Corporate Practice

California Court Upholds Corporate Practice of Medicine Ban

Excerpt from an article appearing in the June 29, 1999, edition of CMA Alert, a publication of the California Medical Association (CMA).

On July 23, California Superior Court Judge Judith Chirlin issued a ruling granting a preliminary injunction and authorizing CMA and the Santa Monica Anesthesiology Medical Group to proceed in their lawsuit against the Regents of the University of California.

In granting the preliminary injunction, Judge Chirlin's ruling saw merit in most causes of action in the suit, and she found that "there is a likelihood that plaintiffs will prevail on the merits of one or more of the causes of action," including state laws banning the corporate practice of medicine and unfair competition.

Judge Chirlin stated, "The Regents' argument with respect to its claimed exemption from the corporate practice ban, essentially that all activity in its facilities are 'teaching activities,' strains credulity." The lawsuit alleges that the Regents, doing business as UCLA Medical Enterprises, had implemented a business plan after acquiring Santa Monica Hospital that coerced private practice physicians to become UC employees, and effectively prevented UC physicians from referring patients to physicians outside of UCLA's network. In enjoining the Regents from terminating the anesthesiology group's privileges to practice at Santa Monica Hospital, Judge Chirlin found that "the harm to the plaintiffs in maintaining their practices (i.e., earning their living) and in disruption to patient care" was far greater than the impact on the Regent's future plans.