program. But what happens is, that’s a lot of trial and error, that is a lot of missteps along the way. And our middle market guys have got to learn the trials and errors. So, again, this is an ongoing process. You cannot have a one meeting for sterilization and not know what in the world is required for compliance on the payment side, which is critical.

Stuart Oberman: [00:07:28] So, the next part is that – number six – you’ve got to respond to a compliance issue timely. So, when the government says we need this, we need that, you can’t get around to it whenever you need it or whenever you feel like it. We run into so many problems where our doctors do not promptly get under control the particular letter and issues that they’re concerned about. So, how do you have a system for compliance? This is where your chief compliance officer has to come into play.

Stuart Oberman: [00:08:08] If you get a notice that OIG is now sending you I love you letter and they have a probably seven or eight page non-compliance issue, and now they’re clawing back millions of dollars, how do you respond to that? Do you give it to your front desk? Do you give it to your hygienist? Do you give to your spouse who may be your office manager? So, you’ve got to have a system in place. You can never, ever delay a governmental notice.

Stuart Oberman: [00:08:40] So, one thing that has to be a balance is that – this is number seven – all compliance programs have to be designed to ensure quality and medical necessity. So, when your audit occurs and they want to claw back millions of dollars because they’re going back five years. They’re going to want to know where is your proof, where is your documentation, where is your quality of service, where is your code, and is there a medical necessity. That is absolutely critical to your defense. They’re also going to take a look at potentially your vendor relationships. If you’ve never heard of AKS, Anti-Kickback Statute, I would strongly recommend you have a meeting yesterday with your corporate attorney.

Stuart Oberman: [00:09:45] These are just some basic things that we’re looking at. Congress is even getting involved in this, which is never a good thing. Where they’ve made it clear that they are looking at DSOs as a corporate structure. And they are looking at the compliance issue, the reimbursement issue, the quality of care issue, the medical necessity issue very, very, very closely. And when Congress comes out and says this, you know there’s a problem.

Stuart Oberman: [00:10:20] So, the last thing you want to do – and I’ll say this is number eight and probably the final topic on this. Again, I could talk, probably, for hours and days on this particular compliance topic – you have to understand AKS, Anti-Kickback Statute, and you have to understand on the compliance side, audit side, OIG side, HHS side, the safe harbor provisions.

Stuart Oberman: [00:10:45] So, now, you’re thinking, what in the world is AKS and how does that apply to my DSO? Because all I do is I treat kids all day long and I’m looking forward to maximize my revenue through aggressive coding, aggressive treatment. And how does that even come into play with my vendors, my treatment, my care, my coding, my revenue? So, you’ve got to understand all these things.

Stuart Oberman: [00:11:19] And, again, what we’re seeing is that as our offices and doctors scale, this is the last thing they’re worried about is compliance, which this should absolutely be the first. Because if you get an audit and you’re trying to scale, and scale hard and, all of a sudden, you get a nice letter from OIG that says you owe a couple million dollars and you think you’re going to be growing, your practice just stopped dead in its tracks. Because you will spend months and years trying to get this squared away and thousands and thousands and thousands of dollars on attorneys fees, costs, trying to deal with this.

Stuart Oberman: [00:12:03] So, again, we’re getting a lot, a lot of calls all the time, how do I scale how do I grow, what do I need to do, and everything. It’s revenue based. But one of the key issues is revenue is great. And what’s my multiple? That’s great. But my question is, how in the world are you going to scale? Because when you do a transition – and I had a chance to talk about this probably about a month or two ago for the American Health Law Association, I did a speech on due diligence on acquisitions. And this was a huge topic because if you are in the midst of a governmental investigation and you’re trying to even remotely sell your practice, you’re dead in the water.

Stuart Oberman: [00:12:53] Because they’re going to want to know everything about what your risk is, whether or not you’re under a CIA, Corporate Integrity Agreement, what the terms are, and you’re, essentially, going to be untouchable. So, this one particular area could set you back for years and millions of dollars. That’s the last thing you want to do.

Stuart Oberman: [00:13:14] So, again, I could talk for forever on this topic, but this is becoming a hot topic. It’s been hot for a while. It’s getting even hotter as the markets scale. There’s more money than ever flowing into private equity. Compliance is getting sloppy and Congress got its antennas up. Because any time there’s money involved, Congress has got its ears up.

Stuart Oberman: [00:13:38] So, hopefully, this has been a little bit of a refresher if you’re familiar with this. And, hopefully, this has been an eye opening podcast if you’re looking to scale or you have scaled and you’re looking to sell, and then what’s the next steps. So, I’d like to thank everyone for joining us and we’re going to continue talking about our hottest topics in the dental industry. We want everyone have a fantastic day. Thank you.