Delta Dental of Kansas board members, without warning, stripped member dentists of voting powers, created lifetime appointments, and superseded legislation that created the nonprofit. (Getty Images)
TOPEKA — The way Mark Troilo and Christopher Leiszler see it, a power grab by political appointees empowers Delta Dental of Kansas to abuse its control over dentists.
Troilo and Leiszler challenge actions taken by board members — who also converted their positions into lifetime appointments — in a lawsuit that provides insight into a long-brewing feud between dentists and the state’s main dental insurance provider.
About 95% of Kansas dentists participate in Delta Dental’s network because the company covers a third of the state’s population.
“I’m sorry to say this, but at this point, none of us really WANT to be with Delta,” Leiszler said in court documents. “The only reason so many dentists participate with Delta is because Delta is huge, and many of them feel they HAVE to participate in order to survive.”
A Sedgwick County district judge is expected to issue a ruling soon on whether to reverse actions taken by the board in December 2020, dismiss the case, or proceed to trial. Legal arguments are complicated by the unique status of the insurance company: The Legislature created the nonprofit in 1972.
The dentists’ lawsuit is narrowly focused on whether board members are allowed by law to unliterally declare themselves to have the power of stockholders and effectively rewrite legislation, but court filings include copies of letters, emails, affidavits and confidential meeting notes that reveal broader complaints dating to 2019.
Delta Dental of Kansas, or DDKS, characterizes Troilo and Leiszler as rogue antagonists who tried to impose radical and costly changes to the company’s operations at the expense of patients and their employers.
“The harm these proposals would cause to Kansans, Kansas employers and our company is irrefutable,” said DDKS spokeswoman Sarah Patterson.
Dentists wanted to require the company to pay the same reimbursement rates for procedures regardless of whether a dentist is in the DDKS network. Patterson said the company estimated the change in policy would result in an annual cost of $27.3 million to businesses and consumers. Dentists dispute that figure.
Before dentists could bring the proposal to a vote, board members met in secret with Kansas Insurance Commissioner Vicki Schmidt and her legal counsel to get their blessing for an extraordinary alteration of the nonprofit’s articles of incorporation. Without prior notice, the board voted on Dec. 11, 2020, to strip dentists of their authority to propose or oppose changes in company policy.
Six board members who were appointed by past governors and insurance commissioners rejected concerns raised by the four board members who are elected by member dentists.
The appointed board members include Kim Borchers, a Kansas GOP official and political consultant who served as appointments secretary for Gov. Sam Brownback — and was appointed to the board by Brownback. Former Republican state Sen. Ruth Teichman and longtime lobbyist Nancy Zogleman are among the other appointed members.
Under revisions passed by the board, members’ terms will automatically renew, allowing them to remain in place for as long as they want. The board members receive about $23,000 in annual compensation.
Patterson said the change was made “under the threat from a very small minority of activist dentists attempting to illegally seize control of DDKS from the board.”
“Board composition and deep institutional knowledge of the business and our industry are critical to the health of our highly competitive organization,” Patterson said.
Troilo and Leiszler formed an association to fight back, quickly gaining donations from more than 500 of the 1,300 member dentists to help fund the lawsuit they filed in February.
“Many dentists have become increasingly frustrated with dental insurers attempting to dictate patient treatment, deny benefits, lower reimbursements, and deceive dentists into undesirable contract agreements,” Leiszler said in an affidavit for the lawsuit.
Galvanized and angry
Troilo, who opened a dental practice in 1978 in Rose Hill, outlined complaints in an Oct. 27, 2020, letter to the DDKS board that was endorsed by 50 colleagues.
“Dentists across the state have found a voice and have become awoken, galvanized and even angered by Delta over the past few years,” Troilo said. “I write this letter because we dentists do want to be your partners; it just seems like you don’t want to be ours.”
He asked for a meeting with board members to work our their differences.
DDKS had enraged dentists by slashing reimbursement rates in 2019, setting off months of increasingly tense negotiations with member dentists. Some dentists estimated they lost 10-15% of their earnings. DDKS assets grew from $74 million in 2017 to $91 million in 2019, according to the company’s most recent financial reports.
Leiszler, who opened practice in Baldwin City after getting his license in 2005, exchanged angry emails with CEO Michael Herbert in June 2019.
“Because of your decision to lower our reimbursements this year, we have had to work harder and see more patients to make up for the revenue you have unilaterally taken away from us,” Leiszler wrote.
In response to questions for this story, Patterson emphasized compensation from DDKS to Troilo and Leiszler actually increased in 2019. Leiszler said that’s because he expanded office hours and took on more work.
Dentists proposed increased fees, and a requirement that money paid by Kansas residents stay in Kansas and be used for the benefit of Kansas patients. DDKS contends the proposals were illegal because the state’s policy is to provide affordable, flexible, consumer-focused dental benefits.
The company is especially opposed to standardizing reimbursements for procedures across all types of plans and without regard for receiving services outside of the network. By DDKS calculations, which are based on the assumption that 43% of members would leave the network, the change would translate to a $14.9 million price increase for businesses and $12.4 million for consumers.
