In a landmark verdict likely to draw praise from those opposed to the growing corporate presence in medicine, a jury ordered a Massachusetts company to pay $130.6 million to a group of Twin Cities dentists who claim the company interfered with their delivery of care to patients.
A Hennepin County jury ruled Wednesday in favor of PDG PA, a professional association of 115 dentists who operate the Park Dental and Dental Specialist clinics. The dentists had accused American Dental Partners Inc., a public company to which they had outsourced most of the administrative side of the business, of overstepping its legal authority and granting itself grossly excessive fees.
The ruling and the mammoth award will have far-reaching implications for thousands of clinics and hospitals nationwide that in recent years have outsourced the management of their business operations to corporations that aren't owned by medical professionals, industry analysts said.
"It puts in sharp relief the tension that exists in the health care industry over who controls the practice of medicine and dentistry," said Joseph Anthony, an attorney with Anthony, Ostlund & Baer, which represented the dentists. "Will it be the doctors or will it be non-doctor-trained service providers?"
After a monthlong trial, American Dental and a subsidiary were found liable for, among other charges, breach of contract, breach of good faith and defamation. Late Wednesday, the jury ordered the company to pay $88.3 million in damages, then added $42.3 million in punitive damages on Thursday.
American Dental, based in Wakefield, Mass., said in a written statement that it is evaluating the verdict. Officials did not return repeated telephone calls. Shares of the company tumbled Thursday to $4.62 a share from $14.34 a share a day earlier.
The verdict stems from a dispute over a 1996 agreement in which an American Dental subsidiary, PDHC Ltd., agreed to provide the dentists with money for expansion as well as "non-dental administrative services," such as accounting, lab services and equipment maintenance. In return, the dentists agreed to pay a portion of their billing revenue to American Dental in the form of a "service fee."
Between 1996 and 2004, the arrangement worked as intended, with American Dental providing business services so the dentists could focus more on the practice of dentistry.
However, according to a 2006 lawsuit filed by the dentists, PDHC began in 2004 to make decisions that overstepped its legal authority and interfered with the delivery of dental care. For instance, PDHC implemented a daily "sweep" of the dental group's bank account and refused to give the dentists access to their own funds, the lawsuit said. PDHC also interfered with patient scheduling and insisted on handling all patient complaints.
The dentists also accused PDHC of granting itself unreasonable service fees, while withholding money for new equipment. "PDHC and its non-dentist businesspeople have unilaterally extended [its] control and involvement in a manner that constitutes the practice of dentistry," the lawsuit said.
The interference also made it more difficult for the dentists to transition to become independent when in March, they exercised the right to terminate the service agreement. However, PDHC interfered with this transition by refusing to provide the dentists with their electronic patient records, and by encouraging doctors to set up new dental clinics in the Twin Cities that are in direct competition with Park Dental, according to the lawsuit.
Though the clinics suffered financial damages as a result of this interference, the estimated 244,000 patients of the 31 Park Dental and Dental Specialist clinics were not harmed, said Anthony. "What it meant was that doctors had to work harder and longer to overcome the problems," he said. "And because of those doctors' efforts, not one patient suffered adverse care."
Brooks O'Neil, a health care analyst with Dougherty & Co. in Minneapolis, said he attended every session of the trial and was "stunned" by both the verdict and the size of the jury award. He estimated that the $130 million award was more than 10 times PDG's annual net income.
The verdict likely will embolden other medical practices across the country to file similar lawsuits, O'Neil warned. However, he questioned whether other juries would reach a similar verdict.
"It's unfathomable in today's world to think that the business and practice of medical care aren't inextricably entwined," he said.
Chris Serres • 612-673-4308