Massive Dental Fraud Uncovered

Stephen Barrett, M.D.
August 23, 2011

A class-action suit has been filed against FORBA Holdings, LLC, several related companies, and as-yet-unnamed dentists who have operated “Small Smiles Dental Centers” and similar clinics in 23 states [1]. FORBA’s current owners, in turn, are suing the previous owners of the chain, claiming that during the sales process, they misrepresented the company’s assets and potential liabilities [2].

FORBA’s suit charges that the original owners did not disclose that they were facing government scrutiny or that the intense pressure to increase production “could lead to overtreatment, substandard quality of care, poor charting, and improper payment that could lead to requests for repayment, denial of claims, and fines and penalties.” It also states that the original owners have failed to honor contract provisions to indemnify FORBA for expenses arising from acts or omissions before the sale took place [2].

This article traces the origin of the clinics and the enormous harm they did to the children they treated.

Company History

FORBA operates the largest chain of dental clinics that serve chilldren on Medicaid. According to its lawsuit suit, the Small Smiles Dental Centers trace their roots to a clinic in Pueblo, Colorado founded in 1928 by Dr. Bruno DeRose. Bruno’s son Edward J. DeRose joined the clinic in 1961, and in 1970, the clinic began treating children covered by Medicaid. In the mid-1990s, Edward DeRose, his son Dr. Michael DeRose, and other family members opened additional Small Smiles Centers in Colorado and New Mexico, focusing on providing dental care to children on Medicaid. In 2001, Michael, Edward, Edward’s son Danny E. DeRose (not a dentist), Michael’s uncle Dr. Adolph R. Padula, and Dr. William A. Mueller formed FORBA to manage the existing clinic and additional Small Smiles Centers throughout the country. (FORBA stands for “For Better Access.”) The number of such centers grew steadily from 12 in 2002 to 50 by September 2006. Over the years, the clinic chain appears to have included at least 80 corporate entities, including at least one for each facility and a maze of corporations that represented the interests of the owners and managers of the chain.

In June 2006, FORBA’s current owners agreed to buy the company for ten times its annual estimated pre-tax income. This led the original owners to exert intense pressure on the individual clinic operators to increase production levels. The eventual purchase price, set in September 2006, was more than $400 million, of which Danny DeRose received $80 million and Edward DeRose, Michael DeRose, Mueller, and Padula each received $58 million [2].

Cruel and Unethical Treatment
Investigative reports have demonstrated that many of the children who visited FORBA’s clinics both before and after the sale were horribly mistreated. The problem was brought to light in March 2008 by WJLA-TV’s Roberta Baskin, who was permitted to film a child undergoing treatment at a Small Smiles clinic in Maryland. Her report shows a 4-year-old boy—who is restrained in a “papoose board”—writhing and screaming in pain while undergoing treatment that he doesn’t need. It also shows how the clinic staff members were preoccupied with making money [3]. ABC-TV’s “20/20” aired additional findings in March 2009 [4]. These graphic reports show how children were unnecessarily restrained, inadequately anesthetized, and subjected to unnecessary procedures, including multiple tooth removal and tooth capping, that left them psychologically traumatized as well as physically and cosmetically damaged. Two children shown in the “20/20” report had 16 pulpotomies (“baby root canals”) performed at one sitting.  

Multiple unnecessary
stainless steel caps
Click to watch “20/20” video

Government Actions

FORBA’s management and some of the dentists who directed individual clinics have been the target of legal and regulatory actions:

