The Compliance Clinic: A cross-disciplinary look at healthcare compliance risk

Dentistry’s quiet risk: What investors and operators are missing

Dentistry has historically operated within a different billing and coding environment than the broader medical industry, as the sector is driven largely by commercial payers and Medicaid, not Medicare. Over time, this has shaped a general perception that billing risk in dentistry is more contained and predictable.

However, recent enforcement actions and regulators’ increasing reliance on data analytics and artificial intelligence (AI) are challenging that assumption. This is particularly true in the context of Medicaid, where reimbursement is concentrated among pediatric patients and other vulnerable populations, drawing heightened scrutiny and enforcement interest.

For dental practices, the risk of investigation often stems from high-volume services, such as routine cleanings, where a single billing error repeated over time can result in broad exposure. Regulators evaluate outcomes, not intent, and ignorance of billing requirements is not a defense.

“Because dental billing relies on a relatively small number of repeatable codes, even minor documentation errors can scale quickly,” said Angela Martin, senior vice president of billing, coding, auditing, and compliance at Farragut Square Group. “From an investor perspective, the priority is catching those errors upfront and making sure documentation and coding practices are clean and consistent going forward.”

Common risk areas in the dental sector

High-volume billing: Imaging and repetitive error risk

When it comes to high-volume services, imaging is a hard hitter in dental billing, and because imaging is performed routinely across patient populations, errors tend to repeat rather than appear in isolation. An occasional documentation omission may be overlooked, but those same omissions repeated over extended periods can translate into audit exposure and repayment demands.

Rita Ratner, managing director at Farragut Square Group, noted that billing and coding audits are often less about fault-finding and more about equipping practices with the structure necessary to implement best practices at scale. “An audit can surface hidden repeat errors that may not be visible day to day. This gives practices a roadmap to implement changes that meaningfully reduce their exposure over time.”

Coding precision and “low-dollar” errors at scale

Another recurring risk in dentistry stems from the use of incorrect or imprecise codes. In many cases, practices apply codes that differ only slightly from the correct selection. Individually immaterial errors, such as miscoding a fluoride application, can aggregate quickly in high-volume billing environments, creating meaningful exposure over multiple billing cycles.

Kickbacks and referral arrangements in a multi-payor environment

A common misconception in the dental sector is that limited participation in Medicare reduces fraud and abuse risk. In reality, exposure often persists, and in some cases expands, because of state Medicaid requirements and all-payor antikickback laws, regardless of Medicare program involvement.

As a result, financial relationships involving referrals, marketing arrangements, or patient steering can present significant risk even for practices that do not routinely bill Medicare, as demonstrated by recent state-level enforcement activity. For example, the Connecticut attorney general announced a settlement with a group of dentists following allegations that certain practices and referral relationships violated the Connecticut False Claims Act. Similarly, in Texas, the attorney general brought suit against a dental network alleging Medicaid fraud tied to illegal kickback arrangements designed to generate patient referrals, highlighting continued scrutiny of growth-driven referral models.

Credentialing, enrollment, and who is actually billing

Credentialing and enrollment issues are also garnering increased enforcement attention, particularly as dental organizations scale. Misalignment between the rendering provider, the billing provider, and enrollment status can create significant compliance gaps, especially where services are billed under an individual or entity that is not properly credentialed or authorized.

Recent enforcement activity highlights how these issues arise in practice. Multiple dental entities agreed to pay $540,000 to resolve allegations involving claims submitted for services performed by providers who were not properly credentialed. Some claims were billed using national provider identifiers of credentialed dentists who did not perform the services, and others were billed even though rendering providers lacked appropriate credentials.

These issues often result from operational breakdowns, not intentional misconduct, but they can still trigger overpayment liability and False Claims Act risk. Enforcement in this area typically focuses on whether the entity’s billing structure aligns with program requirements, underscoring the need for coordination across credentialing, operations, and billing functions.

DSOs and structural compliance risk

Dental service organizations (DSOs) introduce additional regulatory complexity, as they can create scenarios where nonclinical entities interact closely with clinical operations and revenue streams. While DSO models are widely used, they remain subject to scrutiny under corporate practice doctrines, fee-splitting prohibitions, and fraud and abuse laws, especially where financial incentives may influence utilization.

US Department of Health and Human Services Office of Inspector General (OIG) guidance reinforces the importance of carefully structuring these relationships. In a recent advisory opinion addressing a management support model, the OIG analyzed whether certain compensation and operational arrangements could present risk under the federal Anti-Kickback Statute. For a detailed analysis of this advisory opinion, please see our client alert.

Medicaid: Vulnerable populations drive scrutiny

Medicaid coverage in dentistry is heavily concentrated among children and adolescents, often in high-volume practices serving underserved communities. The combination of government dollars, vulnerable patients, and standardized services creates a natural target for increasing enforcement intensity, particularly as detection tools improve.

Recent enforcement trends in states such as Texas show increased focus on pediatric dental and orthodontic providers, with actions targeting billing for services not rendered, inadequate documentation, overutilization, and medically unnecessary care. Authorities have also examined “paper-only” visits (where the practice bills for an exam that never actually occurred), use of unlicensed personnel, and insufficient supervision models, all of which tend to emerge as organizations scale faster than their compliance infrastructure.

Key takeaways

For investors and operators, the takeaway is straightforward: dentistry’s historically lighter oversight does not eliminate risk. As enforcement agencies deploy AI to proactively identify billing outliers, disciplined coding and documentation practices contribute to defensible, institutional-grade operations and are increasingly central to maintaining enterprise value in a consolidating market.

Healthcare compliance and enforcement risk continue to evolve alongside changes in care delivery and reimbursement. The McDermott Will & Schulte healthcare regulatory and white-collar teams, in collaboration with Farragut Square Group, bring together deep experience in billing and coding, healthcare regulatory, and white-collar enforcement to help clients navigate complexity, mitigate risk, and strengthen compliance in an increasingly scrutinized environment.

Farragut Square Group’s Alana Zangl, Rita Ratner, Alina DiDonato, and Shira Klapper also contributed to this article.