The company came under scrutiny as early as 2007, when the Georgia Department of Community Health said it was investigating “patterns of over-utilization of services” and “unusual patterns of patient restraint” along with its “over-utilization of stainless steel crowns.”
Wednesday, the Justice Department announced the multi-million dollar settlement in a lawsuit brought by prosecutors after three whistleblowers, some of whom worked for Kool Smiles, came forward.
Benevis acknowledges no wrongdoing as part of the deal. Amy McCool, a Benevis spokeswoman, said the lawsuit was “largely focused on professional disagreements between qualified dentists in determining the appropriate level and cost of the care.”
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WellCare of Georgia, which managed the state’s Medicaid programs, found that a child treated by Kool Smiles was five times more likely to receive crowns and 40 percent more likely to have their teeth pulled or extracted, compared with other dentists.
In a statement, the company said it “strongly disagree with the government’s allegations.”
Those allegations? “Kool Smiles keenly observed it could make millions of dollars using children as means of defrauding Medicaid and engaged in a systematic expansion to exploit the Medicaid program in numerous states,” the lawsuit said.
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Dr. Tu Tran and Dr. Thein “Tim” Pham, the two dentists who created Kool Smiles, met at a clinic in Colorado. “Here, the doctors gained insight as to how to build a business model, which preys upon the Medicaid populations,” the lawsuit said.
Four months after the first Kool Smiles opened in 2002 on Candler Road, it had served 2,200 children, The Atlanta Journal-Constitution reported at the time. It was the first business to take advantage of DeKalb County’s tax incentives to come to the Candler area.
There were several plastic slides in the waiting room, which had a mural depicting smiling children, animals and cars.
The dentists had expanded to 37 locations in six states by July 2007, which is about the time WellCare and Peach State Health Plan were sued by patients of Kool Smiles.
The suit came in response to the plan to terminate contracts with the company over concern about the quality of care.
But the patients argued that ending the contracts would deny children access to oral care. “This class action is brought to vindicate the rights of over 100,000 of Georgia’s neediest children to access to adequate dental care,” the lawsuit began.
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About 10 weeks after filing the lawsuit, the patients asked it be pulled, which a judge did.
Despite its legal troubles, the business continued to grow and now boasts having more than 2 million patient visits per year across the United States.
There were 130 Kool Smiles locations in 16 states and Washington, D.C. by August 2013, which is when prosecutors filed the lawsuit that ended with the settlement.
In the suit, employees who came forward alleged that they had “eyewitness information that the Kool Smiles dental practice empire was predicated upon a widespread, multi-state scheme to perpetrate dental Medicaid fraud … using unsuspecting patients, primarily low-income children, in the process.”
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PowerPoint presentations developed in Kool Smiles’ corporate office in Marietta encouraged doctors to perform nonessential work, the lawsuit said.
Of the payout from Benevis, the federal government will receive a total of $14 million. The other $10 million will be returned to individual states that funded improper claims submitted to state Medicaid programs, the Justice Department said.
The feds said they would give $2.4 million of its payout to three Kool Smiles whistleblowers.
“Given the seven years and significant expense already incurred, as well as the anticipated additional time and expense associated with lengthy litigation, the companies believe putting this matter behind them was the best option for their dentists, team members and the patients they serve,” McCool said when asked for comment.
Marietta-based Benevis, the company behind Kool Smile dental clinics, has agreed to pay a fine. It will pay nearly $24 million to settle accusations of Medicaid fraud. Prosecutors said the company had performed unnecessary dental procedures for years. They said Benevis would then bill taxpayers, "using unsuspecting patients... in the process."