California AG Settlement with Aspen Highlights Heightened Scrutiny of CPOD Structures

On May 7, 2026, California Attorney General (“AG”) Rob Bonta announced a settlement with ADMI Dental Management, Inc. (“ADMI”) imposing sweeping restrictions on how ADMI structures its relationships with affiliated dental practices including as it relates to real estate and equipment rights, vendor and supplier relationships, payor relationships, succession agreements, patient scheduling, marketing, and management services. The settlement resolved allegations that ADMI’s business practices violated California’s prohibition on corporate practice of dentistry (“CPOD”), including alleged breaches of California’s recently enacted corporate practice law SB 351, which prohibits private equity firms (ADMI is PE backed) and hedge funds from interfering with physicians’ or dentists’ independent professional judgment in making health care decisions—including decisions relating to diagnostic testing, referrals, treatment, and provider productivity—and from entering into contracts or other arrangements that facilitate such interference.¹ The settlement also resolved claims under California’s unfair competition and false advertising laws.²

The AG brought the case under its authority pursuant to California Business and Professions Code Section 17203, which permits the AG to seek injunctive remedies (including changes to challenged business practices), restitution, and other equitable relief. While a complete court litigation of the matter may have yielded a different result, the settlement is instructive as to potential consequences of enforcement under these laws.³

The settlement imposes extensive injunctive restrictions on ADMI’s relationships with affiliated dental practices, requires the appointment of an independent compliance monitor for three years, and includes $2 million in civil penalties and $300,000 in restitution.⁴ More broadly, the resolution reflects California regulators’ increasing willingness to look beyond formal ownership structures and examine the practical degree of influence dental support organizations (“DSOs”) exercise over affiliated professional practices through operational controls, financial arrangements, and centralized management functions.⁵ The settlement provides an important roadmap for how California regulators evaluate the line between permissible management support and impermissible control over professional dental practices in California.

What does this mean for DSOs operating in California?

DSOs operating in California considering this settlement should first analyze what parts of their operations could be viewed as similar to those focused on by the AG in this case/settlement. ADMI’s operating model is distinguishable from many traditional DSO-PC structures. Although not formally organized as a franchise system, ADMI operates with a high degree of centralized branding and operational uniformity, including integrated procurement, staffing, scheduling, marketing, and patient-financing functions. While such support functions are common among large DSOs, ADMI’s network has often been characterized as franchise-like because affiliated practices operate under a common brand and standardized operating model across hundreds of locations. That distinction is important when evaluating the broader implications of the settlement and the extent to which certain remedies imposed on ADMI may apply across the broader DSO industry (or not). Accordingly, while certain aspects of the settlement are likely to resonate across the broader DSO industry, other provisions, particularly those relating to branding, advertising, and centralized operational controls, may be more closely tied to ADMI’s uniquely integrated operating model.

Key Takeaways

Against that backdrop, the settlement provides important insight into the operational arrangements and management functions California regulators may view as presenting heightened CPOD risk in DSO-PC structures. Specifically, ADMI agreed to a wide range of injunctive terms that restrict how it may structure and operate its relationships with affiliated dental practices in California, including:

