A Non-Dentist Investor, Percentage Fees, and Referral Payments
A dentist in Shreveport is negotiating with a non-dentist investor. The proposed deal: the investor buys 45 percent of the practice through a Louisiana LLC, and the operating agreement gives the investor authority to set fees, hire and fire hygienists and assistants, and approve marketing. In exchange the investor receives 45 percent of profits plus a consulting fee of 6 percent of gross collections. Separately, a marketing company will pay the practice $75 for each new patient referred, and the practice will pay the marketing company $250 for each implant case that closes. The dentist will remain the only licensed provider and will "supervise" the arrangement. The investor also wants the practice renamed "Bright Smile Dental Center, LLC" and wants the dentist's name off the sign to build the brand. The dentist asks whether the structure is permissible and what must change before signing.
1. May a non-dentist own equity in, or exercise this level of control over, a Louisiana dental practice?
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Ownership. Louisiana applies the corporate practice of dentistry doctrine: equity in a professional dental corporation or professional LLC may be held only by licensed dentists, and non-dentists may not control professional judgement. A 45 percent non-dentist stake coupled with authority to set fees and hire and fire clinical staff is not cured by labeling the dentist a supervisor. Fees, clinical staffing decisions, and treatment decisions must remain with the licensed dentist.
Workable structures. (1) The investor becomes a lender or landlord only, receiving fixed, fair-market-value payments. (2) A management services organization provides billing, non-clinical human resources, marketing, and facilities under a written MSO agreement priced at fair market value, with the dental entity retaining clinical control and a termination right without penalty. (3) If equity is essential, it must come from licensed dentists.
Drafting points. The MSO agreement must not give the MSO authority over clinical staffing, fee schedules, treatment plans, or patient records, and must contain an explicit clinical autonomy clause. A percentage-of-profits share for a non-dentist is the core defect, not a detail to paper over.
2. Evaluate the 6 percent consulting fee and the $75 and $250 per-patient payments.
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The 6 percent consulting fee. A percentage-of-gross-collections fee paid to a non-dentist is the classic form of prohibited fee splitting, because it ties a non-licensee's compensation to professional services rather than to identifiable management services. Convert it to a fixed monthly fee or a fee tied to documented costs, supported by a fair-market-value analysis that identifies the actual services provided.
The referral payments. Payments for patient referrals are prohibited remuneration whether received or paid. Paying $250 per implant case and accepting $75 per new patient both tie compensation to the volume or value of referrals rather than to services. Marketing should be paid for marketing services, not per patient or per case. If any federal program patients are involved, anti-kickback analysis is also required.
Practical steps. Obtain a written fair-market-value opinion, restructure both arrangements so compensation does not vary with referrals, and document the services actually delivered. Any arrangement where practice income depends on referrals rather than treatment is a red flag to the Board and to third-party payers.
3. Does the proposed renaming and removal of the dentist's name create problems, and what must remain unchanged?
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Trade names. A practice may use a trade name, but the advertising must be truthful and must not imply a specialty or a business status that does not exist. The professional entity that renders the dental services must be the licensed professional entity, and the dentist responsible for care must be identifiable. Removing the dentist's name from the sign is permissible only if the advertising still complies and does not mislead patients about who owns and controls the practice.
What must remain unchanged. (1) The dental entity must be dentist-owned and hold the professional registration. (2) The dentist signs the professional services and MSO agreements and remains responsible for records and supervision. (3) Patient records belong to the dental practice, not to the investor's LLC. (4) Consent forms and the notice of privacy practices must name the correct entity.
Sequencing. Have counsel review the operating agreement, the MSO agreement, and the naming together before signing. Restructuring after the fact is far more expensive than getting the entity and the fee structure right at the outset.