The business behind dental treatment for America’s poorest kids

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Nearly half of the nation's children were on Medicaid or similar government assistance last year. Yet even with this insurance, families in poverty often struggle to find a dentist for their kids, forcing them to use emergency rooms to treat excruciating toothaches.

To solve that problem — and to settle a lawsuit — the state of Connecticut dramatically increased the fees it paid dentists through Medicaid four years ago. A flurry of private dentists signed up and soon, corporate dental chains specializing in Medicaid began opening offices around the state.

One of them was Kool Smiles. The Atlanta-based chain is the largest Medicaid dental provider in the country, serving roughly 2 million children with 129 offices in 15 states and the District of Columbia.

Within months, the state's Medicaid dental director said she became alarmed when she saw a disproportionate spike in kids getting stainless-steel crowns to treat cavities coming from a number of dental offices. The state pays at least $230 for these shiny crowns, compared to as little as $100 for a filling. But their use is controversial to treat small cavities.

The state started requiring dentists to get prior approval for each crown. That’s when the state identified problems at Kool Smiles.

"The X-rays didn't show a need for these kinds of services," said Donna Balaski, head of the state Medicaid dental program. "What we tended to see was that there was a small cavity and they wanted to put a crown on it."

They also started reviewing Kool Smiles’s X-rays taken after the treatments and found problems that Balaski called “atrocious:” crowns that didn't fit, decay left untreated under a crown and nerves left exposed.

The state showed the X-rays to Kool Smiles at a meeting in August 2010 but Balaski said the company didn't seem to take the criticisms seriously.

As the weeks went by, the company failed to come up with a plan to deal with all the children with questionable care, according to Balaski. So the state's Medicaid commissioner wrote a letter, telling Kool Smiles that some of the cases the state had seen were "malpractice." Finally, the company started to respond, Balaski said.

Today, she says, the chain is still under observation, but she's much happier with the work it's doing in Connecticut. Kool Smiles said it was able to correct the problems and has used the lessons learned there to make improvements at offices nationwide.

Yet the kind of problems discovered in Connecticut have shadowed Kool Smiles elsewhere. A joint investigation by the Center for Public Integrity and FRONTLINE found that the same business model that makes Kool Smiles profitable as a dentist of last resort has also led to complaints that they provide unnecessary treatment for children in need.

Medicaid pays an average of 30 percent less than what typical dentists charge, the company says. So Kool Smiles acknowledges that it has to be more efficient than most dental offices and has developed a computerized system to track its work. Several former employees said the chain is highly focused on production. It offers bonuses to dentists who bill beyond a certain amount and in some circumstances will fire dentists who fail to meet production standards, according to internal and court documents as well as former employees.

State authorities in Massachusetts and Georgia, Kool Smiles's home state, have reported documented cases of unnecessary procedures at Kool Smiles in past years. Medicaid authorities in Texas say they are currently conducting inquiries into Kool Smiles and other dental practices for possible unnecessary treatments. And the Senate is doing its own investigation of Kool Smiles and other dental chains for potential Medicaid waste, fraud or abuse.

Kool Smiles vigorously disputes criticism of its practices and business model. The company points out that it fills a critical need largely ignored by private dentists. In markets it serves, it says it can track the reduction of dental ailments in its patients. Last year, Kool Smiles says it provided almost as much free care as it made in profits.

But Kool Smiles is not a charity. It's run by a company owned by the private-equity firm Friedman Fleischer & Lowe of San Francisco, a firm whose investments exceed $2.5 billion in companies including the fast-food chain Church's Chicken and the payday lender Speedy Cash.

Kool Smiles denies that it exerts any influence on dentists to boost revenues and says it offers quality dental care.

“While nearly all health delivery models can be critiqued, we believe that our patients can speak for themselves — almost 80% of our patients on a daily basis are ones that come back because of the care that we’ve delivered,” company spokesman Geoffrey Freeman said. “We stand firmly by our dentists, their integrity and the quality of the care they offer to thousands of children every day.”

Many more crowns

One of Kool Smiles’ most controversial practices is its dentists’ heavy use of stainless-steel crowns to restore decayed baby teeth. Crowns can be the best treatment if much of a baby tooth has been eaten away, because crowns are more durable than large fillings. Still, the tooth’s natural enamel is the ideal surface and a basic ethic of dentistry is to save as much tooth as possible.

