The MSO model allows non-MD (non-physician) entrepreneurs to create a robust business model for the healthcare venture in which they do not partner or share professional fees with the medical doctors, but rather take an MSO or management fee in exchange for their management and marketing efforts. State licensure laws, including fee-splitting and the Corporate Practice doctrine, can complicate that collaboration. Title 32 32-1454, 1455 (authorizing injunction against practice of medicine by one not licensed to practice or not exempt from licensing requirements) A.R.S. The first section of this article explains the constraints on ownership of medical businesses imposed by the corporate practice of medicine doctrine.The second section of the article details the role of the professional medical corporation, which is the only business entity permitted to provide medical services or employ physicians in California. Please see Title 43, Chapters 1 and 11, for general provisions and dental law, respectively. You may access the Board Rules by clicking here. While there often is a Corporate Practice of Medicine exception for hospitals that hire physicians, the AGs rationale in the 1995 opinion, cited above, provides a good statement of the logic behind the weak version of the prohibition against Corporate Practice of Medicine. 178 (1938), which has not been overruled or modified in the 82 years since the original holding. However, the MSOs services must not interfere with the professionals medical (clinical) judgment or otherwise result in MSO control over the medical aspects of the medical practice. https://cohenhealthcarelaw.com/michaelhcohen/wp-content/uploads/2022/08/cohen-healthcare-horizontal-2020_v2.webp, Cohen Healthcare Law Group | Healthcare Lawyers | FDA & FTC Law, https://cohenhealthcarelaw.com/michaelhcohen/wp-content/uploads/2018/05/bigstock-modern-business-buildings-6268132.jpg. There are many benefits to operating a business in a corporate form. Medical Spas Healthcare Facilities Understanding these questions is essential to structuring medical business and management service entities in accordance with the law. Our state licensure and corporate practice attorneys have counseled clients on a number of aspects of state law, including matters related to: Representation in Joining a Practice Management Platform, Epstein Becker Green Successfully Advises on Regulatory Issues for Mental Health Platform, Epstein Becker Green Announces 2023 Promotions, Epstein Becker Greens Lasting Support of AHLA Recognized in 2022 Top Honors and New Leadership Positions, Sarah Hall, Elena Quattrone Quoted in Conflicting State Laws and Unpredictable Enforcement Await Providers in Post-, Anjana Patel Quoted in How Group Practices Can Plan for Partial Retirements, Epstein Becker Green Welcomes Glenn Prives, Health Care and Corporate Attorney, Health Care & Corporate Law Attorney Glenn P. Prives Joins Epstein Becker Green. (Bill) Kalogredis, Esq. Private equity and other nondoctor investment in U.S. health care has grown significantly over the past decade thanks to. As business opportunities abound for both licensed physicians and non-licensed entrepreneurs and investors, in the ownership and operation of ambulatory care facilities, drug treatment facilities, and diagnostic testing facilities, physicians, licensed practitioners, and businesspersons must ensure that the structure of their business complies with the Corporate Practice of Medicine (CPOM . She represents physicians, dentists, medical group practices, and other health-related entities in transactional, regulatory, and compliance matters. Other state regulations also determine the composition of ownership in medical organizations such as medical spas. The presence or absence of the appropriate agreements (shareholder control agreement, management service agreement, or employment agreement) can help determine what development is necessary for further consideration. 43-11-17 (2010) . The PSC and the Parent should have safeguards in place to ensure that compensation of physician employees is reasonable. Ask the Parent of the applicant to provide the following written representations: The Parent's SCA with the physician shareholder is enforceable at law and in equity., The Parent will not suffer or permit the physician shareholder (together with all successors, heirs and assigns of the physician shareholder and all subsequent designees holding the corporation's stock) to financially benefit in any manner, directly or indirectly, from the physician shareholder's legal ownership of the stock of the corporation as the designee and fiduciary of the Parent., The Parent will expeditiously and vigorously enforce all its rights in the shareholder control agreement and will pursue all legal and equitable remedies to protect its interest in the assets and stock of the corporation., Carefully review all organizational documents. Medicare/Medi-Cal Audits, Appeals and Overpayment Disputes, Moscone-Knox Professional Corporation Act, majority of the shareholders must be licensed. Under the auspices of protecting the public, the American Medical Association (AMA) promulgated the initial version of the CPOM doctrine. 3 State law may provide for specific exceptions; for hospitals, for example. GEORGIA COMPOSITE MEDICAL BOARD MINUTES June 7-8, 2012 Page 4 of 26 Dr. The answer is invariably nuanced. 