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Small Smiles Lawsuit

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Spotlight On: Small Smiles

October 12, 2010

In 1967, Small Smiles was one of the first clinics in the nation to extend dental services to Medicaid patients - a generous and welcome gesture, since Medicaid paid far less than insurance or out-of-pocket payments for dental procedures.

By 2010, Small Smiles was churning through patients at the impossible rate of one every ten minutes. The company's dentists strapped children as young as two into a straitjacket-like device to perform dental procedures. Parents are no longer permitted in the waiting rooms and cannot watch their children as they go through multiple fillings or even intense dental surgery.

Worst of all, the procedures being performed are frequently not medically necessary.

How did this happen? How did such unethical methods spring out of a community-serving dental practice generously willing to take Medicaid patients at a time when few dentists were? Where did it all go wrong?

The answer lies in the owner. Who, it turns out, is remarkably difficult to locate.

The Faces Behind Small Smiles

The original Pueblo office was owned jointly by Dr. Edward DeRose, Dr. Michael DeRose, Dr. William Muller, Dr. Adolph Padula and Dan DeRose. The discerning among you will have noticed an inordinate number of DeRoses in that list, as well as a single straggler who lacks the somewhat comforting certification one expects in a dental office. Dan DeRose is possibly the most interesting - and most damning - investor in the Small Smiles franchise, but we'll get to him later. Right now, we're trying to determine who owns Small Smiles.

It's proving to be quite a trick.

The quintet listed above built four additional Small Smiles dental clinics in Colorado and New Mexico during the 1990s. In 2001, the same quintet formed FORBA (a somewhat ironic pseudo-acronym meaning "FOR Better Access), just before they began a decade-long stint of clinic-building that would eventually include locations in Idaho, Nevada, Arizona, New Mexico, Nebraska, Kansas, Oklahoma, Texas, Indiana, Ohio, Kentucky, Virginia, Alabama, Georga, South Carolina, Pennsylvania, Maryland, New York, Connecticut, Massachusetts, New Hampshire, Tennessee, the District of Columbia, and, of course, Colorado, where it all began.

The clinics are invariably located in lower-income neighborhoods, which is only practical considering the Small Smiles clinics has been catering exclusively to Medicaid patients since it began expanding into multiple locations - and since it formed FORBA.

Since, in fact, Small Smiles stopped being a single family-owned clinic, and became a corporation.

What's in a Name?

Small Smiles would become any number of corporations. Since the initial formation of FORBA, LLC, over 80 legal entities surround the parent corporation. To give a brief example, FORBA LLC also goes by the name Forba Dental Management. Its assets were purchased by a group of investors (whom, for the sake of brevity, we will not list here) headed by no less than three other entities: the Carlyle Group, Arcapita Bank, and American Capital Strategies, who jointly formed Sanus Holding LLC to be the official owner of FORBA's assets.

Sanus Holding later became Small Smiles Holding Company, LLC. Which is good, because otherwise it might have gotten confusing. After all, there are only more than dozen other entities with "Small Smiles" as part of their name.

A single legal document includes Small Smiles of Toledo, LLC, Small Smiles Holding Company LLC, FORBA Holdings, LLC (that would be FORBA's, also known as Forba Dental Management's, assets, as noted above), and FORBA Services LLC.

Believe us when we say this is one of the less confusing legal documents involving FORBA, Small Smiles, and its various legal counterparts. In sum total, there are over 80 entities that have been in some way involved with the original FORBA LLC.

It's easy to forget that under it all is still the DeRose family.

Dan DeRose

Lacking a medical degree, young Danny got into business, and ultimately became responsible for not a few of the layers of legal entities that stand between his family and direct consequences for their actions.

Dan DeRose owns the cleverly titled DD Marketing Inc., which may sound familiar to those who saw Morgan Spurlock's documentary SuperSize Me or read Eric Schlosser's Fast Food Nation. Dan was the man who advocated putting soft drink machines in schools to generate revenue. His company was engaged by District 11 of Colorado Springs for that very purpose, which he nobly declares tripled the revenue of the district.

Which may very well be true. However, it seems somewhat strange that Dan DeRose, whose father and grandfather and uncle and brother are all dentists, whose family has owned the Small Smiles dental clinic in Pueblo since the turn of the century, who has himself worked in their offices and who was the greatest beneficiary of the eventual sale of FORBA LLC, should be unaware that giving children unfettered access to soft drinks throughout their six-hour school day might mean those children are going to wind up going to the dentist more frequently

Dan has proven that he's more than willing to put income over the interests of children. And why shouldn't he? It's been the family business for years.

He's also the one whose name you'll invariably find on the many legal entities who have been sued over the years - instead of suing the DeRose family, or their other investors, directly.

Selling the Family Farm

Speaking of the family business, they recently sold the whole kit and caboodle to new owners, who agreed to purchase FORBA LLC for ten times its annual revenue (before taxes).

It hardly seems coincidental that immediately after this agreement, dentists and dental assistants at individual Small Smiles clinics began to report that their bosses were putting immense pressure on them to see more patients than ever before. More patients and more procedures meant more revenue, which in turn meant that the final purchase price of FORBA LLC would be higher.

Those dentists at the Small Smiles clinics must have had one hell of a production increase, because the final purchase price of FORBA was $400 million.

Dan DeRose's cut was $80 million. The other four owners received $58 million apiece.

You may be wondering how the sole non-doctor among FORBA's original owners managed to get an extra $22 million of the final sale.

So are we.

What's FORBA Up To Now?

With FORBA in new hands, it's difficult to speculate on whether the incredibly unethical practices found in Small Smiles clinics throughout the United States will continue. One telling clue might lie in the recent legal suit the new owners of FORBA brought against the previous DeRose-heavy owners: the new owners say the DeRoses (and company, in this case both of Dan DeRose's marketing companies) misrepresented the investment.

They neglected to mention that medical malpractice suits were rampant.

FORBA LLC (under its new ownership) recently settled charges that they were billing the United States government and various states for unnecessary procedures. The settlement was $24 million.

Michael DeRose, in 2008, was charged with overtreating children and defrauding Medicaid - under yet another set of business names, Medicaid Dental Center, Smile Starters, and Carolina Dental Center. The defendant, Medicaid Dental Center, settled for $10 million.

It's a lesson he learned from his brother: put enough businesses between you and your misdeeds, and nobody remembers your name.

We'll be keeping up with the DeRoses, FORBA's new owners, and the Small Smiles clinics' individual dentists. It's important to remember that the companies aren't at fault here. The companies didn't come up with the horribly unethical practices, and they didn't execute them.

Behind the terrible practices of Small Smiles are real people.

And we want you to remember their names. 



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