Dental Service Organizations (DSOs) study brings good news to Texas dental consumers, taxpayers

A new study on Dental Service Organizations (DSOs) suggests that stories of potential patient abuse and Medicaid fraud aren’t the only headlines DSOs offer.  After an in-depth review of state reimbursement claims, economist Arthur Laffer found DSOs, companies that provide non-dental administrative and other support services to dentists or groups of dentists, are not only providing critical services to an underserved patient base including many children on Medicaid receiving first-time dental care access, but that DSOs are providing more cost-efficient and conservatively administered service than the average Texas dentist.

Does this industry have some “bad apples” deserving strict disciplinary measures, even perhaps criminal prosecution?  That would seem the case and investigations of those identified players should continue as an effort to uphold responsible industry performance standards and to instill public confidence.  But, this doesn’t mean that DSOs aren’t also offering great opportunity for dental consumers and taxpayers.

While critics have accused DSOs of maximizing profitability by performing, sometimes questionably, high-reimbursement procedures, Laffer’s study of state of Texas claims records found DSO’s rate of procedures performed to be 10 per the average patient while an average non-DSO patient had 12 or more.  Similarly, the average DSO per patient charge was $483.89 compared with $711.54 for other types of dental practice patients.

Specific review of Kool Smiles, the largest Medicaid focused DSO in Texas and the nation’s largest Medicaid-focused dental provider, indicated eight procedures per patient and a cost of $345.45, less than half of non-DSO dentists.  Interestingly, Kool Smiles has been targeted by the legal industry with claims of patient abuse sometimes blamed on its business model.

The study numbers, however, fail to support excessive procedures being performed.  And with reality reminding that typical Kool Smiles patients often enter the practice with significant tooth decay or other issues resulting in poor dental hygiene that comes from lack of dental care access or education, Kool Smiles’ procedure rate indeed qualifies as conservative.

Taking into account that many patients having a lifetime history of little or no dental care, targeting DSOs seems a case of legal opportunism and exploitation at the expense of great public benefit as abusive lawsuits can put some companies out of business and deter others from even entering a particular market.

Another important point.  DSOs are offering important access to a previously underserved population, a population whose more costly alternatives are usually taxpayer-funded emergency room visits.  And if the DSO model can succeed in this environment, it can also break new ground in providing more affordable dental care options for all of us.

The study states:

Bad actors exist in all segments of all industries including non-DSOs and DSOs. The same that can be said for family dental offices is also true for government agencies, for law firms and for public interest study groups. Given the statistics, though, DSO dentists as a whole are performing better than non-DSO dentists for patients and the taxpayer, and dentists as a whole are serving a far larger segment of the population than ever before. DSOs are good for taxpayers, consistently providing a lower cost per patient for more patients. In sum, DSOs provide a much needed, high quality product at low cost to an underserved market. Rather than being vilified, DSOs should be applauded as a win-win-win solution.

Additionally, Laffer said the study indicates the DSO model enables the provision of dental services at a lower cost to consumers of all income levels by taking advantage of economies of scale. He concluded, “Competition, new business models, and increased services are good things. As consumers and taxpayers, we should embrace innovation.”

In a release, Laffer Associates acknowledges the study was sponsored by Kool Smiles and Laffer maintains the independence of the study results and his opinions.  Based on publicly available data of 25.9 million Medicaid procedures in Texas in 2011, the study is available at http://www.pacificresearch.org/docLib/20120918_2012.09.19DSOs.pdf.

Lou Ann Anderson is an advocate working to create awareness regarding the Texas probate system and its surrounding culture. She is the Online Producer at www.EstateofDenial.com, a Policy Advisor with Americans for Prosperity – Texas and a Director of Women on the Wall. Lou Ann may be contacted at info@EstateofDenial.com.

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