  • In 2004, Edward and Michael DeRose were disciplined by the Dental Board of Colorado, which ordered them to stop employing and/or aiding and abetting in the practice of dentistry by persons not licensed to practice dentistry in the State of Colorado [5,6].
  • In April 2005, Michael DeRose and Letitia Ballance, D.D.S. entered into consent orders with the North Carolina State Board of Dental Examiners under which they agreed not to contest allegations that dentists employed and trained by Medical Dental Centers (MDC) had performed excessive treatment on seven pediatric patients by performing pulpotomies and placing stainless steel crowns when they were not warranted or supported by x-rays or appropriate diagnostic documentation [7,8]. Ballance’s license was suspended for 180 days, to be followed by 3 years of probation. She was also ordered to pay $5,850 for the costs associated with the disciplinary proceedings. The Board also disciplined seven dentists who had worked for MDC: Christopher Ballanger, Heather Berkheimer, Erron Brady, John Lyons, Lori Petree, Michelle Wilkerson, and Jeffrey Zieziula.
  • In 2006, David Douglas Gardner, D.D.S. pleaded guilty to third-degree grand larceny and served a short prison sentence. Press reports indicate that while directing the Small Smiles office in Rochester, New York, he caused the submission of Medicaid claims that falsely represented that he filled the teeth of dozens of young patients [9]. After his conviction, he repaid about $444,000 and surrendered his dental license.
  • In April 2008, DeRose and Balance, without admitting fault, agreed to pay $10,050,000 to settle potential civil liability for submitting claims for services that were not medically necessary, reflected substandard care, and lacked informed consent [10]. The conduct at issue occurred from 2001-2003, during which DeRose and Ballance operated dental clinics in North Carolina under the names Smile Starters and Carolina Dental Center—later renamed Medicaid Dental Center (MDC). The United States and the state of North Carolina charged that DeRose, Ballance, and MDC were liable under the federal False Claims Act for submitting claims for reimbursement for (a) performing unnecessary pulpotomies. (b) placing stainless steel crowns that were not medically necessary, and failing to obtain informed consent for their procedures and services. The settlement required MDC to reimburse the government for the amount deemed wrongfully billed to the Medicaid Program and to pay substantial penalties representing more than twice the amount that MDC allegedly received improperly from North Carolina Medicaid [11].
  • In 2009, to avoid disciplinary proceedings in Colorado based on his previous actions in North Carolina, Michael DeRose signed a stipulation under which his Colorado dental license was permanently inactivated [12].
  • In January 2010, FORBA settled a similar action by the Justice Department and several states by agreeing to pay $24 million to settle three False Claim Act suits by former-employees in which the Government had intervened. [13,14]. Immediately afterward, the New York State Medicaid Inspector General announced that FORBA had agreed to pay an additional $2.3 million to settle audit findings in its Rochester and Syracuse offices [15].
  • One of the False Claim Act suits was filed in 2007 by Deborah McDaniel, who worked briefly as a dental assistant at a clinic in Maryland. The Government version of her complaint described the heart of the scam this way:

    At the beginning of her employment with Small Smiles, Relator McDaniel attended a training session sponsored by her employer and FORBA in Pueblo, Colorado. One of the subjects of this training session was the Defendants’ policy called �conversion.” “Conversion” was the term used by Defendants to describe their attempt to convert their routine care Medicaid-eligible patients to patients receiving procedures beyond routine check-ups and cleanings, even if these procedures were not medically necessary. During the course of her employment, Relator McDaniel was instructed that it was the Defendants’ policy to �convert” all patients requiring simple cleanings and check-ups into patients requiring extensive and more expensive additional procedures such as pulpotomies, the dental process of removing pulp from the pulp chambers of the teeth, and the implant of steel crowns. Relator McDaniel learned during the course of her employment that Defendant Small Smiles would perform pulpotomies, and then place steel crowns over the teeth instead of installing simple fillings, which is the usual procedure, to obtain additional and more expensive grounds to bill Medicaid. Training concerning this company policy on “conversion” was provided in Pueblo, Colorado by FORBA employees [16]

The Class-Action Complaint

In 2009, a class-action suit was filed in Ohio against FORBA Holdings, LLC, several related companies, and as-yet-unnamed dentists who have operated clinics in 23 states [17]. The complaint (amended in January 2010) charges:

  • The defendants conspired to perform unnecessary procedures and use unnecessary physical restraints upon children in order to fraudulently obtain extra compensation.
  • At least 300,000 children may have been treated improperly.
  • Medicaid-eligible children would have an appointment for a routine check-up and cleaning with Defendants’ clinics. They would be given x-rays, a cleaning and then the dentist would evaluate the child’s mouth.
  • The x-rays were often unnecessary, taken incorrectly, taken by employees not licensed to operate the x-ray machine, and/or unreadable or even blank.
  • Parents/guardians were then brought to a consultation room where they were told that their child needed extensive work including, pulpotomies and steel crowns.
  • Parents were pressured to sign consent forms immediately so that the extensive procedures could be done the same day as the initial consultation. Defendants thought that if the patients left the building, the might obtain a second opinion about the need for additional procedures and might not return.
  • FORBA also encouraged its clinics to use of a “papoose board” to immobilize the children, regardless of whether or not restraint was necessary.
  • Parents were not permitted to observe their children’s’ treatment.
  • FORBA’s clinics were ordered to clean the children as much as possible before sending them back to their parents, including washing their clothes so that the parents would not find out that the children had urinated or vomited on themselves.

