Western Dental Agrees to Pay $1.7 Million to Settle Charges
Avoiding potentially harsher actions, Western Dental Services agreed Monday to pay $1.7 million in penalties, take corrective action and allow outside monitoring of its business activities to settle state charges that the company operated a “low-quality dental mill” that performed “shoddy, dangerous” patient care.
The settlement allows the Garden Grove-based company’s current management and its controversial owners, retired dentist Robert Beauchamp Jr. and his family, to maintain control of one of California’s largest dental HMOs.
State regulators had threatened to place Western into receivership--a move that would have effectively seized management control from the Beauchamps, whom the state had accused of profiteering and showing a “contemptuous disregard for patients’ welfare.”
Both sides claimed victory in the settlement, with Western executives saying they had “overcome a regulatory challenge” from the California Department of Corporations, the regulatory agency that brought the lawsuit.
Corporations Commissioner Keith P. Bishop said the settlement “does a lot for patients. It gives us assurances and the force of the court order that they’ll provide good care and continuity of care.”
Lawyers for the two sides reached a proposed settlement after an all-night negotiating session Sunday and presented it to Los Angeles County Superior Court Judge Diane Wayne at a hearing Monday.
Under the settlement, Western agreed to a court order requiring it to take more than 20 specific actions to improve oversight and management of its dental services and clinics. The state will appoint an independent monitor, dentist Maxwell Davis, to evaluate Western’s compliance with the state plan.
Western will also pay $1.7 million in penalties, including a $600,000 civil fine, $600,000 to reimburse the state for its legal expenses and $500,000 toward creation of a dental school program to study quality issues in managed care. No school has yet been selected, state officials said.
Officials said the settlement does not specifically prohibit Western from engaging in one practice that regulators had sharply criticized: paying dentists bonuses based on their production and generation of patient fees.
Bishop said state law already requires HMOs to demonstrate that medical decisions are “unhindered” by financial concerns, and that would empower the state to crack down on such violations.
The settlement will strengthen the agency’s enforcement power because, if Western fails to comply with state licensing rules or the new corrective action plan, it could be found in contempt of court, he said.
But Western President Robert C. Schur said the monitor will have “limited duties” related to evaluating the company’s compliance with the settlement agreement. Schur said Western has already taken steps to better monitor patient care and that the settlement “merely formalizes our reporting” to the corporations agency.
Critics have questioned Western’s commitment to reforming its behavior in past regulatory entanglements. The state’s lawsuit identified a 10-year pattern of violations despite repeated state actions intended to correct abuses. For example, the suit alleged that Western executives intentionally sought to mislead state regulators in the mid-1990s, when the California Department of Health Services sanctioned Western for violations in the state’s dental program for low-income families.
In an affidavit filed in support of the state suit, former Western Chief Executive Michael Silva accused Western’s directors of “a series of moves that undermined the agreement with DHS.” Silva said that included the board’s firing of executives, including himself, after they raised questions about allegations of poor patient care.
Jamie Court, a spokesman for Consumers for Quality Care, a Santa Monica group affiliated with consumer activist Ralph Nader, called the state’s actions a “pretty minor slap on the wrist for a company and a family that has a pattern of abuses dating back a decade.”
The Beauchamps declined to comment, company executives said.
Jeanne Finberg, senior staff attorney with Consumers Union’s West Coast office in San Francisco, applauded the fine against the dental plan but questioned why the state hasn’t been as aggressive in policing abuses by larger medical HMOs.
“I hope it’s not a question of just buying [the state] off and Western continuing to provide poor-quality of care to California consumers,” she said.