Parents and kids don’t like the look of the shiny crowns, and dentists acknowledge they’re used less often on children from families that can afford dental care. Yet crowns are common on Medicaid patients. Guidelines from the American Association of Pediatric Dentists say that crowns are appropriate for children with large or extensive cavities, especially if they aren’t likely to take care of their teeth.

Crowns are more profitable than fillings for dentists, because they can charge more for them. While adult crowns are custom made to last a lifetime, crowns for baby teeth come in standard sizes and cost the dentist no more than $8 each. It’s not clear why Medicaid pays more for stainless-steel crowns, since dentists agree that they’re easier and quicker to do than fillings.

Kool Smiles does far more crowns than average on children age 8 and under on Medicaid, according to an analysis of 2010 Medicaid data in two states done by CPI and FRONTLINE. In Texas, a child under the age of 9 at Kool Smiles has nearly a 50-50 chance of getting a crown as a restoration to treat problems like cavities, our analysis found. That compares to a one in three chance on average at other providers. And in Virginia, a child 8 or under on Medicaid going to Kool Smiles is twice as likely on average to get crowns than at other dental offices.

In response, Kool Smiles supplied its own analysis using state Medicaid data and said in general it found that their offices perform fewer procedures per patient, charge less per patient and have lower X-ray costs per patient on average. In Texas and Virginia, it said its analysis shows that it does fewer crowns per patient. But it did not address whether a young child going to Kool Smiles as opposed to any other dentist accepting Medicaid in Texas or Virginia is more likely to get a crown.

Take the case of four-year-old Jacey Regan. Her father, Robert Regan, who works for the Navy on an aircraft carrier, took his daughter to a Kool Smiles last July in Newport News, Va. He was surprised when the dentist diagnosed her with seven cavities, five needing crowns.

The young curly-haired girl is mildly autistic, so she can have trouble adjusting to unfamiliar situations. She got two fillings at one visit but rebelled on a second visit after what the family said was a long wait.

Unhappy with Kool Smiles’ general dentists, Regan took Jacey to specialist in children’s dentistry. Regan expected to be told that Jacey would need crowns. But the pediatric dentist said there was no need to do that.

Jacey had four tiny “lesions” on her teeth and the common practice is to watch such spots to see if they get any worse, according to the head of a pediatric dental program at a major university who examined Regan’s X-rays at CPI and FRONTLINE's request.

Robert Regan said it never occurred to him that his daughter might not need stainless-steel crowns. “I trusted the dentist,” he said. Kool Smiles diagnosed Jacey as a high risk patient for cavities and said under those circumstances, crowns were appropriate treatment.

State Medicaid officials in Georgia have twice done audits, most recently in 2009, finding that Kool Smiles was doing what they called unnecessary treatments.

Two Medicaid networks in Georgia kicked the chain out of their programs in 2007. WellCare of Georgia later told parents in a press release that kids who went to Kool Smiles were three times more likely to be physically restrained and five times more likely to get stainless steel crowns when compared to other dentists. WellCare reported that 44 percent of children treated at Kool Smiles got crowns.

The company said it did nothing wrong, and accused WellCare at the time of trying to boost its own profits by cutting back on dental care.

At the same time in 2007, the Georgia Department of Community Health reviewed 6,600 patient files at Kool Smiles and found 427 children who got dental care they didn’t need and another 219 cases where the work didn’t meet basic quality standards.  In their notes, reviewers said they saw cases where Kool Smiles put crowns even on small cavities.

In a 2009 audit, the findings were even worse. Dentists hired by the state found 1,024 quality problems in only 248 patient files. That included 324 cases of unnecessary treatments. As a result, Kool Smiles paid back more than $40,000 to the state Medicaid program on billings the state said were unjustified.

Kool Smiles describes these findings as “unsubstantiated” and blames them on documentation issues. It also says that the state focused its 2009 audit on only nine dentists and only on cases that were complicated. The company said public data shows that it is a "quality, conservative provider."

In 2009, the Massachusetts state auditor reported that three Kool Smiles offices had overbilled Medicaid by $1.2 million, primarily by taking X-rays that weren’t needed. Auditor Joe DeNucci, talking about those Kool Smiles offices and seven other dental providers, said, “There appears to be a culture of using the system to maximize benefits to the providers, which leads to reduced services for people in need and the waste of taxpayer funds.”

Kool Smiles calls this statement “unsubstantiated” and says it follows industry guidelines for X-rays. Kool Smiles said it takes X-rays only in the best interest of the children.