1. Real Estate Ownership: The settlement prohibits ADMI from owning any “property” of the practice interpreted to mean real property used by affiliated practices and requires any lease rights obtained by ADMI to be assigned in full to a licensed dentist or professional entity. The settlement also prohibits ADMI from requiring practice owners to surrender offices or equipment upon termination and grants practice owners the option to assume lease obligations upon termination and purchase equipment at fair market value.⁶ Such provisions reflect increasing regulatory focus on whether centralized control over leases, equipment, and operational infrastructure creates indirect leverage over affiliated professional practices.
2. Lab Choice and Product Choice: The settlement requires ADMI to permit affiliated dental practice owners to purchase products and laboratory services from vendors other than ADMI, further requiring that when ADMI provides such products or services, it must furnish a written fee schedule and may not charge amounts exceeding scheduled pricing without advance notice.⁷ Additionally, the settlement expressly requires that the affiliated practice owners retain the right to select the laboratory used for denture products prescribed to patients.⁸ Such restrictions on vendor selection could now warrant CPOD scrutiny from California regulators.
3. Insurance Participation: The settlement provides that ADMI may neither require affiliated practice owners to participate in any particular insurance plans nor prohibit them from accepting any type of insurance, although ADMI may provide information and advice regarding the operational and financial implications of participation in particular programs.⁹
4. Annual Renegotiation of Services and Fees; Practice Owner Engagement: The settlement also requires ADMI to confer at least annually with each Practice Owner regarding the nature, scope, and fees associated with management services, with the results memorialized in writing and existing agreements automatically terminating if negotiations are not completed within specified time periods.¹⁰ These requirements mark a notable departure from the long-term management services agreements traditionally used in many DSO-PC structures. More broadly, they reflect an increasingly expansive regulatory view that practice owners must exercise meaningful oversight of the management company and participate in significant operational and financial decisions affecting the practice.
5. Revenue-Based Fees and Incentive Compensation: The settlement imposes significant restrictions on compensation methodologies commonly used in DSO arrangements—providing that ADMI’s service fees “must not be based on dental practice revenue, sales, or profits”¹¹ and restricts ADMI from providing incentive compensation to its own employees—or reimbursing affiliated practices for compensating practice employees based on practice sales, revenue, profits, or the sale of specific products or services. Such provisions reflect increased regulatory scrutiny of incentives that may encourage non-clinicians to influence treatment decisions, product decisions, patient volume, or practice performance.
6. Practice Financing Arrangements: The settlement restricts ADMI’s ability to provide loans or advances to affiliated practice owners, including financing associated with opening new practices, except in limited circumstances where a practice owner’s monthly revenue is insufficient to cover applicable expenses.¹² Because working capital advances, startup financing, and other intercompany funding mechanisms are standard features of DSO-PC structures, broader adoption of similar restrictions could have significant implications for prevailing DSO-PC financing models.
7. Prohibition on Owning or Managing Dental Offices; Clinical Protocol Restrictions: Finally, the settlement provides that ADMI “must not practice dentistry, including but not limited to the owning or managing any dental office.”¹³ Although the prohibition on practicing dentistry reflects a traditional application of California corporate practice principles, the inclusion of “managing” as a prohibited activity materially expands the potential scope of CPOD scrutiny because DSOs fundamentally exist to provide management and administrative services to affiliated practices. The provision takes on added significance in light of the AG’s focus on ADMI's alleged clinical-related directives, including specifying procedure codes for billing, the amount of time clinicians should spend on particular procedures, the frequency with which certain procedures and follow-up measures should be performed, and the products recommended to patients. Such allegations suggest California regulators may view operational directives touching on clinical workflow as evidence of impermissible “management” of a dental office.¹⁴ The settlement provides limited guidance regarding the distinction between impermissible “management” and permissible management support services, leaving substantial uncertainty regarding where California regulators may draw that line going forward.

Implications for Investors

As noted above, these developments raise several practical considerations for investors and DSOs operating in California.

1. Existing DSO Structures Operating in California May Warrant Review: Read together, the Art Center amicus brief and ADMI settlement provide additional insight into how the California Attorney General’s Office may evaluate management services arrangements, and succession/business continuity agreements and the degree of influence exercised by DSOs over affiliated professional practices. In light of these developments, investors and other industry stakeholders may wish to revisit governance arrangements—including management services agreements and consulting agreements—particularly where those arrangements address staffing, compensation, operational oversight, or practice governance. Although these developments do not suggest that DSO-PC structures are impermissible in California, they reinforce the importance of carefully structuring and operationalizing such arrangements to appropriately preserve the independence of affiliated professional practices and licensed clinicians.
2. Compensation and Financial Arrangements in DSO-PC Arrangements May Require Additional Attention: The settlement also signals heightened scrutiny of financial arrangements that regulators may view as creating economic leverage over affiliated practices or incentives inconsistent with professional independence. In particular, the restrictions relating to revenue-based fees, incentive compensation, practice financing, and long-term management agreements suggest California regulators are focusing not only on clinical oversight, but also on the financial and operational mechanisms through which DSOs may influence affiliated practices. Stakeholders should therefore consider whether existing compensation structures and financing arrangements remain appropriately structured in light of evolving California enforcement priorities.
3. Operational and Patient-Facing Practices Continue to Be Important Areas of Focus: Finally, the settlement reflects increasing focus on centralized operational functions—including staffing, scheduling, marketing, insurance participation, vendor selection, and patient-intake systems—that historically have been viewed as ordinary management activities within DSO structures. Taken together, the settlement suggests California regulators may increasingly view operational control itself as a potential indicator of impermissible influence over professional judgment. As California regulators continue to expand corporate practice enforcement beyond formal ownership questions and into the operational mechanics of DSO-PC relationships, stakeholders evaluating California investments or operating DSO platforms in the state should expect continued scrutiny of management structures, financial arrangements, and centralized operational controls.

Ropes & Gray will continue to monitor developments relating to California’s evolving corporate practice enforcement landscape and broader regulatory trends affecting health care ownership structures and DSO-PC arrangements. Please contact the authors or your usual Ropes & Gray advisor with any questions regarding the issues discussed above.