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Corporate Practice

Medical Board of California Adopts Corporate Practice of Medicine Guidelines

According to an item in the January 1999 issue of the Medical Board of California's Action Report, the Medical Board of California has adopted a perspective document intended to provide guidance in understanding the intent of the Corporate Practice of Medicine law, as well as some indications of situations which suggest when it might be violated. The Perspective, included below for reference, is viewed by the Medical Board of California as another step in the direction of assisting physicians, their attorneys, and the general public in understanding the scope of the corporate practice prohibition.

Medical Board of California's Perspective to Provide Guidance on the Prohibition Against the Corporate Practice of Medicine

The Medical Practice Act, Business and Professions Code Section 2052 provides: "Any person who practices or attempts to practice, or who holds himself or herself out as practicing…[medicine] without having at the time of doing so a valid, unrevoked, or unsuspended certificate…is guilty of a misdemeanor."

Business and Professions Code Section 2400, within the Medical Practice Act, provides in pertinent part: "Corporations and other artificial entities shall have no professional rights, privileges, or powers."

The policy expressed in Business and Professions Code Section 2400 against the corporate practice of medicine is intended to prevent unlicensed persons from interfering with or influencing the physician's professional judgment. The decision described below are examples of some of the types of behaviors and subtle controls that the corporate practice doctrine in intended to prevent. From the Medical Board's perspective, the following health care decisions should be made by a physician licensed in the State of California and would constitute the unlicensed practice of medicine if performed by an unlicensed person:

  • Determining what diagnostic tests are appropriate for a particular condition.
  • Determining the need for referrals to or consultation with another physician/specialist.
  • Responsibility for the ultimate overall care of the patient, including treatment options available to the patient.
  • Determining how many patients a physician must see in a given period of time or how many hours a physician must work.

Again, the above represents only those issues addresses by the Board to date and is not intended to be all-inclusive.

In addition, from the Medical Board's perspective, the following "business" or "management" decisions and activities resulting in control over the physician's practice of medicine should be made by a physician licensed in the State of California and not by an unlicensed person or entity:

  • Ownership is an indicator of control of a patient's medical records, including determining the contents thereof, and should be retained by a California licensed physician.
  • Selections (hiring/firing as it relates to clinical competency or proficiency) of professional, physicians extender, or allied health staff.
  • Set the parameters under which the physician will enter into contractual relationships with third-party payers.
  • Decisions regarding coding and billing procedures for patient care services.
  • Approval of the selection of medical equipment for the medical practice.

The types of decisions and activities described above cannot be delegated to any unlicensed person, including (for example) management service organizations. While a physician may consult with unlicensed persons in making the "business" or "management" decisions described above, the physician must retain the ultimate responsibility for, or approval of, those decisions.

Editor’s Note: California is on the leading edge of addressing the issues related to the corporate practice of medicine. AAEM has raised this issue in the CHW/EPMG matter in California. AAEM members need to be aware that similar prohibitions on the corporate practice of medicine exist in many states. The large EM corporations are aware of this and try to skirt these statutes by setting up sham professional associations. When examined closely, these professional associations may not hold up to scrutiny. Demonstration of physician fees flowing to a business is the acid test of corporate practice. AAEM believes these statutes, in certain circumstances, may help avoid losing one's contract to a large group or may help the pit docs win the contract away from them. Contact AAEM if further information is desired.