Republican Sen. Charles Grassley of Iowa has had his staff conduct an investigation of Kool Smiles as well as a handful of other corporate dental chains since late last year for possible waste, fraud and abuse. Grassley said he was concerned that private-equity firms might exert influence on dentists to focus more on profits than on the patients.

“I’m finding in this investigation that there are people that know nothing about dentistry are saying you got to see so many people, you got to do so much work for each one, and in a sense, gaming the system,” Grassley said in an interview.

“We have found, at least initially, some things that we think are very wrong and need to be changed.”

The best of intentions

Several former employees said Kool Smiles started off with the best intentions. Doug Brown, a former paramedic who later headed a private ambulance service in Tuscon, Ariz., decided to start Kool Smiles after working with his brother-in-law, a dentist treating Medicaid patients. Brown said he saw an opportunity to have a viable business and to help children in need.

In 2002, Brown recruited two young dentists in Denver and opened Kool Smiles’ first office in Decatur, Ga., a small community outside Atlanta.

“The demand for service was unbelievable,” said Brown. “These kids had nowhere to go for years and years.”

The original plan was to open perhaps 10 to 15 offices. But Brown says he got an unexpected call from Friedman Fleischer & Lowe in 2004. The private-equity firm had considered buying another Medicaid dental chain, but decided to build its own chain. Brown said getting picked was a million-to-one shot. Though the initial investment was small by private-equity standards, in 2010 FFL tried to sell the company for $700 million but a deal fell through.

The company says it addresses the low reimbursement rate by freeing dentists from worrying about administrative tasks. Kool Smiles has a company called NCDR LLC that hires the dentists, finds new locations, owns the offices and equipment and manages the employees.

“It's what every professional practice aims to achieve, which is take the people who are capable of actually generating revenue and put them in a position to generate revenue,” said company spokesman Freeman.

NCDR is known at Kool Smiles for meticulously tracking data. The company distributes an “Office Scorecard” each day, showing each office a monthly and even daily ranking of how well they met revenue targets. A scorecard from September 2009 showed that for the month 34 offices hit their revenue targets while 24 did not.

“We always had to account for failing short of our goals,” said Christina Bowne, who managed an office in Portsmouth, Va.

On the other hand, she said office managers got bonuses when they hit their revenue targets.

“When you’re focused on the numbers, you remove yourself from the feeling of doing the right thing,” Bowne said.

Bowne said the system rewards dentists who bill as much as possible. Bowne herself was eventually fired days after reporting one dentist to the state dental board for what she considered improper treatments. Bowne's now suing Kool Smiles for wrongful termination. The company’s human resources senior vice president testified in a deposition that she was fired for falsifying business records and tensions with one or more of the dentists.

Megan Calimbas said she faced the same pressures as the office manager of a new clinic in Bryan, Texas in 2008. “We were just completely swamped,” Calimbas recalls. “While I was there I was working 60 to 70 hours a week.”

Although her office was a star performer on the "Office Scorecard," she says she was criticized for paying staff too much overtime. As a result, Calimbas said she was asked to leave after only five months on the job.

In hindsight, Calimbas thinks most of the dentists and staff at Kool Smiles want to do what’s best. But she thinks the mathematical precision of all those goals was unrealistic and doesn't account for the individual needs of patients.

While Kool Smiles acknowledges that offices have revenue targets, it denies that its dentists do. When asked if dentists have revenue goals, regional dentist Dr. Polly Buckey, speaking on behalf of Kool Smiles, said, “For our dentists, there are not. For our dentists, there’s not a number.”

However, contracts with dentists provided by Kool Smiles show that rank-and-file dentists can get paid bonuses based on the revenue they bill. The company provided a recent bonus plan showing that dentists are paid a base salary, typically $120,000 a year, or 25 percent of their billings, whichever is greater.

Kool Smiles acknowledged that their dentists get production based bonuses, but only after meeting quality standards. And they insisted that bonuses are not the same as targets. In a statement, the company said, “Dentists do not receive revenue, patient or procedure targets or scorecards.”

The Center for Public Integrity and FRONTLINE obtained several confidential internal documents, including one that ranks each dentist in the chain based on how much they bill in an average day. Another document lists a variety of metrics for dentists, including how many patients are seen a day, how many crowns dentists do and even how many areas of a child’s mouth they put crowns or fillings on in a single appointment.

In response to questions about these documents, Kool Smiles said dentists are able to see how they rank if they chose. It says the report on patients per day and other metrics is used to assure quality. But Kool Smiles says no one from the business side ever discusses these reports with the dentists.

