Improper billing during practice transitions is risky business

As the dental benefits analyst for CDA Practice Support, my job is to help dentists navigate the ever-changing dental benefits marketplace, and this entails clearing up misconceptions that could place a dentist at risk. In my conversations with dentists who are selling or buying a practice, I’ve found some misconceptions concerning billing dental benefit plans following the sale of a practice. 

I recently was on the phone with two dentists who wanted to know how long the new owner (the purchaser) would be allowed to submit claims under the previous owner’s business name, tax identification number, national provider identifier number and contract status.

I explained that there is no such grace period and that a claim is a legal binding document and all elements documented on it must be accurate. These elements include the billing dentist or billing entity’s TIN, the practice location address, where the treatment was provided and the license number and Type 1 NPI of the dentist who treated the patient. 

The first responsibility that a dental benefit plan has during claim processing is to report any earnings produced by the claim to the IRS. I explained to the callers that plans do this by capturing the TIN documented in the billing-dentist and/or billing-entity section of the claim form. The plan then provides a Form 1099 to the billing dentist or dental entity at the end of the year to be reported with their taxes. If the selling dentist were to move forward with this improper billing, on paper it would appear that the dentist had received the earnings for the services provided and therefore could be required to pay the taxes associated with that income.

The selling dentist on the phone with me said he thought he’d heard of a way to transfer the monies paid to his business to the new business owner. I reiterated that while this might be possible, he must keep in mind that a claim is a legal document and all elements documented on it must be accurate. I explained that many dental benefit plan contracts state that the contracted billing dentist must either contract any dentist performing treatment on their enrollees with the plan or report to the plan that the treating dentist wishes to be outside of the network. Failing to report this information puts the contracted selling dentist at risk of breach of their contract with the plan.  

As the conversation progressed, we explored another flaw with this type of billing practice. In today’s dental benefits marketplace, many plans have adopted contracting based on the contract of the treating dentist, not the billing dentist. If a plan that contracts a dentist in this manner received a claim, the plan’s system would respond by noting the selling dentist as the billing dentist but the purchasing dentist as the treating dentist. During processing, the system would be able to locate the selling dentist’s contract under their TIN in the plan’s system of records; however, the plan would not be able to locate the purchasing dentist with a contractual relationship to the selling dentist’s business in its system of record. Once this issue was discovered, the claim would either be denied or paid as out of network.

To make matters worse, not all dental benefit plans allow assignment of benefits to out-of-network dentists, so if the claim were processed by a plan that does not allow AOB, the payment would be mailed to the patient rather than the office.

As the discussion continued, I heard another misconception: Both dentists thought that the selling dentist’s license number and Type 1 NPI could be noted in the treating section of the claim. I explained that the treating section of a claim form must document the dentist who treated the patient. In the dental benefits industry, if the treating dentist documented on the claim differs from the treating dentist noted in the patient’s chart, the plans consider this billing practice to be fraudulent billing. This type of improper billing places the contracted selling dentist at risk of being in breach of their contract with the dental plans. If discovered, such billing could be costly, as the plan could recoup monies paid out because the contractual obligations were not met by the contracted selling dentist. Additionally, since the payments would be made in the name of the selling dentist, the plan would look to the selling dentist for recoupment.

One more problem can occur if the selling dentist's license number is noted on the claim as the treating dentist: If he or she were to face a malpractice case for the services provided, it would appear on the claim as if the selling dentist performed the treatment when in fact it was the purchasing dentist who performed the treatment.

With every change in practice ownership, the purchasing dentist needs to contact the plans he or she wants to contract with — well in advance of the sale of the practice, as contracting with plans can sometimes take months. It would be wise to find out how long a plan takes to process contracts and, if possible, arrange for the transfer of ownership near the time the plans are expected to have the contracting process completed for the new owner. This deferral of transfer of title to the practice is something the seller and buyer can agree to on their own. What the purchasing dentist doesn’t want to happen is to take ownership of a practice and then wait two or three months for the dental plan companies to complete the contracting process. A dentist is not contracted with a plan until the contracting process is complete. 

If a sale of a dental practice is coming up, here are some things to remember.

  • The new owner cannot bill under the contract of the previous owner.
  • The new owner should learn the contracting requirements and time frames of the plans with which they may want to participate.
  • If improper billing is done, the selling dentist could be found in breach of their contract with a plan and the selling dentist takes on the risks and penalties of the improper billing. 
  • The selling dentist should follow the contractual obligations noted in their contract with the plan for reporting the sale of the practice. 

Remember that dental benefit plans billing under the name of the previous owner is technically fraud, especially if the previous owner had a higher fee schedule than the new owner is expected to be offered.

For additional assistance with these and other dental benefit questions, contact CDA Practice Support at 800.232.7645 or by email.

This article was authored by Dental Benefits Analyst Cindy Hartwell and originally appeared in the January Update.

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