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Can a Corporation Be Your Doctor?

By on April 21, 2016 in Uncategorized with 0 Comments

With the recent and continuing proliferation of ambulatory care facilities, drug treatment facilities, and diagnostic, therapeutic, and ancillary care services frequently under the same roof as medical practices, it is essential that physicians and other licensed practitioners ensure that the structure of their practice complies with the Corporate Practice of Medicine (CPOM) doctrine and associated regulations.

While some states have done away with the CPOM doctrine, the doctrine is alive and well in both Pennsylvania[1] and New Jersey.[2]  In essence, the CPOM doctrine prohibits a practitioner from providing health care services as an employee of a general business corporation or a business entity in which the shareholders are not all licensed practitioners (however, there are several exceptions to this rule found in the regulations).[3]  The rationale behind the CPOM doctrine is to create a barrier between the practitioner, who must act in patient’s best interests, and corporate shareholders, who seek to maximize profits, thereby eliminating any influence in the provision of medical care from a corporate shareholder.

In light of the CPOM doctrine, a practitioner must be careful in how his/her practice is structured and the shareholders thereof. The following are several common structures which are generally permissible.

Solo Practice.  A practitioner may practice solo and/or may employ or otherwise remunerate other licensed practitioners to render professional services within the scope of practice of the employee’s license.   However, it is important to ensure that the scope of the employee’s license does not exceed that of the employer’s license.  For example, a nurse, chiropractor, optometrist, psychologist, or other professional holding a limited licensed may not employ a physician who holds a plenary license to practice medicine.

Limited Liability Company, Professional Association, Partnership.  While the CPOM doctrine generally prohibits the practice of medicine through a general business corporation, a limited liability company, partnership, and professional association are expressly allowed under the regulations, so long as such entity is composed solely of health care professional shareholders, each of whom is duly licensed or otherwise authorized to render the same or closely allied professional services.  Closely allied fields include chiropractic, dentistry, nursing, nurse midwifery, optometry, physical therapy, podiatry, psychology, and social work.

Associational Relationship with Other Practitioner or Professional Entity. In this scenario, a practitioner would be an employee or independent contractor, for any form of remuneration, of the other practitioner or professional entity; however, the scope of the employer’s license must be equal to or exceed that of the employee/contractor.

Shareholder or Employee of a General Business Corporation.  Such a form is permissible, but is limited to the following circumstances, in which the corporation is:

  • Licensed by the New Jersey Department of Health and Senior Services as a health maintenance organization, hospital, long- or short-term care facility, ambulatory care facility or other type of health care facility or health care provider, such as a diagnostic imaging facility;
  • Not in the business of offering treatment services but maintains a medical clinic for the purpose of providing first aid to customers or employees and/or for monitoring the health environment of employees;
  • A non-profit corporation sponsored by a union, social or religious or fraternal-type organization providing health care services to members only;
  • An accredited educational institution which maintains a medical clinic for health care service to students and faculty; or
  • Licensed by the State Department of Insurance as an insurance carrier offering coverage for medical treatment and the licensee is employed to perform quality assurance services for the insurance carrier.

In less common circumstances, a licensed health care professional may also have an equity interest or be employed by a professional practice (including a professional service corporation or limited liability company) which is a limited partner to a general business corporation which, in turn, has a contractual agreement with the professional service entity.  The general business corporation may contract to provide the professional practice with services exclusively of a non-professional nature, including routine office management, hiring of non-professional staff, provision of office space and/or equipment and servicing thereof, and billing services. The practitioner, however, remains responsible to assure that an appropriate licensed health care professional determines and carries out all services and medical care including retention of sole discretion regarding establishment of patient fees and modification or waiver thereof in an individual case. As a condition of such contractual arrangement, the general business corporation may make no representations to the public of offering, under its own corporate name, health care services which require licensure.

In all, there are a variety of business structures which allow practitioners to provide professional services while being employed, partnering with, and/or engaging the services of other licensed professionals.  However, given the structural complexity of many modern medical entities (i.e. captive practices, MSOs, etc.), it is vital to ensure that any corporate arrangements comply with the statutory and regulatory requirements of the CPOM doctrine.


[1] See Neill v. Gimbel Bros., Inc., 199 A. 178, 182 (Pa. 1938).  Please note that while the PA CPOM doctrine remains, this blog focuses on New Jersey’s regulations thereof.

[2]See N.J.A.C. 13:35-6.16; see generally Michal et al., CORPORATE PRACTICE OF MEDICINE DOCTRINE 50 STATE SURVEY SUMMARY, available at http://www.nhpco.org/sites/default/files/public/palliativecare/corporate-practice-of-medicine-50-state-summary.pdf.

[3] See N.J.A.C. 13:35-6.16(f)(4); Selective Ins. Co. of America v. Medical Alliances, LLC, 362 N.J. Super. 392, 395, fn.1 (Law Div. 2003) (“the Legislature has carved several statutory exceptions from this common law ban against the corporate practice of professional services to permit hospitals, nursing homes and certain other “ambulatory care” facilities to operate as general business corporations. The rationale for this exception is that the adverse influences and countervailing interests peculiar to a business corporation are minimized and overshadowed by their public necessity, by a public need to assure institutional continuity, and by the fact that such entities are regulated and inspected by the State Department of Health and Senior Services, thus providing similar protections otherwise provided by the regulations of the State Board of Medical Examiners, N.J.A.C. 13:35-6.16(f)(4), which limit the ability of its licensees to be shareholders or employees of a general business corporation to five settings.”)

 

Questions regarding this article may be sent to Publications@Capehart.com

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