On May 7, 2026, California Attorney General Rob Bonta announced a settlement with Aspen Dental Management, Inc. (Aspen Dental), a private equity-owned dental support organization (DSO), resolving allegations that Aspen Dental violated California’s prohibition on the corporate practice of dentistry and engaged in false and misleading advertising. The settlement, which remains subject to court approval, includes $2 million in civil penalties, $300,000 in restitution, and what the Attorney General’s office describes as “first-in-state” injunctive terms restricting Aspen Dental’s arrangements with its affiliated dental practices. While the settlement is not binding precedent, it offers an important window into the AG’s enforcement priorities and provides useful guidance for management organizations that contract with professional corporations (PCs) that provide dental or medical services.
Background of the case
Aspen Dental provides business management and administrative services to dental practices operating under the “Aspen Dental” brand. In the AG’s complaint, the AG alleged that Aspen Dental exceeded its administrative support role by unlawfully directing the clinical practice, ownership, and management of dentistry in California. Specifically, Aspen Dental selected, purchased, staffed, and advertised dental practices, as well as designed and furnished each office and selected, purchased, and installed all dental equipment across locations. Most notably, according to the AG’s complaint, when opening a new dental office, Aspen Dental installed a dentist who was “friendly” to Aspen Dental—and, although the dentist is licensed in California, she does not practice in California and is not domiciled in the state, which the AG indicates is problematic.
The complaint asserted causes of action under California’s prohibition on the corporate practice of dentistry (CPOD) and the Unfair Competition Law. The AG further alleged false and misleading advertising, including deceptive testimonials, unsubstantiated claims, and ambiguous pricing language. Together, the AG contended, these practices constrained dentist-owners, restricted clinical staff, and misled patients.
The settlement
In addition to monetary relief, the settlement imposes a set of injunctive terms designed to restore clinical and ownership independence at Aspen Dental-supported practices. Among other things, Aspen Dental agreed to the following:
- Not replacing any practice owner with another dentist of its choosing
- Not requiring practice owners to effectively forfeit ownership of any dental practices upon termination of the management relationship
- Not owning the property for any practice
- Not practicing dentistry, including by owning or managing any dental office
- Discontinuing and not enforcing any existing contractual provision that restricts where any licensed clinician may practice or be employed
- Providing a written fee schedule for products and laboratory services
- Registering with the Dental Board of California as a Dental Group Advertising and Referral Service
- Clearly and conspicuously identifying the practice owner’s name when creating, publishing, or disseminating advertisements
- Not basing service fees on revenue, sales, or profits
- Not suggesting, directing, or encouraging any licensed clinician, other than a practice owner, to sell or increase revenue for any service or product
- Not compensating any of its employees based on the sales or revenue of practices
- Not paying any practice employees incentives based on practice sales, revenue, or profit, including the sale of a particular service or product
The AG’s recent PC-MSO enforcement posture
The Aspen Dental settlement is consistent with the more assertive stance the AG has recently taken with respect to arrangements in the physician context. As discussed in a prior client alert, the AG submitted an amicus brief endorsing the view that replacement rights held by a management services organization (MSO) over PC physician-owners may, standing alone, constitute unlicensed lay control in violation of California’s corporate practice of medicine (CPOM) doctrine. The position that any contractual mechanisms that confer the ability to replace a licensed owner may violate the CPOM doctrine tracks with the injunctive terms of the Aspen Dental settlement, which bars Aspen Dental from replacing any practice owner with a dentist of Aspen Dental’s choosing or requiring owners to forfeit ownership upon termination of their management relationship with Aspen Dental.
The common thread is the AG’s scrutiny of the contractual architecture of PC-MSO arrangements, identifying replacement rights, continuity agreements, assignable options, stock transfer restrictions, discretionary fee formulas, and incentive programs that reward clinical staff for sales—as indicia of impermissible control. In light of SB 351, codified at Cal. Health & Saf. Code § 1190, which authorizes AG enforcement and prohibits PE- and hedge fund-backed MSOs from interfering with physicians’ and dentists’ clinical judgment, the Aspen Dental settlement serves as an important data point in the AG’s enforcement posture scrutinizing PE-backed PC-MSO platforms. Our prior analyses of the Art Center Holdings amicus brief and the California Medical Association’s companion brief urging a more fact-based and context-driven approach, provide further background on how these enforcement signals may develop.
Next steps and recommendations
While the Aspen Dental settlement does not create binding law, it serves as a notable enforcement signal that, taken together with the AG’s recent amicus filing in Art Center Holdings and SB 351, suggests that the AG is preparing to increase scrutiny of PC-MSO models. Importantly, the Aspen Dental complaint and settlement offer limited facts. We advise that organizations consider the following:
Ownership
Although California law does not mandate an “active” practice requirement or require a PC owner to be domiciled in the state, the AG’s complaint indicates that PC-MSO models that utilize a non-practicing physician/dentist-owner may raise concerns. Best practices would be to have the PC’s owner actively involved in the PC’s operations.
Recalibrate replacement triggers
Parties should inventory existing PC-MSO for unfettered replacement, continuity, option, or stock transfer provisions that could be viewed as conferring control over physician (or, by analogy, dentist) ownership or clinical functions. For example, the ability to replace a physician or dentist owner at the MSO’s/DSO’s discretion may create enforcement risk.
Services fees should not vary based on PC profitability or under the MSO’s discretion
Under Cal. Bus. & Prof. Code § 650(b), third-party service providers, such as MSOs and DSOs, are permitted to charge a fee based on a percentage of revenue, as long as the consideration is set at fair market value and is not a payment for patient referrals. However, parties should pay close attention to compensation and incentive structures. The Aspen Dental complaint identifies that the management fee was subject to change at Aspen Dental’s discretion—although the AG did not articulate the facts around this or identify the specific allegation here, this may have created fee-splitting concerns. Thus, in line with existing guidance, MSOs/DSOs should not vary their management fees based on profitability of the practice.
Be wary of incentive fees, even to employees
The AG’s complaint identified that the incentive programs that rewarded the PC’s clinical employees for product or service sales created undue pressure on clinicians to follow DSO directives. As such, even if success fees are structured in compliance with available fraud and abuse exceptions, these structures should be carefully vetted to ensure that they do not raise CPOM or CPOD concerns, as articulated by the AG.
Reserve clinical decisions to licensed professionals
Governance documents and management services agreements should expressly reserve nondelegable clinical decisions to licensed professionals.
Advertisements should be truthful and verifiable
Consistent with existing parameters around marketing clinical services in California and federal truth-in-advertising laws, advertisements for clinical practices should be truthful and not misleading to patients. PC owners and clinicians should retain ultimate control and approve all advertisements.
Audit substance, not just form
Organizations should maintain clear operational distinctions between clinical authority and business services, with regular audits to demonstrate compliance in substance and not merely in contractual form.