Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC staff urges Texas dental board to reject restrictions on agreements with non-dentist providers, (Oct 9, 2014)

By Jeffrey May, J.D.

Just days before the FTC will argue before the U.S. Supreme Court that the agency was entitled to challenge the North Carolina state dental board's efforts to block the provision of teeth-whitening services by non-dentist providers, the FTC staff has urged the Texas State Board of Dental Examiners to reject proposed rules that would restrict agreements between dentist and non-dentist providers of business services.

In an October 6 letter released today, the staffs of the FTC Office of Policy Planning, Bureau of Competition, and Bureau of Economics expressed concern that the rules discourage dentists from affiliating with Dental Service Organizations (DSOs). DSOs are management companies, often owned by non-dentists, that contract with dentists to provide a variety of nonclinical business services. These services include: acquisition or sale of capital equipment and dental supplies; accounting, bookkeeping, payroll, and financial services; billing and collection services; advertising and marketing services; legal services; and management of external laboratory services.

One of the proposals would impose new restrictions on the ability of Texas dentists to enter into contracts with “unlicensed persons” for the provision of nonclinical services, such as administrative support and business functions. The other would make dentists who own, maintain, or operate a dental practice that employs a dentist “responsible for all administrative and operational” functions. Although the proposed rules do not expressly refer to DSOs, the rules seem likely to discourage dentists from affiliating with DSOs by mandating that dentists assume responsibility for the types of functions that DSOs typically provide, and by expanding the Board’s authority to take disciplinary action against dentists who enter into such prohibited agreements, according to the FTC staff.

The rules "likely would lead to reduced competition in the markets for dental management services and dental care," it was noted. Dentists might refrain from entering into agreements with DSOs or other companies that provide such services or they might seek to terminate existing contracts because the new regulations could subject them to disciplinary action for entering into such agreements. The agency staff pointed out that Texas already has laws and regulations to address concerns that a DSO-affiliated practice might be compromised due to the financial interests of owners who are not licensed professionals.

The letter responded to a notice requesting public comments from the Texas State Board of Dental Examiners. It comes as the FTC is set to argue before the Supreme Court on October 14 that the state action immunity doctrine does not bar the agency from challenging the conduct of a state professional board whose members are market participants elected by other market participants. In March, the High Court agreed to review a decision of the U.S. Court of Appeals in Richmond, Virginia (717 F.3d 359, 2013-1 Trade Cases ¶78,406), upholding an FTC finding that the North Carolina State Board of Dental Examiners was not immune under the state action doctrine for excluding non-dentist providers from the market for teeth whitening services in violation of Sec. 5 of the FTC Act. In its petition, the board questioned the appellate court’s holding that state agencies “in which a decisive coalition (usually a majority) is made up of participants in the regulated market,” chosen by and accountable to their fellow market participants, are private actors that are entitled to state action immunity only where their challenged conduct is both pursuant to a “clearly articulated and affirmatively expressed” state policy and “actively supervised by the State itself.” The doctrine provides that the antitrust laws do not apply to anticompetitive restraints imposed by states as an act of government.

In recent years, the FTC has weighed-in on other proposed regulations of the dental profession. For instance, in December 2010, the staff of the FTC urged the Georgia Board of Dentistry to reject a proposal to prohibit dental hygienists from providing basic preventive dental services in approved public health settings except under the indirect supervision of a dentist.

News: Antitrust FederalTradeCommissionNews