Recent Lawsuits Hold Implications for Dentistry

Michael W. Davis, DDS


Recent government legal actions and settlements have significant potential implications for the dental industry, spanning from alleged violations of the Stark Law and Anti-Kickback Statute (AKS) to abuses of the Paycheck Protection Program (PPP).

Stark Law and Anti-Kickback Statute

The US Department of Justice continues to utilize the prosecutorial tool of the False Claims Act in going after alleged violators of the Stark Law and AKS. The Stark Law and the AKS apply to healthcare services rendered under Medicaid, Medicare, and TRICARE.

The Physician Self‑Referral Law, commonly known as the Stark Law, prohibits a healthcare facility from billing Medicare, Medicaid, or TRICARE for certain services referred by physicians or dentists with whom the clinic has a financial relationship, unless that relationship satisfies one of the law’s statutory or regulatory exceptions.

The AKS prohibits providers from offering or paying remuneration to induce the referral of items or services covered by Medicare, Medicaid, and other federally funded programs.

Both the Stark Law and the AKS are intended to ensure that healthcare judgments are not compromised by improper financial inducements.

On July 8, 2020, the Oklahoma Center for Orthopaedic and Multi-Specialty Surgery, its management company, a physicians’ group, and others agreed to pay $73.3 million to resolve allegations of violations of the False Claims Act for improper payments to referring physicians.

“Offering illegal financial incentives to physicians in return for patient referrals undermines the integrity of our healthcare system,” said Acting Assistant Attorney General Ethan P. Davis of the Department of Justice Civil Division. “Patients deserve the independent and objective judgment of their health care professionals.”

“Kickback schemes like this drain valuable resources from the federal and state healthcare systems, which go to our most vulnerable,” said Oklahoma Attorney General Mike Hunter. “This settlement is substantial and will hopefully send a clear, concise message to those who want to defraud the system—that we will not tolerate these illegal acts in our state. I am pleased we were able to work with our federal partners to achieve this successful outcome.”

“Patients rightly expect providers to deliver the best treatment without thought of financial gain,” said Miranda L Bennett, Special Agent in Charge for the Office of Inspector General of the US Department of Health and Human Services.

On December 18, 2020, Texas Heart Hospital of the Southwest LLC and its management company agreed to pay $48 million to settle allegations related to alleged kickbacks.

“Inappropriate financial relationships between healthcare providers and their referral sources can distort physician decision-making and drive up healthcare costs for everybody,” said Acting Assistant Attorney General Jeffrey Bossert Clark of the Department of Justice’s Civil Division. “The department remains committed to ensuring that physicians act in the best interests of their patients rather than their pocketbooks.”

“Although the business of healthcare continues to evolve, our mission remains the same—to ensure that medical decision making is based on patient care and free of influence by financial consideration,” said Stephen J. Cox, United States Attorney for the Eastern District of Texas.

“We commend the whistleblowers and their counsel for uncovering this arrangement and pursuing the case to a point where defendants and the United States were able to reach a resolution that both protects the taxpayer and ensures patient care, free from financial influence,” said Cox.

Attorney Rachel V. Rose provides a more in-depth evaluation of these two cases online. However, the dental industry implications should be clear. Patient referrals in dental Medicaid, Medicare, or TRICARE must not be based upon financial inducements.

Violations of the Stark Law and the AKS may occur in both the private and public sectors. The dental profession, beyond medicine, must certainly be alert to these laws. C. Scott Litch, chief operating officer and general counsel for the American Academy of Pediatric Dentistry, offers a helpful overview.

PPP Violations

Six individuals were criminally indicted in the US District Court for the Northern District of Georgia, on January 12, 2021. One individual is accused of recruiting five others to receive PPP loan money that they were ineligible to obtain.

The PPP loans were acquired “based on the false and fraudulent representations and submissions in the PPP loan applications, and other supporting documentation (by defendants),” the government alleged.

“After the PPP loan funds were deposited in their respective business’ checking accounts at Banks (controlled by defendants), (defendants) used the PPP loans funds for non-qualifying, non-business-related purposes, including making checks out to individuals who did not work for their respective businesses, in violation of the terms of the PPP loan program,” the government continued in its filing. 

The primary purpose of the federal PPP loan funding under the US Small Business Administration was to help small businesses keep their workforce employed during the pandemic. That definitely included small business dentistry.

The nonprofit watchdog group ProPublica provided a public record listing of approved PPP loans for dental entities. It lists 107 pages of recipients and loan amounts ranging from $5 million to $10 million down to $150,000 to $350,000.

Interestingly, many of the entities listed are not beneficially owned by licensed dentists. In some situations, dentists serve as a nominal figurehead owners to circumvent state statues related to corporate practice of dentistry.

Other dentist “owners” may be contractually prohibited from ownership of a majority interest stake in “their” dental practice. True beneficial ownership may rest in the hands of a dental support organization (DSO) or a private equity or Wall Street firm.

In these particular examples, dentists professing business ownership must apply due diligence with any documents proffered to them by management or beneficial ownership. Falsification or misrepresentation of data supplied on a federal government loan application is a serious offense. Any doctor who signs his or her name to a fraudulent loan application may face undesirable consequences.

Prior to signing such loan applications benefiting others, one is advised to seek personal and independent legal counsel. Do not simply rely upon direction from an attorney representing the interests of DSO management or beneficial ownership. This reasonable legal expense should be assumed by management of the DSO for reimbursement.

It may have been possible for a DSO to receive PPP loan money through loans obtained via “owner” dentists. At the same time, auxiliary employees may have been furloughed and left uncompensated. Any government investigation will likely include the doctor who signed for the loan. Any and all who may have profited from misrepresentations in a fraudulent loan application may face civil and criminal penalties.

The penalty for dentists may also include loss of licensure, which may result in severe financial pain. In any settlement agreement, unlicensed management will typically pay a fine and generally admit no wrongdoing. They are then free to move on to their next scheme.

Dentists should avoid circumstances in which certain unethical DSOs are seeking the cover of a patsy, scapegoat, or fall guy as a dental practice “owner.” One’s best defense is obtaining prior legal advice from an attorney expert in the DSO industry.

Dr. Davis practices general dentistry in Santa Fe, NM. He assists as an expert witness in dental fraud and malpractice legal cases. He currently chairs the Santa Fe District Dental Society Peer-Review Committee and serves as a state dental association member to its house of delegates. He extensively writes and lectures on related matters. He may be reached at or

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