Who Can Own a Dental Practice? Anyone, in Some States.

A lawsuit recently filed against Aspen Dental Management, Inc. is shining a spotlight on state laws regarding who can, and cannot, own a dental practice.  The allegations of the plaintiffs in the Aspen lawsuit rely heavily on state laws prohibiting non-dentists, such as Aspen Management, from owning dental practices.  Unfortunately for the Aspen plaintiffs, however, these laws are no longer as widespread as they once were or as widespread as the suit alleges.  In some states, including Wisconsin, anyone, including a non-dentist, can own a dental practice.

At one time, the laws of most states prohibited corporations, like Aspen Management, from owning dental or medical practices.  The theory behind these laws was that only a person, not a corporation, could be licensed to practice medicine or dentistry and, therefore,

only a person with the proper license, not a corporation, could own a medical or dental practice.  This theory was commonly known as the “corporate practice of medicine doctrine” or the “corporate practice of dentistry doctrine.”

Since then, changes in the laws of some states have greatly limited, and in some cases eliminated, the application of the corporate practice of medicine doctrine to medical and dental practices.  Interestingly, these changes often came at the request of physicians and dentists who wanted to obtain the tax and liability benefits of corporate status for their practices.

Image courtesy of sixninepixels freedigitalphotos.net

Image courtesy of sixninepixels freedigitalphotos.net

Eventually, all fifty states passed laws creating a new type of corporation, called a service corporation (or, in some states, a professional corporation or a professional service corporation).  This new type of corporation was created specifically, and exclusively, for dental and other professional service practices and generally limited ownership of the corporation to people holding the same professional license (such as a license to practice dentistry) or, in some states, to people holding licenses in any one of a group of related fields, such as health care.   (To learn more about service corporations, see, “The ABC’s of Service Corporations.”)

After the service corporation was created, some states, including Wisconsin, then took  another step away from the corporate practice of medicine doctrine by allowing business corporations and limited liability companies, not just service corporations, to own dental practices and by allowing anyone, not just dentists, to be the owners of these entities.  In Wisconsin, the State’s Dentistry Examining Board has even gone so far as to issue a written policy statement making it clear that nothing in Wisconsin law prohibits non-dentists from owning dental practices.  (“Position Statements Related to Dentistry Issued by the Dental Examining Board”).  Of course, a non-dentist who owns a Wisconsin dental practice must still hire licensed dentists to perform all of the dental work, but, otherwise, the only limitation on the ownership of Wisconsin dental practices is a statute that prohibits a contract of employment that requires a dentist to act in a manner that violates professional standards.  (Wis. Stat. Sec. 447.06(1)).

Laws in states, such as Wisconsin, that permit non-dentists to own dental practices may pose a significant problem for the Aspen plaintiffs.  The majority of states, however, still follow the “corporate practice of dentistry doctrine,” and this may well help the plaintiffs’ case.  Whether the plaintiffs win or lose, however, a more important question may be whether the Wisconsin approach, or the majority approach, is better, from a policy perspective.  While the Wisconsin approach gives dental practices access to the capital of non-dental investors, the allegations in the Aspen lawsuit suggest that this access may come at the expense of quality.  It will certainly be interesting to see what happens next in this groundbreaking case.

This article was written by Janice L. Gauthier, Esq. Ms. Gauthier has an A.B. from Harvard University and a J.D. from Harvard Law School.  She is the owner of The Gauthier Law Group, LLC, a boutique law firm that represents dentists, physicians, health care providers, professional service practices and other businesses and business owners in Wisconsin and Illinois.  You can contact Ms. Gauthier at 414-270-3857 or by email. To learn more about Ms. Gauthier’s background and experience, visit her Google or LinkedIn profiles.

© 2013 The Gauthier Law Group, LLC