The Recent California AG Settlement Is a Wake-Up Call, But Not What You Think

From the West Coast Healthcare Desk

California Attorney General (AG) Rob Bonta on May 7, 2026, announced a settlement with Aspen Dental Management Inc. (ADMI) resolving allegations that the company engaged in false and misleading advertising and violated California's prohibition on the corporate practice of dentistry (CPOD). The settlement, which remains subject to court approval, includes $2 million in penalties, $300,000 in restitution, first-of-their-kind injunctive terms and a 36-month independent compliance monitor. Though it is technically the first enforcement action under Senate Bill (SB) 351 in 2026 involving medical or dental practices, the allegations centered on marketing activities that were similar to those at issue in enforcement actions in other states over the past decade.¹ Moreover, the SB 351-related allegations in the complaint suggest an expanded interpretation of current CPOD law because they did not necessarily align with the agreed-upon contractual terms in the settlement agreement. It is also important to remember that the outcome of any CPOD enforcement action hinges on the full scope of operational facts and circumstances, rather than any single activity or finding.

This Holland & Knight alert provides an analysis of the marketing and CPOD allegations in the complaint and where the AG's positions may extend beyond current California law. The alert also provides considerations for healthcare businesses seeking to improve compliance practices and mitigate enforcement risks. Though this settlement involved a dental service organization (DSO), it is informative for management service organizations (MSOs) supporting medical practices.

Now is certainly the time for healthcare companies to reassess their operations in California. Enforcement is real. Compliance is not impossible. Holland & Knight can help navigate what comes next.

The Complaint: What the AG Alleged

Advertising

Sixty percent of the AG's complaint focused on allegations regarding false advertising and misleading statements in violation of California Business and Professions Code Section 17500, et seq. (the False Advertising Law). However, the advertising terms in the settlement were largely modeled on the Massachusetts AG settlement from 2023 resolving similar advertising allegations against ADMI and, therefore, did not represent much of the negotiated settlement terms. Notably, the complaint did not specify incidents of consumer harm related to ADMI's advertising practices. However, when reviewing their own marketing practices for compliance, other stakeholders may use the allegations as a guidepost for enforcement trends in the future.

The advertising allegations in the complaint are as follows:

1. deployment of national advertising campaigns without evidence of practice owners' review or affirmative sign-off
2. use of a general call center with patient direction to California practices without registering with the Dental Board of California as a dental group advertiser and referral service (more information on that registration can be found online)²
3. use of a common brand for dental practices with the failure to disclose that ADMI did not own the practices
4. noncompliance with California's disclosure requirements when more than 50 percent of advertising references a single dentist
5. free exam offers omitted eligibility restrictions (i.e., adults 21 and older, uninsured only) and pricing language such as "starting at" and "as low as" failed to disclose material conditions
6. use of testimonials from patients who never received care at any California practice
7. claims to work "with all insurance or no insurance" despite supported practices not accepting Medi-Cal or federally funded plans
8. advertising "no hidden fees or surprises" and "emergencies welcome" while charging undisclosed emergency fees
9. marketing dentures as "crafted onsite" when some were fabricated by outside labs
10. use of Spanish-language materials that omitted disclosures present in their English counterparts, including references to third-party financing being in-house products

Corporate Practice of Dentistry

The complaint also alleged that ADMI crossed the line from management support to unlawful control of clinical practice under California's CPOD regime, as strengthened by SB 351. The AG advanced an expansive interpretation, targeting not only classic CPOD factors – such as ownership of charts and setting clinical protocols – but also financial incentives, uniform operational procedures and the DSO's operational footprint. The most significant aspect of this enforcement action is the AG's interpretation of control, both the specific factors the AG identified as problematic and terms ultimately reflected in the settlement.

The California AG focused on the fact that all California offices were newly established offices where ADMI selected the locations, entered leases, built out spaces and installed equipment rather than partnering with established dental practices in the state. The California AG also focused on incentive programs that rewarded clinical employees for product sales: Hygienists received $50 to $100 per clear aligner sale, and dentists received $200 per sale of ADMI's Motto brand aligner case plus promotional items and a trip. The AG further indicated that office managers encouraged maximum patient spending, scorecards tracked utilization, detailed protocols covered the patient experience from start to finish, and supervisors received profit-share bonuses tied to practice performance. Finally, the AG parsed through the ADMI management agreements with dental practices and cited the restrictive covenants, document retention and termination surrender provisions as being indicia of improper control.

