Orange-based Western Dental Services Inc. has laid off 237 workers as it attempts to deal with a shift in its business wrought by healthcare reform.
Western Dental operates dental offices throughout California and Texas.
The layoffs were effective late last month, according to a Worker Adjustment and Retraining Notification Act notice filed with the state Employment Development Department.
Most of the job cuts “were in … business support functions such as call center, billing and collections departments,” said Chief Executive Simon Castellanos, who added that the call center will permanently close after July.
Western Dental had to “make commensurate adjustments” in staffing after it stopped taking Denti-Cal patients at some of its offices, Castellanos said in an email.
Denti-Cal is a state- and federally subsidized dental insurance program for lower-income Californians. Castellanos said that the restoration of adult Denti-Cal benefits last year, coupled with the expansion of eligibility under federal healthcare reform, almost quadrupled visits by patients covered under the program.
A recent report by Moody’s Investor Services said the ratings agency expects Western to receive lower reimbursement rates on insurance overall because of the higher frequency of Denti-Cal patient visits compared with higher-paying commercial insurance or cash-pay patients.
The company said in a news release that Denti-Cal’s reimbursements have not been adjusted for inflation since 2001 and were cut another 10% two years ago.
Moody’s predicted that Orange-based Premier Dental Services Inc., the parent of Western Dental, would likely violate its loan agreements during the next year to 18 months if it didn’t add more patients with standard dental insurance or the ability to pay cash for services.
Western stopped taking Denti-Cal at 13 of its 150 offices in California. It now employs about 700 workers at its corporate office and 4,500 companywide, and said it does not expect any additional job cuts.
“We believe we have adjusted appropriately to manage effectively in the current business environment,” Castellanos said.
Premier Dental will soon need its private equity backer, New York-based New Mountain Capital, to provide an additional infusion of capital, according to Moody’s.
The agency downgraded Premier’s corporate family rating to “Caa1” from “B3”; its probability of default rating to “Caa-1-PD” from “B3-PD”; and a senior secured bank credit line rating to “Caa-1” from “B-3” with a negative rating outlook. The agency said some $325 million of rated credit lines were affected by the action.
B3 and Caa-1 ratings are below investment grade, according to the agency’s online rating guide.
The rating agency said in a news release that its action “reflects the company’s weak operating performance and the deterioration of credit metrics beyond Moody’s prior expectations,” attributing the outlook to the increase in Denti-Cal patients.
Castellano declined to discuss financial details of Premier or Western. He said private equity backer New Mountain is “fully supportive” of the company, “and they have worked with our lenders to financially support the future success of the company.”