Moriarty Leyendecker, which represents about 550 vicitms, has filed several suits, and many more are likely to arise in the future.

“Under New Management”

The Small Smiles Web site, while not mentioning any of the above problems, states that since 2006, “company leaders have also encouraged a culture of compliance that sets high standards and encourages feedback from employees and parents.” [18] Curiously, however, the Keystone Marion Youth Center, which was managed by several of FORBA’s officers, is facing a False Claims Act initiated by former employees in Virginia. The suit alleges that the company provided substandard care to adolescents in violation of federal and state Medicaid requirements, falsified records to cover up serious violations, and filed false Medicaid claims [19,20].

The Bottom Line

The pattern of cruelty, greed, fraud, and unprofessional conduct described in this article is almost beyond belief. I am puzzled that few of the dentists involved have been disciplined by their state licensing boards. Perhaps more will be as lawsuits by the victims move forward.

Additional Information
  1. Class action complaint. Parnell v. FORBA Holdings, LLC; FORBA Services, Inc; Small Smiles Holding Co., LLC; Small Smiles of Toledo LLC; et al. U.S. District Court for the Northern District of Ohio, Western Division, Case No. 3:10-cv-00172-JGC, filed Jan 25, 2010.
  2. Amended complaint. FORBA Holdings, LLC V. v LICSAC, LLC, DeRose Management LLC, LICSAC NY, LLC, Danny E. DeRose, Edward J. DeRose, Michael A. DeRose, Michael W. Roumph; Richard R. Lane, William A. Mueller, Adolph R. Padula, and Padula Family Partnership, LLP. U.S. District Court for the District of Colorado, Civil Action No. 09-cv-02305-CMA-MJW, filed Jan 22, 2010.
  3. Small Smiles investigation. WJLA-TV, March 18, 2008.
  4. The littlest patients. ABC-TV, March 9, 2009.
  5. Cease and desist order. Case No 2004-000132 (Michael DeRose). Before the Colorado State Board of Dental Examiners, March 29, 2004.
  6. Cease and desist order. Case No 2004-000131 (Edward DeRose). Before the Colorado State Board of Dental Examiners, March 29, 2004.
  7. Consent order. In the matter of Michael A. DeRose, D.D.S. Before the North Carolina State Board of Dental Examiners, Dec 12, 2005.
  8. Consent order. In the matter of Letitia L. Ballance, D.D.S. Before the North Carolina State Board of Dental Examiners, Dec 8, 2005.
  9. Former Irondequoit dentist pleads guilty of bilking Medicaid. Rochester Daily Record, May 19, 2006.
  10. North Carolina dental services chain pays $10 million to resolve false claims allegation. USDOJ press release, April 9, 2009.
  11. Settlement agreement, March 28, 2008
  12. Stipulation and final agency order. In the matter of the disciplinary proceeding regarding the license to practice dentistry in the State of Colorado of Michael DeRose, D.D.S., license number 5133. June 8, 2009.
  13. National dental management company pays $24 million to resolve fraud allegations. USDOJ news release, Jan 20, 2010.
  14. Civil settlement agreement between FORBA Holdings and the U.S. Department of Health and Human Services, Jan 15, 2010.
  15. New York State Medicaid Inspector General announces oversight agreement with FORBA Dental. OMIG investigation led to quality-of-care initiatives. N.Y. Medicare Inspector General press release, Jan 21, 2010.
  16. Complaint. USA ex. rel Deborah McDaniel v. FORBA Holdings LLC and Small Smiles of Langley Park, PC. U.S. District Court for the District of Maryland, Civil action No. 07cv3416, Filed Dec 21, 2007.
  17. Class action complaint. Parnell et el. v FORBA Holdings LLC et al. U.S. District Court for the Northern District of Ohio, Western Division, Case No, 3:10-cv-00172-JGC, filed Jan 25, 2010.
  18. Compliance: Effective stewardship of public resources. Small Smiles Dental Centers Web site, accessed Feb 9, 2010.
  19. Complaint. U.S.A. et al. v. Universal Health Services, Inc, Keystone Marion LLC, Keystone Education and Youth Services, LLC, all d/b/a Keystone Marion Youth Center. U.S. District Court for the Western Division of Virginia, Abingdon Division, Civil Action No. 1:01cv00054, filed June 14, 2007.
  20. United States intervenes in False Claims Act suit against Virginia Medicaid providers. USDOJ news release, Nov 4, 2009.

This article was revised on August 23, 2011.