Organizations MSOs and DSOs - Dental Attorneys

MSOs vs. DSOs: Clear Legal Distinctions

Dentists interchangeably use the terms MSO and DSO, but distinct legal differences set them apart.

Management Service Organizations (MSOs)

MSOs provide strictly non-clinical business support to dental offices. Their services include:

• Billing, collections, and revenue cycle management
• Marketing, branding, and patient acquisition strategies

• Information technology services and cybersecurity protections
• Administrative HR tasks, payroll, and benefits administration

MSOs hold no equity or ownership in dental practices and cannot legally influence clinical decisions or patient care.

Dental Support Organizations (DSOs)

DSOs operate differently, often holding partial or full ownership in dental practices. DSOs offer:

• Equity buy-ins or practice purchases
• Operational oversight, including staffing, scheduling, and resource allocation
• Clinical oversight agreements (carefully structured to comply with state laws)

This involvement raises additional compliance and legal issues compared to MSOs.

Legal Risks and Compliance Issues

Corporate Practice of Dentistry Doctrine

The Corporate Practice of Dentistry Doctrine prevents non-dentists from owning, operating, or controlling dental practices. States enforcing this doctrine include:

• California (Business & Professions Code §1625 et seq.): Prohibits non-dentists from having any control over clinical practices or patient care.
• Texas (Texas Occupations Code §251.003): Bars corporations and non-dentist entities from exercising control over dental treatment.
• Illinois (225 ILCS 25/37): Strictly prohibits non-dentists from directing clinical decisions or owning dental offices outright.

Consequences of violations include criminal charges, civil penalties, licensure revocation, and forced dissolution of the practice structure.

Fee-Splitting Regulations

Most states explicitly ban fee-splitting between licensed dentists and third-party management companies:

• New York: Under Education Law §6509-a, dividing professional fees with non-licensed entities constitutes professional misconduct.
• Florida: Florida Statutes §466.028 prohibits dentists from fee-sharing arrangements tied directly to clinical services or referrals.

To comply, MSO/DSO compensation must represent fair market value, be carefully structured, and clearly documented to withstand regulatory scrutiny.

HIPAA and Patient Privacy Compliance

Federal HIPAA regulations (45 CFR Parts 160 and 164) place strict patient privacy obligations on dental practices and their affiliates. Agreements with MSOs and DSOs require:

• Explicit Business Associate Agreements (BAAs) clearly defining privacy roles and responsibilities.
• Training MSO/DSO staff regarding confidentiality and proper handling of Protected Health Information (PHI).
• Establishing procedures for handling data breaches, patient record disclosures, and privacy complaints.

Non-compliance risks heavy fines imposed by the Office for Civil Rights (OCR).

Employment Law Compliance

MSO and DSO structures frequently involve joint employment arrangements, bringing federal employment laws into play, including:

• Fair Labor Standards Act (FLSA), 29 U.S.C. §§201–219, dictating minimum wage, overtime pay, and record-keeping requirements.
• Equal Employment Opportunity (EEO) laws (Title VII, ADA, ADEA), prohibiting workplace discrimination and harassment.

Employment violations expose dental practices to federal enforcement actions, expensive litigation, and reputational damage.

Anti-Kickback Statutes and Stark Laws (Federal Compliance)

Federal Anti-Kickback Statutes (42 U.S.C. §1320a-7b) prohibit financial incentives influencing patient referrals, which may inadvertently involve improperly structured DSO/MSO arrangements.

Similarly, the Stark Law (42 U.S.C. §1395nn) prohibits specific financial relationships that involve patient referrals for federally reimbursed services.

Compliance requires precise structuring of contracts to avoid inadvertent triggering of these federal healthcare laws.

Contractual Essentials: Structuring Agreements

Clearly Defining Management Roles and Limitations

Compliant MSO and DSO agreements specify:

• Precise delineation of responsibilities to separate clinical (dentist) from administrative (MSO/DSO) duties
• Limits on decision-making authority of MSO/DSO to comply with Corporate Practice Doctrine
• Operational terms to avoid perceptions of undue influence over clinical autonomy

Ambiguity invites regulatory audits and exposes practices to enforcement actions.

Establishing Legally Defensible Compensation Models

MSO/DSO compensation must be consistent with fair market valuations, justified by clear metrics and industry standards. Regulators scrutinize:

• Payment structures tied directly to clinical revenues or patient referrals
• Unreasonably high or undocumented fees
• Incentives appearing as disguised kickbacks or fee-splitting arrangements

Detailed market research and legal guidance keep agreements defensible.

Contractual Safeguards and Exit Strategies

Robust MSO and DSO contracts explicitly state:

• Conditions permitting early termination (e.g., material breach, regulatory violation)
• Processes for dispute resolution and arbitration clauses
• Clearly defined post-termination obligations (patient records, data, accounts receivable)

These safeguards protect practices against unforeseen liabilities or sudden partnership dissolutions.

Proactive Risk Management Practices

Comprehensive Due Diligence

Due diligence prior to signing contracts reduces legal exposure. Necessary steps include reviewing:

• Compliance history (past regulatory violations, litigation, audits)
• Financial stability and transparency of prospective partners
• Existing contractual obligations or liabilities carried by the MSO/DSO

Regular Compliance Audits and Reviews

Continuous monitoring of compliance with state and federal regulations through:

• Periodic legal audits of all operational and contractual documents
• Reviews of patient privacy, employment law adherence, and fee structure compliance
• Updating contracts promptly when laws or regulatory guidance change

Utilization of Qualified Legal Counsel

Engaging attorneys with specific knowledge of dental healthcare regulations, compliance laws, and corporate practice statutes significantly reduces the risk of inadvertent violations or costly enforcement actions.

Why Us: Wood & Delgado’s Distinct Advantage

Dentists nationwide select Wood & Delgado because the firm provides tailored solutions for dental practitioners, prioritizing your professional autonomy:

• In-depth Dental Industry Knowledge: The firm’s deep familiarity with state-specific dental statutes and regulations reduces your risk of non-compliance or litigation.
• Strategic Negotiation: Wood & Delgado carefully negotiates agreements, ensuring compliance with Corporate Practice Doctrine, HIPAA, and fee-splitting regulations.
• Proactive Compliance Monitoring: The firm conducts thorough legal reviews of operational practices, mitigating risks before problems arise.

Customized Legal Advice: Wood & Delgado delivers legal solutions matched to the unique complexities of your dental practice, avoiding generic approaches or inappropriate templates.