Key Contractual Restrictions Imposed by the California AG

In the settlement agreement, ADMI agreed to detailed operating constraints. Although they bind only ADMI, they potentially signal the AG's enforcement focus when combined with the AG's amicus brief filed in Art Center Holdings Inc. v. WCE CA Art LLC right before it filed the underlying complaint against ADMI. In that amicus brief, the AG argued that stock transfer restriction agreements are themselves CPOM violations. Notably, however, the settlement does not address or unwind any such agreements – a notable omission given the timing of the brief.

• Clinical and Operational Control and Real Property: ADMI may not practice dentistry, operate dental offices or involve itself in hiring licensed clinicians beyond initial screening and administrative tasks. It may not require practice owners to surrender offices or equipment upon contract termination, and it may not own real property used by practices.
• Compensation and Fee Structures: Service fees may not be based on practice revenue, sales or profits. The settlement prohibits ADMI from compensating any of its own employees based on the sales or revenue of practices, including based on the sale of a particular product or service, except where the consideration is commensurate with the value of services that the individual has furnished to the practices. The settlement also prohibits ADMI from paying any practice employees incentives based on practice sales, revenue or profit, including the sale of a particular product or service. Further, ADMI may not reimburse any practice for incentives based on sales, revenue or profit that the practice offers to any employees. However, the settlement does not prevent practices from independently compensating their own employees. The fair market value exception for ADMI's own employees is sufficiently broad to permit continued performance-based compensation for ADMI employees who support practice operations, but it does not extend to practice employee incentive programs funded or reimbursed by ADMI.
• Clinical Decision-Making: ADMI may not suggest or encourage licensed clinicians, other than owners, to sell particular services or increase revenue for any service or product.
• Contractual and Post-Employment Restrictions: ADMI must discontinue and refrain from enforcing any provisions restricting where licensed clinicians may practice or prohibit them from communicating with patients they have treated.
• Advertising and Transparency: ADMI must register with the Dental Board of California as an advertising and referral service, clearly identify dentist owners in practice-specific advertisements and on signage, and provide written fee schedules for products and lab services.
• Compliance Oversight: An independent compliance monitor ensuring these requirements are met will serve for 36 months, delivering status reports beginning at three months and written compliance reports every six months, with all costs borne by ADMI.

Where the Settlement Exceeds California Law: A Totality of the Circumstances Approach

The settlement is unprecedented and appears to exceed the bounds of California law. It is important to understand that most CPOD/CPOM enforcement matters focus on the totality of the circumstances when analyzing whether a stakeholder is engaging in the corporate practice of a licensed profession. Here, no single activity or operation cited by the AG in isolation would independently qualify as a CPOD violation. However, when the elements were combined, the AG determined that there were sufficient indicia of control to warrant the modifications imposed in the settlement. However, several of the individual settlement terms have no foundation in SB 351 or existing California CPOD law. It also does not appear that the Dental Board or any licensed practitioners weighed in on the related activities crossing the line between clinical decision-making and business operations. These interpretations exceed the bounds of current law and, though the AG may seek to enforce them in future actions, such enforcement would be vulnerable to administrative challenge and litigation. More broadly, this expanded framework potentially attempts to regulate commercial interests in the dental economy and interstate commerce without legislative authorization.