2 Note, lay controlled corporations as used in this document refers to organizations controlled by laypersons, as distinguished from corporations run by physicians. Corporate Practice of Medicine Allstate Insurance Company vs. Northfield Medical Center The New Jersey High Court unanimously reinstated an insurance company's fraud claims and $4 million dollar verdict against a management company, its owner the their attorney for knowingly violating the Corporate Practice laws. legally may provide medical services except under the supervision, control and responsibility of a licensed physician. Official Code of Georgia Annotated, Title 43, Chapters 34 and 34A (O.C.G.A. 178 (1938), which has not been overruled or modified in the 82 years since the original holding. Georgia law provides a fairly typical definition of the practice of medicine (O.C.G.A., Section 43-34-21) as well as a prohibition against unlicensed practice of medicine (Section 43-34-22(a)). There are a few exceptions to the CPOM doctrine in Pennsylvania, including practicing medicine through a professional corporation, limited liability partnership, or restricted professional company. A majority of states restrict the practice of medicine and dentistry by entities that are not owned and controlled by the relevant licensed professionals. There are also a lot of subtle layers of influence, as California indicates on its Corporate Practice of Medicine web page, including: These are criteria that Californiaa strong corporate practice of medicine stateuses to assess whether there has been a corporate practice of medicine violation. 3. The corporate practice of medicine doctrine is a medical practice act aimed at protecting patients from deceptive behavior that might come with the private ownership of medical corporations by non-licensed individuals including: 1992 Op. Law360, New York (December 11, 2015, 10:29 AM EST) --. There must be no inurement to stockholders in the form of dividends or profits on transfers of their stock, distributions in the event of dissolution, or excessive compensation. Failing to do so may result in professional misconduct and/or unlicensed practice of the profession. Negotiating, or assisting other counsel in negotiating, with lenders and insurance providers concerned about state law and/or corporate practice of medicine compliance. However, given the structural complexity of many such medical entities, including MSOs, it is vital to ensure that any corporate/business arrangements comply with the requirements of the CPOM doctrine. Some medical spas are opened by nurses, believing that because you have a medical license you can do whatever you want. The applicant must describe in detail the methods and procedures through which the exempt parent controls the shareholder. The roles played by these agreements may vary from applicant to applicant. Following a model known as Practice Perfect, a New Jersey chiropractor incorporated a management company and a medical practice. Partner | Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). Lets just say that these are appropriate arenas for MSO involved. Rul. This is good news if you are planning a multi-state or national model of health and wellness services, whether through physical healthcare clinic sites or digital health or mobile health (telemedicine, etc.). Ownership is an indicator of control of a patients medical records, including determining the contents thereof, and should be retained by a California-licensed physician. The official Administrative Rules are published separately from the law and further clarify the regulations form the OCGA and are specific to the professions licensed by the Georgia Composite Medical Board. GEORGIA 1 Chart of Sources 2 Summary 3 Key Professions 4 Entities . The Parent (not the shareholder) initiates all actions regarding the election and removal of the corporations board of directors. Chad D. Ehrenkranz. However, two more recent cases applying Pennsylvania law (albeit by non-Pennsylvania courts), further caution about the structure of these private equity (or other non-licensed entities or people) and medical and dental arrangements. Strong v. Weak Corporate Practice of Medicine States. In some states (for example, California), it can be a percentage of gross revenues, whereas in other states (for example, New York), the management fee, at least historically, has had to be a flat fee. the corporate practice of medicine regulations are action-able against your license to practice podiatry. Responding to state professional board inquiries, information requests, complaints, investigations, and other related matters. The decisions described below are examples of some of the types of behaviors and subtle controls that the corporate practice doctrine is intended to prevent. Additionally, if you are found guilty of commit-ting a crime, by illegally being involved in the corporate La. But it is not the law, simply a restatement of what the medical board interprets the law. Many lawyers say that corporate practice of medicine is dead that this is a new age of healthcare and we no longer need to worry about these old 20th century, or maybe 19th century healthcare rules. Most states do not allow you, a licensed professional, to facilitate what is, in effect, the unlicensed practice of medicine/ podiatry. The private physician-patient relationship shall be maintained; and a subscriber shall at all times have free choice of any doctor of medicine, doctor of dental surgery, or podiatrist who is a participating physician in the medical service corporation and who agrees to accept a particular beneficiary as a patient. In Maryland, the corporate practice of medicine doctrine prohibits a corporation from operating a physician practice, unless the corporation is owned exclusively by physicians or related licensed professionals, or the corporation is itself licensed or statutorily permitted to practice medicine, as is the case . If you ask, if enforcement likely, thats another story. Concierge Medical Practices The Corporate Practice of Medicine (CPM) doctrine continues to befuddle, beleaguer, and bewilder healthcare companies seeking to venture with physicians and non-physician entrepreneurs. Part Two. Because unlicensed and corporate practice of medicine are considered crimes, its important before starting up any healthcare venture to consult alaw firm that knows the ins and outs of the corporate practice of medicine doctrine. Substance abuse treatment centers must steer carefully when sending patients for labs. . Setting the parameters under which the physician will enter into