The Legal Side of DSO PartnershipsContracts, Compliance, and More

The Legal Side of DSO Partnerships Contracts, Compliance, and More

Dec 26, 2024 9:00:00 AM / by Everything DSO

Picture4-2

Dear Reader,

Let’s talk about the elephant in the room. You’re ready to ink a deal with a Dental Service Organization (DSO), and the thought of seeing a fat check and letting someone else handle the headaches of practice management has you excited. But before you pop the champagne, let’s have a brutally honest conversation about contracts, compliance, and the legal maze that comes with DSO partnerships. Make no mistake—if you don’t handle this part correctly, that dream deal can turn into a nightmare faster than you can say “non-compete clause.”

Contracts: The Devil is in the Details
When you sit down to sign on the dotted line, you’re not just selling a practice. You’re entering into a complex, binding agreement with long-term implications. This isn’t like a quick lease renewal; this is your legacy, your career, and your future we’re talking about. So, here’s the first rule: Read every single word. Twice.

  • Non-Compete Clauses: Read Carefully, or Regret Later
    One of the first landmines to watch for is the non-compete clause. DSOs often include terms that restrict your ability to practice within a specific geographic area for a certain period after the sale. Some are reasonable; others are downright draconian. Know what you’re signing up for. If you plan to retain clinical duties post-sale or ever want to open a new practice, these restrictions could dictate your entire professional future. Negotiate them carefully.

  • Employment Contracts: Know Your Role and Terms
    If you’re staying on with the DSO, the employment contract is critical. Clarify your duties, hours, compensation structure, and the terms under which either party can terminate the relationship. Don’t assume anything is “standard.” Every term must align with your expectations, or you’ll find yourself in a situation you didn’t anticipate—often with fewer rights than you’d like.

  • Equity and Payout Structures: Protect Your Financial Interests
    Many DSO deals include an upfront payment and an equity stake. Pay close attention to how these are structured. How and when can you sell your equity? What happens if you decide to leave or retire? Will your payout be adjusted based on practice performance or unforeseen market shifts? Make sure you understand every financial nuance before signing.

Compliance: Navigating the Regulatory Landscape
When you partner with a DSO, you’re subjecting your practice to additional layers of regulation and scrutiny. DSOs operate in a highly regulated space, and failure to comply can land you—and your partners—in hot water.

  • HIPAA Compliance: Protecting Patient Data
    Patient privacy isn’t just an ethical obligation; it’s a legal one. DSOs typically bring their own compliance protocols, but you’re still responsible for safeguarding patient data. Familiarize yourself with new systems, and make sure compliance is built into every touchpoint of your practice.

  • State Dental Board Regulations: Know Your Rights and Obligations
    State dental boards have their own rules for DSO arrangements. Some states restrict corporate ownership, while others allow greater flexibility. Make sure you understand the laws in your state and how they impact your practice. Ignorance is not a defense, and failure to comply can result in hefty fines—or worse.

  • Billing and Coding: Ensuring Accuracy and Integrity
    With the DSO handling administrative tasks, you might be tempted to take a hands-off approach. Don’t. Billing and coding errors are common pitfalls that can lead to insurance audits, fines, and reputational damage. Stay involved. Review billing practices and ensure compliance with industry standards.

Key Legal Best Practices for a Smooth Transition
So, how do you avoid stepping on legal landmines? Here are some best practices that can save you a lot of sleepless nights:

  1. Hire the Right Legal Counsel
    This isn’t the time to rely on a generalist attorney. Find someone who knows the DSO landscape inside and out. A good lawyer will spot red flags, help you negotiate favorable terms, and ensure you don’t sign away rights you’ll regret losing.

  2. Get Everything in Writing
    Verbal assurances are worth as much as a paper napkin. If a term or promise isn’t in writing, assume it doesn’t exist. Make sure every aspect of the deal is documented, from your compensation structure to the scope of your post-sale duties.

  3. Understand Indemnification Clauses
    Indemnification clauses specify who pays for legal expenses if things go south. Read these carefully. You don’t want to be left holding the bag if a compliance issue arises after the sale.

  4. Plan for the Unexpected
    Ask “what if” questions. What if you want to exit early? What if the DSO is sold to another entity? What if performance metrics aren’t met? Good contracts account for contingencies and protect your interests.

Final Thoughts: Protecting Your Legacy
Joining a DSO is a transformative step, but it’s also a complex one. Don’t let dollar signs cloud your judgment. Take the time to understand every legal implication of your partnership. Protect your practice, your rights, and your future.

If you want a trusted guide through this process, reach out. I’ve been through it all, and I can help ensure your legal ducks are in a row—so you can focus on what you do best: dentistry.

Sincerely,

Stan Kinder

and Your Team at Everything DSO

Everything DSO

Written by Everything DSO

 Stan Kinder

Which of these 4 DSO Strategies is best for YOU and Your Dental Practice?

Discover how current Dental Market Disruptions can mean Massive Profits for you. Everything DSO is here to help level the playing field for you. As an Industry Insider, the advice you get from our involvement will assure you make the best decisions and achieve the most favorable outcome. 

Take our short 30-second assessment to get started with the best DSO Strategy for you and your Dental Practice …

Take the Assessment!

Subscribe to Email Updates

Recent Posts