- - Tuesday, September 6, 2016

Five years ago, I started researching the delivery of children’s dental care in the growing Medicaid dental space. I discovered a pioneering, cost-effective dental health care solution called “dental support organizations,” or DSOs. Some DSOs help improve access for underserved children, who largely lack access to “regular” dental practices that have historically not accepted patients who rely on the low-paying Medicaid program. As an economist, I was intrigued — however, as I dug deeper, I uncovered something disturbing: a coordinated effort to inhibit entrepreneurship and innovation in this critically underserved health care niche, at the expense of vulnerable children.

A majority of U.S. dentists do not accept Medicaid. In a 2013 report, Pew Charitable Trusts found that 75.5 percent of Medicaid-eligible children in Florida never saw a dentist. Dentists cite low reimbursement rates, outsized regulatory risk and giant amounts of paperwork associated with state Medicaid programs.

Under the DSO model, administrative services are centralized and economies of scale are harnessed by a business partner. Dentists focus on patient care, not the distraction of overhead and red tape associated with insurance and Medicaid. As a result, DSOs have allowed dental practices to extend into communities most dentists would never consider.

Benevis, a DSO, approached me to study its client — a multistate group named Kool Smiles that has rapidly expanded to fill the void in pediatric dental care among lower-income children and families. What was clear to me and my research team was that this model was working: Consumers were getting treated at a lower cost to them, taxpayers were paying less than they had been for alternative models of care and, ultimately, the oral health care of the community was improving.

But, as so often happens with disruptive agents, the defenders of the status quo reacted with suspicion. The DSO model came under fire, as the model threatens to lower prices for dental services, which have remained unchanged and unchallenged by competition for decades. The claims by DSO detractors are predictable and similar to what we’ve seen with industry disruptors like Uber: The new model is underregulated and takes advantage of vulnerable populations. They use anecdotes and misinformation as their platforms.

Investigative media outlets “Frontline” and the Center for Public Integrity (CPI) jointly broadcasted similar claims, a “gotcha” report laden with anecdotes and incriminating analysis alleging that DSOs — using Kool Smiles as one prominent example — have been taking advantage of the government by performing and billing for unnecessary services.

I looked into the allegations against Kool Smiles and the research that CPI and “Frontline” conducted. I was granted full autonomy to conduct my analysis. I found that the media outlets’ methodologies were improper, and their conclusions were patently false.

“Frontline” and CPI’s investigation was misleading; it used only one calculation to reach the conclusion that Kool Smiles performed unnecessary procedures: They divided the number of Kool Smiles patients who received crowns by the total number of patients who received fillings. This data point means nothing.

To understand utilization, you must analyze the amount of dental work performed per patient. I analyzed each Medicaid claim paid by the state of Texas in 2011, and I found that the dentists affiliated with Kool Smiles performed four fewer procedures per patient, on average, than dentists who weren’t a part of a DSO. Moreover, they delivered care at a fraction of the cost compared to non-DSO affiliated dentists. The cost per patient per year was just over $345 at Kool Smiles offices, a full $366 less than non-DSO affiliated dental offices. Less than half the cost. No wonder the status quo feels threatened.

Contrary to the media findings, Kool Smiles was not only a more efficient care provider, but also more cost effective. A more recent report from Dobson DaVanzo, funded by the Benevis Foundation, found very similar results. Using publicly available government data across seven states and multiple years, researchers found Kool Smiles was doing 17 percent fewer procedures at a 35 percent lower cost per patient than the average Medicaid dental provider. They concluded taxpayers could save more than $500 million per year if Kool Smiles or a similar provider treated all of the states’ patients.

We should do everything in our power to root out fraud and abuse in our health care system. But the attacks on this particular DSO used a flawed approach that could cost taxpayers millions and young children their smiles. Consumers are flocking to firms that have found innovative ways to reduce cost and make their lives easier, it would truly be a tragedy to lose an “Uber-like” innovation in a health care space so many Americans find unaffordable.

We all need better access and lower costs for dental care. We need innovative providers like Kool Smiles. Let’s not permit improper interpretation of the data, fear of change and competition, and scare tactics to get in the way of effective care. Let’s empower entrepreneurial efforts that are, in turn, empowering families in need and leading to more affordable dental care for all Americans.

Arthur B. Laffer was a member of President Ronald Reagan’s Economic Policy Advisory Board and is the founder and chairman of Laffer Associates in Nashville, Tenn.

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