contractual relationships with third-party payers. The Medical Board of California continues to receive complaints and inquiries about the law, and some repeating issues are presented here. To get to the prohibition against the corporate practice of medicine (or Corporate Practice of Medicine), you have to put these three sources together. Joshua Kaye. The PSC should maintain its own charity care policy for its activities to further the exempt purpose of the Parent. Another risk is fee-splitting, which many states prohibit to reduce the likelihood that unnecessary medical services will be provided to maximize income. Exclusive Decisions vested in the Professional Medical Corporation/ Practicing Physician Professional Medical Corporation/ Practicing Physician has sole responsibility for the decision. Also, because it is allowed only to provide professional services, it can only manage the services that it provides. https://cohenhealthcarelaw.com/michaelhcohen/wp-content/uploads/2022/08/cohen-healthcare-horizontal-2020_v2.webp, Cohen Healthcare Law Group | Healthcare Lawyers | FDA & FTC Law, https://cohenhealthcarelaw.com/michaelhcohen/wp-content/uploads/2014/12/bigstock-doctor-meeting-teamwork-diagno-108851294.png. Attorney advertising. Since California is a state that follows the corporate practice of medicine doctrine, those thinking of practicing medicine or even opening their own practice must be mindful of the roles non-licensed individuals play in the corporation. Because of the CPOM doctrine, non-physician investors desiring to offer physician services (alone or with other services) often set up two entitiesa professional corporation that employs physicians through which physician services are furnished (often referred to as a captive PC or friendly PC), and a management services organization (MSO) that, under contract with the professional corporation, furnishes all non-physician services to the business (e.g., space, equipment, non-physician staffing, billing and collection, and other functions). The American Health Law Association (AHLA) Corporate Practice of Medicine survey more thoroughly examines the variation of practice restrictions by each state as they relate to behavioral health providers, chiropractors, and other types of health care professionals. Its very much dependent on your exact model. It is important that practices are informed of these regulations from the start of their business operations to ensure they are not engaging in fraud or other illegal activities. In terms of risk mitigation, here some key legal strategies the healthcare venture can bake into its operational plan: Your healthcare lawyer can provide nuanced advice as what is good for business, often is fodder for enforcement; and conversely, what is most compliant, is often neither efficient nor profitable. has been advising physicians, dentists, and other health care professionals and their businesses as to contractual, regulatory and transactional matters for over 45 years. It cannot offer physical therapy services, speech services or any other professional services. ME-P Publishing. in your telemedicine venture? Guidelines for analyzing professional service corporation cases involving the Corporate Practice of Medicine (CPOM). What Is the Corporate Practice of Medicine? 610-701-4416. Is the MSO going too far into medical practice, in the eyes of the regulators who enforce the corporate practice of medicine prohibition? And the prohibition against corporate practice often isnt written into statutes; the statutes prohibit unlicensed practice of medicinereferencing to individuals. Whatever the medical board says on its website is a good indication of the medical boards enforcement position. one or more persons licensed pursuant to the medical practice act of 1987, as heretofore or hereafter amended, may form a corporation pursuant to the "business corporation act of 1983", as amended, to own, operate and maintain an establishment for the study, diagnosis and treatment of human ailments and injuries, whether physical or mental, and Cannabis Ventures On a final note, according to CMB, under California Law, the following business or management decisions and activities, resulting in control over the physicians practice of medicine, should be made by a licensed California physician and not by an unlicensed person or entity: Furthermore, the types of decisions and activities described above cannot be delegated to an unlicensed person, including (for example) management service organizations. Decisions regarding coding and billing procedures for patient care services. The SCA imposes the provisions of IRC 501(c)(3) on the operation of the PSC. Privacy, Cybersecurity & Data Asset Management, Physician-Owned Management Services Organizations: Regulatory Compliance, Contract Considerations, Enforcement, Clifford Barnes Featured in Follow the Brand Podcast: Wise Counsel, Sarah Hall, Elena Quattrone Quoted in Conflicting State Laws and Unpredictable Enforcement Await Providers in Post-Roe America, Glenn Prives Featured in Bloomberg Law Wake Up Call: Laterals, Moves, In-House, NJBiz Features Glenn Prives in Health Care Attorney Joins Epstein Becker Green. WE PROVIDE LEGAL STRATEGY & REGULATORY ADVICE TO BUSINESSES THAT ACCELERATE HEALTH AND WELLNESS, Addiction Treatment Centers However, they can own a management entity which can serve as an administrative and non-medical, management services organization (MSO) for the clinic or medical practice, which is frequently organized as a professional medical corporation (Professional Medical Corporation). The "corporate practice of medicine" doctrine arose out of early-20th-century efforts by the American Medical Association to professionalize medicine through the development of an ethical code preventing quackery and the commercial exploitation of physicians. The management fee must be at fair market value. Corporate Practice of Medicine Exceptions. The corporate practice of medicine doctrine has been shaped