The company’s chief counsel and senior vice president of human resources, David King, recently testified in a lawsuit that dentists have production standards. King testified that a doctor in Portsmouth, Va., was fired “not meeting our performance standards, basically production standards … She basically wasn’t meeting our targets around seeing a number of patients per day, quadrants of dentistry per day, those types of measures.”

Dr. Ashley Nichols, the regional dental director of Virginia, testified that the dentist was fired for "not meeting performance standards in terms of productivity."

Dentists who used to work at Kool Smiles said they were under pressure to meet revenue goals. One former Kool Smiles dentist, who asked not to be identified for fear of being sued, was asked how she met the targets if the children that day didn’t have a lot of dental problems.

“Oh my God, it’s a really hard thing to do. You have to do what’s best for the kid ... If you get in trouble, you get in trouble for not producing enough. And believe me, I got in trouble.”

Another former Kool Smiles dentist alleged in a federal lawsuit that he saw children being misdiagnosed and given treatments they didn’t need as a result of the financial incentives.

“Kool Smiles’ company structure rewards staff who performs multiple treatments on their patients — whether necessary or not,” alleged Dr. Baljot Bains, who was fired from an office in Bryan, Texas, after an angry confrontation with another dentist he had reported for allegedly misdiagnosing patients.

Bains wouldn’t talk publicly about his allegations, but in the lawsuit he said that “there was constant talk about production.” Dentists said they’d be told they needed to boost production, and that they would decide to use stainless steel crowns on small cavities as a way to increase revenue, Bains alleged. Kool Smiles denied the allegations in the lawsuit and the lawsuit was settled.

The financial incentive raises questions about treatment decisions at Kool Smiles for parents like Kari Reyes of Norfolk, Va. Reyes at first felt good about Kool Smiles. She trusted her daughter’s dentist there.

In February 2011, the dentist examined 3-year-old Marissa Mares and found eight cavities. She wrote up a plan for seven fillings and one crown. After fixing four teeth, the dentist asked Reyes to come back to take care of the four others.

But when Reyes showed up three days later, a different dentist examined Marissa. The new dentist rewrote the treatment plan, changing the fillings to crowns.

Reluctantly, Reyes agreed. The little girl slept through most of the treatment on laughing gas. But the new dentist couldn’t get one of the crowns to stay on. Reyes said the dentist kept pushing the crown hard against the gums, causing them to bleed. Suddenly, Marissa awoke with a jerk and start shrieking in a way that Reyes had never heard before.

“It was a very scary thing when she started screaming,” Reyes said. “It sounded like a painful scream.”

The dentist decided to have Marissa strapped down as the 3-year-old continued to scream and kick. Reyes couldn’t bear it and starting tearing up. “She was just stuck there crying, couldn’t move, couldn’t do anything. I couldn’t do anything to help her,” Reyes said. “It was really horrible.” Finally Reyes told the dentist, “Could you stop and numb her mouth?”

Reyes said the dentist didn’t respond. After asking again several more times, Reyes said, the dentist finally told her to be quiet. That enraged Reyes, who says she yelled at the dentist to stop and to get a different dentist. Reyes even followed the dentist out in the hallway, yelling.

Another dentist came in, numbed Marissa’s mouth and got the crown to stay on. There was still one tooth left to treat, but days later Kool Smiles told Reyes she couldn’t return. They now considered her a threat for her angry outburst. Reyes took her daughter to another dental office.

Dr. Robert Howell examined the tooth and said there was no cavity on it. It was just a stain that he polished off. In an interview, Howell said, “From my observation of the child’s mouth, she was very aggressively treated.”

The dentist at Kool Smiles, Trina Collins, defended her decision to put crowns on Marissa, saying that fillings were more likely to fall out. The chain said other dentists who have looked at Mares’ X-rays concur. Kool Smiles called the treatment “appropriate” and “in compliance with professional guidelines.”

Collins said the first dentist who planned to use fillings was young and inexperienced. And she said dentists can have different opinions on whether to use crowns or not, but that she had years of experience treating children.

A background check showed that Collins was thrown out of a pediatric residency program at Harlem Hospital in New York in 2009. The hospital leveled ten charges of misconduct against Collins, including falsifying a report and changing a treatment plan with no justification. In an interview, Collins denied that she did a residency at Harlem Hospital, but documents she filled out there give her current address in Virginia.

Reyes now questions whether her daughter needed all that work, especially whether she needed crowns.

“You know, they caused my daughter pain for their gain,” Reyes says. “It’s wrong to do that to a child.”

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