• Revenue-Based Service Fees: California Business and Professions Code (BPC) § 650(b) permits MSOs to charge a percentage of revenue management fees if commensurate with the services performed (basically fair market value). SB 351 did not change that provision. The settlement, however, flatly prohibits such fees contrary to existing law.
• Compensation Restrictions: SB 351 does not ban revenue-based compensation for non-clinical DSO employees. BPC § 650(b) permits percentage-based management fees "calculated on gross revenue" so long as the consideration is commensurate with the value of services furnished, and separate fee-splitting rules govern how such calculations must be structured. Moreover, California law does not otherwise restrict companies from lending to or reimbursing dental practices for practice expenses. The settlement, however, prohibits ADMI from 1) compensating its own employees based on practice sales or revenue, except where commensurate with the value of services that individual has furnished (a fair market value (FMV) standard broad enough to permit performance-based pay for ADMI staff), 2) paying practice employees incentives based on practice sales, revenue or profit, and 3) reimbursing practices for such incentive programs. Practices themselves remain free to compensate their own employees independently; the restriction targets only ADMI's involvement.
• Real Property Ownership: The settlement prohibits ADMI from owning real property used by dental practices and requires that any lease for practice premises be assigned to a Division 2 licensee (i.e., a licensed dentist or dental corporation) before operations commence. Upon termination of the management relationship, departing practice owners receive a 90-day option to assume the lease and purchase equipment at FMV. No analog to these real property restrictions exists in SB 351 or other CPOD law in California. This represents a novel structural expectation imposed by the AG that DSOs should not control the premises where clinical care is delivered, effectively extending the CPOD doctrine beyond clinical decision-making into the commercial real estate arrangements. It is worth noting that most landlords leasing clinical space to dental practices are unlicensed and DSOs merely serve as a middleman tenant in most cases.
• Additional Terms Without Statutory Analog: The settlement requires retroactive unwinding of noncompete and nondisparagement provisions, whereas SB 351 only voided such clauses prospectively. The restrictions on loans and advances to practices, detailed treatment plan and billing requirements, insurance coverage disclosure and written patient consent requirements have no SB 351 or California CPOD counterpart.

Action Items for MSOs/DSOs

Considering the novelty of the ADMI settlement, MSOs and DSOs now have guideposts for compliance going forward.

• Immediate: Audit Internal Practice for Compliance with Existing California Law. MSOs/DSOs should 1) audit all advertising and marketing campaigns for accuracy of insurance claims, pricing, service descriptions and material disclosures, 2) ensure testimonials relate to California practices and 3) confirm Spanish-language materials include all required disclosures. Standard operating procedures should ensure practice owners sign off on marketing materials and that document retention procedures are in place to document such approvals. DSOs using a common brand should disclose that the DSO does not own the practice and consider whether they should register with the Dental Board as a dental group advertiser.
• Near-Term: Align with the AG's Enforcement Expectations. MSOs/DSOs should ensure that decision-makers and leadership understand the organizational boundaries between management support and clinical operations, particularly the activities specifically enumerated under SB 351 as indicia of improper control. Management services agreements should be reviewed to confirm they accurately reflect these boundaries. Practice-owner approval of clinical standard operating procedures should be documented, and any incentives tied to sales, revenue or product promotion should be reviewed by counsel. All restrictive covenants with providers should be reviewed for compliance with SB 351. Additionally, MSOs and DSOs using stock transfer restriction agreements, assignable purchase options or similar mechanisms should review them with counsel. Though the AG argued in the Art Center Holdings amicus brief that such structures constitute CPOM violations, that position has not been adjudicated, and the ADMI settlement's silence on these agreements suggests the issue remains unresolved.
• Conservative Long-Term Approach. In the event the court approves this settlement, MSOs/DSOs should consider whether any changes should be made to leasing arrangements in light of the AG's position that MSOs/DSOs should not own practice real property. Platforms could also evaluate transitioning revenue-based management fees to flat or FMV-based structures and restructuring MSO/DSO employee compensation tied to practice revenue. However, as discussed above, certain AG positions on these matters are not rooted in California law and are commonly used in the healthcare industry in California and across the country.

Conclusion

The ADMI settlement in California is a reminder that now is the time for stakeholders to review their marketing campaigns and operational procedures. It remains to be seen if this enforcement action is isolated and unique to the facts of ADMI's operations in California or if there will be a series of investigations forthcoming. It takes time to develop these cases, but the settlement is a clear indication that the AG is willing to enforce California law and impose even more burdensome contractual restrictions. Stakeholders in the medical and dental industries should learn from the lessons in the complaint and settlement and be prepared to defend their practices and operational history. Investing in strong compliance practices and thorough documentation will help mitigate risk and ease the administrative burden of addressing any future scrutiny.

Notes

¹ ADMI has faced similar enforcement actions in other states. In January 2023, the Massachusetts AG's Office announced a $3.5 million settlement with ADMI resolving claims that ADMI allegedly engaged in bait-and-switch advertising, including charging patients for services advertised as free and claiming to accept "all" insurance when it did not accept MassHealth. In June 2015, the New York AG entered into a settlement with ADMI that included a $450,000 civil penalty and required ADMI to restructure certain arrangements and make disclosures that Aspen Dental-branded practices are independently owned and operated by licensed dentists.

² Not all DSOs have registered, which makes sense since operations would need to line up with that registration's requirements.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.