Texas to Require Registration of Dental Support Organizations

July 23, 2015

On June 14, 2015, Texas Governor Greg Abbott signed into law Senate Bill No. 519, which imposes new registration requirements on dental support organizations (“DSOs”). The DSO business model is built around the provision of nonclinical services to dentists and their practices, such as administrative and financial management services, and therefore is not directly regulated by the State Board of Dental Examiners (the “Board”). While the new law does not grant the Board regulatory authority over DSOs or limit the services DSOs may provide, it does permit the Board to monitor their activities in an effort to increase transparency and strengthen the Board’s ability to assess DSOs’ impact on the practice of dentistry in Texas.

Specifically, the law requires all DSOs to register annually with the Secretary of State and pay a fee. Registration with the Secretary of State is due by January 31 every year, or for an entity first qualifying as a DSO in any year after January 31, within 90 days of qualification. The DSO also is required to file a corrected registration each quarter as necessary. The law takes effect September 1, 2015, but does not require registration before February 1, 2016.

As part of a DSO’s annual registration, it must disclose the following:

  1. The DSO’s name and business address
  2. The name and address of each licensed dentist with which the DSO contracts to provide business support services
  3. The name of each licensed dentist and non-licensed individual who holds an ownership interest of 10 percent or more of the DSO
  4. A list of all the business support services that the DSO provides to each dentist

Note that the Secretary of State is required to share all registration information with the Board to aid in investigations of unlawful behavior. Thus, while the new law may not grant the Board direct regulatory authority, this increased transparency could lead to heightened scrutiny of DSOs.

For purposes of the new law, “dental support organizations” or “DSOs” are defined as entities that provide two or more “business support services” to a dentist. A “business support service” is defined as business, management, consulting, or administrative services, facilities, or staff provided for a dentist. The law further provides an expansive list of “business support services.” A few examples include: provision of office space and equipment; regulatory compliance; marketing and advertising; financial services accounting; payroll or benefits administration; and insurance services. Notably, the law does not require registration by legal counsel, accountants, insurance companies or agents, or investment or financial advisors. Nor would registration be required of organizations that provide only one type of business support service; such as billing companies that provide no other management services.

In addition to the registration requirements, the law makes any person who fails to file a registration liable to the State of Texas for a civil penalty in an amount not to exceed $1,000. Each additional day of noncompliance is treated as a separate violation for purposes of calculating the penalty. DSOs and their investors should closely monitor registration compliance, as penalties can compound rapidly.

Previously, DSO entities were required to report their locations and dentists providing services at those locations only upon request by the Board. Coming off the heels of House Bill No. 3201, signed into law in 2013, which revamped reporting requirements for Texas-licensed dentists, this law continues the trend in Texas toward somewhat tighter regulation of DSOs.

Special thanks to summer associate Alexis Reynolds for her significant contributions to this legal alert.