Can a dental practice pay a management company a percentage of practice revenues, or must the fee be tied to specific services? And what contract terms cross the line into the unlicensed practice of dentistry?

Plain-English summary

The North Carolina State Board of Dental Examiners asked whether a business entity could provide services to a dental practice when its payment was based partly or wholly on the practice's or a dentist's revenue. The Attorney General said compensation for business services may be based on the amount, nature, and value of the services the entity provides. It rejected a payment arrangement tied to the dentist's revenues or profits because the business entity would become a participant in the dental practice rather than simply a service provider.

The opinion also addresses management contracts. It says a dental practice may not give a business entity control of the practice. Contract terms that can indicate improper control include business-entity ownership of patient records; restrictions on dentists competing with the entity; input into clinical practice; control over hiring and firing clinical personnel; approval of professional-services contracts with dentists; and control over transfers of ownership interests in the practice.

That list is not exhaustive. The opinion directs the Dental Board to consider the entire relationship and its potential effect on patient care, case by case. Even an express clause reserving patient-care decisions to the dentist may not save a contract whose other terms assign improper control to the business entity.

For a proposed management contract, the opinion calls for reviewing both how the entity is paid and what authority the agreement gives it. It does not approve particular prices or fee formulas such as flat monthly or per-transaction charges.

Currency note

This opinion was issued in 1999. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Check the current dental practice statute and applicable Board rules before using this opinion to evaluate a present-day agreement.

Common questions

Q: May a dental practice pay a management company a share of its revenue?
A: The opinion says a business entity paid from a dentist's revenue or profits becomes a participant in the practice and runs afoul of the prohibition on non-dentists engaging in dentistry.

Q: How may a business entity be compensated for services?
A: The opinion discusses compensation based on the amount, nature, and value of the services the entity actually renders. It does not name or approve any specific billing formula.

Q: Can a management company own patient records or control clinical hiring?
A: The opinion lists both as examples of contract provisions that would indicate improper control of a dental practice.

Q: Would a clause saying dentists keep all patient-care decisions cure other control terms?
A: Not necessarily. The opinion says such a clause may not redeem a contract if other terms assign improper control to the business entity. The Board should evaluate the whole relationship.

Background and statutory framework

N.C. Gen. Stat. § 90-29(b)(11), as discussed in the opinion, prohibits a non-dentist from owning, managing, supervising, controlling, or conducting an enterprise engaged in dentistry. The opinion refers to an August 23, 1996 letter to Senator C.R. Edwards that allowed contracts for business services when payment was tied to the amount and nature of those services, not the dentist's revenue. The Board's 1999 request asked how that distinction and the statute applied to revenue-based payments and management control.

Citations

• N.C. Gen. Stat. § 90-29(b)(11) (unlicensed practice of dentistry; non-dentist control prohibition)
• Op. Att'y Gen. to Sen. C.R. Edwards, Aug. 23, 1996 (1996 WL 925123) (fee-for-service compensation permissible)

Source

• Landing page: https://ncdoj.gov/opinions/dental-care-and-business-services-2/

Original opinion text

• N.C. State Board of Dental Examiners
• 3716 National Drive, Suite 221
• P.O. Box 32270
• Raleigh, NC 27622-2270

RE: Advisory Opinion: Dental Care and Business Services; N.C.G.S. § 90-29(b)(11)

Dear Dr. Fleming, Dr. Kinlaw and Ms. Lockwood:

This letter responds to your request for an Attorney General's opinion dated July 19, 1999. You ask whether an arrangement whereby a business entity provides services to a dental practice constitutes the unlawful practice of dentistry if payment to the business entity under such arrangement is based in whole or in part on the revenues of the dental practice or one or more individual dentists.

It is unlawful for a non-dentist to own, manage, supervise, control or conduct an enterprise which is engaged in the practice of dentistry. N.C. Gen. Stat. 90-29(b)(11). As we have opined in the past, a dentist may contract with a business entity to provide the dentist with an array of business services. See letter opinion to Senator C.R. Edwards, dated August 23, 1996 (1996 WL 925123). That opinion, however, was predicated on the fact that compensation for the services would be based on the amount and nature of the services utilized by the dentist and not upon revenues of the dentist.

Where a business entity is compensated based upon the value of the services rendered by the business entity, the dentist retains control of the practice and the amount and quality of service rendered. That control is compromised, however, when the business entity shares in the dentist's profits. At that point, the business entity becomes a participant in the practice rather than a provider of services to the practice and runs afoul of the prohibition against non-dentists engaging in the practice of dentistry.

You also ask whether a dental practice can give complete control over its operations to a business entity in light of the prohibition against the unlicensed practice of dentistry. If not, you ask that we advise you regarding how the Dental Board should analyze management arrangements between a business entity and a dental practice to determine whether the business entity has improper control over the dental practice or its dentists.

A contract between a dental practice and a business entity may not assign to the business entity control of the dental practice. Some clauses which we believe would evince improper control are:

• Ownership of patient records by the business entity;
• Restrictive covenants limiting the ability of dentists who own or are employed by the dental practice to practice in competition with the business entity;
• An agreement that gives the business entity control over or input into the clinical practice of the dental practice or its dentists;
• An agreement that gives the business entity direct or indirect control over the hiring and firing of clinical personnel;
• An agreement that gives the business entity authority to approve any contract between the dental practice and dentists for professional services, or requires the business entity's approval of such contracts or arrangements; or
• An agreement that gives the business entity control over the transfer of ownership interests in the dental practice, e.g., a stock transfer agreement limiting the ability of the dentists to sell or otherwise transfer shares of the dental practice or permitting the business entity to require the dentists to sell such shares to other individuals to be named by the business entity.

The foregoing is not an exhaustive list. Any clauses which alone, or in combination, affect the professional decision-making of a dental practice are problematic. A clause in a contract which purports to reserve to the dentist all decisions regarding patient care may not redeem the contract if the remainder of the contract assigns to the business entity improper control. In determining whether the business entity has improper control over the dental practice or its dentists, the Dental Board should look at the entire relationship and should consider the potential impact of the relationship on patient care. These decisions must be made on a case by case basis.

Very truly yours,

Ann Reed
Senior Deputy Attorney General

Gayl M. Manthei
Special Deputy Attorney General