Dave Hamel, a past president of Kansas Dental Association, disputed those calculations.
“Basically, your insurance companies line up and say, ‘Oh, that will increase costs,’ ” he said. “They never provide any information regarding that or any references for it, but they make those claims, and that pretty much is how they try to stop the conversation. I would say that I have no reason to believe them with the $27.3 million.”
Management stonewalled efforts to negotiate changes and bring them to a vote of all member dentists. In an April 2020 email, Leiszler warned that dentists “are now ‘woke’ to what’s happening, and they are restructuring their business models to enable them to drop Delta.”
Dentists are tired of being taken advantage of, Troilo wrote in his October 2020 letter.
“I sense there is a revolution coming, and it should not surprise you to see your network crumble in the coming years,” Troilo wrote.
Troilo’s attorney, Jim Robinson, asked Delta Dental’s attorney, Gary Ayers, if the board would meet with dentists. Ayers said the board planned to meet to consider the request.
“Do you need a meeting to call another meeting?” Robinson wrote.
“Cute response,” Ayers replied. “But how do we decide for the board if the board wants to meet with your clients to go over these suggested amendments?”
The real purpose of the meeting: Undisclosed plans to strip member dentists of their authority to amend bylaws.
Secrecy and control
Newton, the CEO, opened the four-hour meeting by explaining how damaging the dentists’ proposals would be to the nonprofit’s financial stability.
Meeting notes marked “confidential” and “attorney-client privileged” show board chairman Gary Yager, a Topeka banker, informed the board he had asked attorneys to draft changes that would eliminate the threat.
The strategy: Board members could seize control by declaring they hold the power of stockholders, even though the nonprofit has no stock. That would give them authority under state corporate law to alter the balance of power established by the Legislature in 1972.
Yager and Zogleman already had “visited with the insurance commissioner and her legal counsel to ensure they were comfortable with the proposed action,” according to the meeting notes.
Zogleman proposed the board take action “to provide some closure and protect the company.” Dentists “should not be able to harm the company,” she said.
Dentists who serve on the board raised concerns about the prior knowledge of changes and asked for time to digest the information. Zogleman said Kansas law doesn’t require any advance notice about the purpose of their meetings.
Yager said DDKS has enjoyed great success, “yet we keep hearing how horrible the company is from a small minority of the dentists.”
“This group of dentists also continues putting forth illegal and harmful amendments,” the meeting notes said. “He has not heard any such negative comments from other dentists and wanted to find a way to resolve this issue so DDKS can focus on its core activities and strategy, protect the company from the illegal and harmful amendments and quit wasting valuable time and resources.”
Yager, Zogleman, Borchers and Teichman approved the changes, along with Angela McClure, who works for a Lawrence construction company, and Shawn Naccarato, an administrator at Pittsburg State University.
Attorneys representing dentists sent an 11-page letter with 68 pages of exhibits to the insurance commissioner on Dec. 22, 2020, in an effort to block the changes.
The response from Justin McFarland, general counsel for the insurance commissioner, gave no indication he had prior knowledge of the board’s actions.
“It is not a regulatory matter that the department should or can get involved in,” he wrote in his response.
McFarland took a different position in an interview for this story. He said the department’s role was to review the corporate governance changes to determine whether the changes complied with state statute. He said the agency’s review relied upon Delta Dental documents filed with the insurance department.
“The insurance department’s position is the amended bylaws did not violate the statutes,” McFarland said.
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Dentists viewed the board’s actions as a power grab that should be challenged, Leiszler said in court documents.
Leiszler and Troilo formed United Dentists of Kansas to raise funds for a legal battle, and received contributions from more than 500 Kansas dentists. According to Leiszler’s affidavit, the organization surveyed 1,400 dentists and 90% agreed with concerns about DDKS.
They filed their lawsuit in February.
“By adopting those amendments, defendants have acted disloyally and in bad faith and placed their own interests in avoiding accountability to members over the interests of the company, the members, and the people of the state of Kansas, to whom they owe their fiduciary duties,” the lawsuit said.
The company attacked Troilo and Leiszler’s credibility in a May 19 memo to members, attributing concerns to “a small group of dentists” who “grossly misrepresent” the impact of proposed changes to company policy.
“Any suggestion that the plaintiffs are two lonely Don Quixote dentists tilting at windmills is disingenuous,” Troilo said in his affidavit.
Allen Reavis, who retired this year from his practice in Atchison, said in an interview he wasn’t happy with the board’s actions.
“It sounds like you can just willy nilly decide to change your articles,” Reavis said. “It just sounds really strange to me that you can do that.”
Reavis said you won’t find a dentist who is happy with Delta Dental of Kansas.
From 1984 to 2000, Reavis said, he knew he was going to be paid about 95% of the bill he submitted to the insurance company. By the time he retired, he was planning to write off about 20%.
“You’re kind of stuck taking them, but then they kind of screw you along the way,” Reavis said.
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