over the years by state statutes, regulations, court decisions, attorney general opinions and actions by state medical licensing boards. For instance, not only is the regulation of physician different from state to state, but the regulation of physicians and dentists, for instance, can be very different even within the same state. The corporate practice of medicine doctrine is a medical practice act aimed at protecting patients from deceptive behavior that might come with the private ownership of medical corporations by non-licensed individuals including: The commercialization of the practice of medicine The imbalance between patient obligations and stakeholder obligations Interference of a physicians medical judgment due to outside influences. Compliance Issues for Consulting Fees, Honoraria, Medical Directorships, and Other Types of Remuneration. You may access the full text of the Georgia OCGA at site here. A.S 08.64.170 (prohibiting unlicensed practice of medicine) ARIZONA Statutes A.R.S. Dr. White declared the Board would then be in Open Session. The court concluded that the medical practice was essentially under the control of the management company and the physician was a nominal owner; thus, because the medical practice was not legitimately structured, it was not allowed to submit medical insurance claims. Things are state-specific. 69545. public policy considerations underlying the cpom include concerns that the corporate employment or control of a licensed professional: (1) commercializes and debases licensed professions; (2) undermines the physician-patient relationship and the physician's exercise of independent medical judgment; and (3) allows unlicensed corporate entities to You may access the full text of the Georgia OCGA at site here. 4 Although meeting the integral part test suffices for the operating test, traditionally applicants have also provided or been asked to provide information to establish that they also meet the flexible community benefit standard" derived from Rev. In order to avoid regulatory pitfalls, however, contractual MSO arrangements need to be structured carefully to ensure that . Unlike the corporate practice of medicine, Florida expressly prohibits the corporate practice of optometry. Compliance Issues for Consulting Fees, Honoraria, Medical Directorships, and Other Types of Remuneration. Colorado Revised Statutes Title 12. PSC and Shareholder abide by terms and conditions of an SCA acceptable to Manager. We will be focusing on the exclusive decisions of the Professional Medical Corporation/Practicing Physician and the MSO respectively and decisions where neither party may solely make ultimate decision. 2009) and Warren J. Apollon, D.M.D., P.C. This and resulted in a $4 million verdict in favor of Allstate. For health care investors considering a venture in a health care service that requires professional licensure, consulting with an attorney broadly experienced in the web of state-specific laws and regulations can help ensure efficient platform structuring and enterprise compliance and avoid criminal liability. Similarly, in Allstate Insurance Company vs. Northfield Medical Center, P.C., 228 N.J. 596, 159 A.3d 412 (2017), the New Jersey Supreme Court affirmed a trial courts conclusion that a New York lawyer and a California chiropractor violated the states Insurance Fraud Prevention Act (IFPA) because they promoted and assisted in the creation of a practice structure that was designed to circumvent regulatory requirements with respect to control, ownership and direction of a medical practice.. (a) Health care corporations shall have the right to sell contracts providing for the payment of specified charges made by participating physicians furnishing medical or surgical care, or both, to the holders of such contracts, their beneficiaries, and covered dependents as provided for in this Code section. For example, what if the telemedicine or digital health venture or mobile app guides the user (aka patient) to a specific pathway of diagnostic tests and/or treatments? The motion carried unanimously. The state-level laws governing the conduct of licensed professionals and their investors or partners may appear in general laws, criminal laws, common or judge-made law, corporate formation requirements, Attorney General opinions, professional licensing laws or rules, or even in informal announcements or contested case determinations of applicable licensing boards. Section 33-18-17, a statute that deals with nonprofit medical service corporations, states that this statute shall not be construed as authorizing the corporate practice of medicine.. Often, this language appears inconsistent when read in conjunction with the laws created to govern a Professional Corporation formed under a state's business corporation laws. Search Georgia Code. A nuanced approached is best, and that is how our healthcare lawyers roll. There are exceptions to the one field rule, notably in the Moscone Knox Professional Corporations Act, which allows some licensed healthcare professionals to be directors, employees, or shareholders in another professional corporation. Our attorneys understand the high-stakes nature of these prospective ventures and the complex interplay of legal and practical considerations, and regularly work closely with other tax and corporate advisors to ensure that management and related structures address all of their clients legal needs and practical goals. Georgia Dental Law. Corporate Practice of Medicine. 63-6-204(b). Health Care Law, Workforce Management Lawyer, Litigation Attorney. By Steve Polyakov June 28, 2021, 5:57 PM EDT. 3. These documents should have established adequate control by the exempt parent. Dietary Supplement Companies When evaluating the various legal and regulatory hurdles associated with telehealthsuch as licensure, reimbursement, and privacy one hurdle that often goes overlooked is the corporate practice of medicine. 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