Advisory Resources For Physicians

Understanding Corporate Practice of Medicine Laws by State

Posted by Eric J. Yetter on Aug 25, 2017 3:10:35 PM
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Many states prohibit what is commonly referred to as “corporate practice of medicine” (“CPOM”). In general, CPOM prohibitions don’t allow business corporations to practice medicine or employ physicians to provide professional medical services. That being said, there are exceptions that depend on the state with many legal “workarounds” having been developed.

Typically, CPOM laws allow hospitals to employ physicians since their specific purpose is to treat patients and provide healthcare services through some form of professional corporation or entity - so long as each shareholder is a licensed physician.

The breakdown by state below is the simplest way of gaining a general sense of these laws. These laws have been summarized below from the Corporate Practice of Medicine Doctrine 50 State Survey Summary, written by Mary H. Michal, Meg S.L. Pekarske, and Matthew K. McManus.

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Eric Yetter is Managing Partner at PhysiciansFirst Healthcare Partners - a boutique investment bank  focused on physician-owned assets. He can be reached at (615) 647-6805 or via e-mail at eyetter@physiciansfirst.com. PhysiciansFirst is at the forefront of private equity's interest in ophthalmology practices and offers regular guidance on:

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Here is the CPOM law summary by State:
  • Alabama
    • State does not prohibit physicians from working with corporations as long as the corporation does not exhibit control over the physician’s independent medical judgement
  • Alaska
    • No CPOM prohibitions
  • Arizona
    • Corporations cannot practice optometry through employing licensed optometrists or by arranging patients to specific optometrists
  • Arkansas
    • Limited liability companies that engage in medical practice must register with the Arkansas Medical Board and comply with the Medical Corporation Act
    • Three entities may be formed to practice medicine:
      • Medical corporations that have licensed physicians as shareholders and directors
      • Hospital or medical service corporations
    • Health maintenance organizations
  • California
    • Non-profit medical research corporations, narcotic treatment programs, and hospitals owned by a health care district can charge for professional services
    • Corporations and other artificial legal entities have no professional rights, privileges or powers
    • Supreme Court of California reaffirmed the state’s stance on long-standing prohibition against CPOM
  • Colorado
    • Corporations cannot practice medicine
    • Hospitals can employ physicians, but cannot exhibit control over the physician’s independent medical judgement
  • Connecticut
    • State statutes and regulations do not address CPOM
  • Delaware
    • State statutes and regulations do not address CPOM
  • District of Columbia
    • State statutes and regulations do not address CPOM
  • Florida
    • As of April 2018, Florida does not have any laws that expressly prohibits the corporate practice of medicine. In other words, a physician (M.D. or D.O) may be employed by or contracted by non-physician owned corporations for the provision of healthcare services.
  • Georgia
    • Corporations cannot employ physicians to provide medical services
  • Hawaii
    • State statutes and regulations do not address CPOM
  • Idaho
    • Hospitals cannot practice medicine nor perform surgeries
    • Physicians must have a direct relationship with patients
  • Illinois
    • Hospitals can employ licensed physicians so long as they meet certain requirements
  • Indiana
    • Certain entities and licensed physicians can have contractual relationships
      • Hospitals
      • Physicians
      • Psychiatric hospital
      • Health maintenance organization
      • Health facility
      • Dentist
      • Registered or licensed practical nurse
      • Midwife
      • Optometrist
      • Podiatrist
      • Chiropractor
      • Physical therapist
      • Psychologist
  • Iowa
    • Assessed on case-by-case level
  • Kansas
    • Licensed hospitals can employ licensed physicians
  • Kentucky
    • Kentucky Board of Medical Licensure allow physicians to be full-time employees of hospitals
    • For-profit corporations may hire physicians
  • Louisiana
    • Employment of physicians is lawful so long as the arrangement does not interfere with physician-patient relationships
  • Maine
    • Medical physicians and other license holders are individually responsible for his/her conduct regardless of employment affiliation
  • Maryland
    • Corporations cannot employ physicians with the exception of:
      • Professional service corporations
      • Hospitals
      • Health maintenance organizations
  • Massachusetts
    • Prohibits corporations from employing physicians in order to provide medical services
  • Michigan
    • Only non-profit corporations may hire physicians to provide medical services
  • Minnesota
    • Only non-profit corporations may hire physicians to provide medical services
  • Mississippi
    • Corporations may employ licensed physicians to perform medical services so long as the corporation does not interfere with the physician-patient relationship
  • Missouri
    • Corporations are allowed to employ physicians to provide medical services
  • Montana
    • State statutes and regulations do not address CPOM
  • Nebraska
    • Corporations contracting physicians does not constitute a medical practice, therefore it does not violate any laws
  • Nevada
    • Only non-profit corporations may hire physicians to provide medical services
  • New Hampshire
    • State statutes and regulations do not address CPOM
  • New Jersey
    • Physicians may offer healthcare services as an employee of a corporation so long as they fall within one of these categories:
      • Corporation is licensed by the New Jersey Department of Health as an HMO, hospital, long or short-term care facility, ambulatory care facility or other type of healthcare facility or healthcare provider
      • Corporation is not in the business of offering treatment services but maintains a medical clinic for the purpose of providing first aid
      • Corporation is non-profit, sponsored by a union, social or religious or fraternal organization providing healthcare services to members only
      • Corporation is an accredited educational institution that maintains a medical clinic for services for students and faculty
      • Corporation is licensed by the State of Department of Insurance as an insurance carrier
  • New Mexico
    • Corporations can provide medical services so long as the corporation does not interfere with the physician’s independent medical judgement
  • New York
    • Corporations cannot employ physicians to practice medicine
    • Non-profit medical, dental expense indemnity, and hospital service corporations can employ licensed physicians
  • North Carolina
    • Private corporations cannot practice medicine
    • CPOM prohibition does not extend to non-profit or public hospitals
  • North Dakota
    • Corporations cannot practice medicine in order to prevent practice of learned professions by non-professional corporations
  • Ohio
    • Corporations can provide medical services so long as the corporation does not interfere with the physician’s independent medical judgement
  • Oklahoma
    • Hospitals and related institutions can employ physicians to practice medicine
  • Oregon
    • Hospitals and related institutions can employ physicians to practice medicine
  • Pennsylvania
    • Healthcare facilities, including hospices, can employ physicians to provide medical services
  • Rhode Island
    • State statutes and regulations do not address CPOM
  • South Carolina
    • Corporations cannot employ physicians to provide medical services
  • South Dakota
    • Corporations can employ physicians so long as the corporation does not interfere with the physician’s independent medical judgement and does not gain a profit from the services
  • Tennessee
    • Non-professional corporations can practice medicine as long as there is a written contract between the physician and the corporation
    • If so, the corporation is excluded from engaging in the medical practice
  • Texas
    • Corporations cannot employ physicians to provide medical services
  • Utah
    • Corporations can provide medical services so long as the corporation does not interfere with the physician’s independent medical judgement
  • Vermont
    • State statutes and regulations do not address CPOM
  • Virginia
    • Corporations can employ physicians to provide medical services
  • Washington
    • Corporations cannot employ physicians to provide medical services
  • West Virginia
    • Corporations cannot employ physicians to provide medical services
  • Wisconsin
    • For-profit corporations cannot practice medicine through employees because:
      • Only permit individuals, not corporations, can obtain licenses to perform medical services
      • Medical professionals cannot split fees with a corporation in exchange for referrals
  • Wyoming
    • State statutes and regulations do not address CPOM
 

Topics: Surgery Center Mergers and Acquisitions, Private Equity, Physician Practice Mergers and Acquisitions