A Primer on Corporate Practice of Medicine

The Corporate Practice of Medicine refers to the practice of medicine by a corporate entity, rather than an individual practitioner. That is, the corporate entity employs physicians. Many states prohibit the corporate practice of medicine or otherwise regulate what types of entities may employ physicians. The rationale is often a desire that medical decision-making remain with the physician and should not be influenced by a non-physician employer. These regulations are the reasons that physician “employment” is often organized into physician groups or profession corporations.

Each state treats the corporate practice of medicine differently, but there are three general approaches. First, some states fully prohibit the corporate practice of medicine. These states do not allow physicians to be employed by non-physicians and only allow physicians to form professional corporations, professional associations, or professional limited liability companies (PLLCs) that are owned exclusively by physicians. For example, Michigan generally requires that all shareholders in a professional corporation or PLLC that engages in the practice of medicine must be licensed physicians. Some states may allow other types of licensed health professionals to own a professional entity that employs physicians.

Second, some states have no restrictions on the corporate practice of medicine or otherwise allow physicians to be employed by entities controlled by non-physicians.

Lastly, many states fall somewhere in the middle. Several states allow non-physicians to own a portion of a professional corporation that practice medicine, but limit this to a 49% interest or other non-controlling interest. Non-profit corporations may be subject to different restrictions or no restriction at all. Some states ostensibly prohibit or restrict the corporate practice of medicine but have many exceptions to their restriction. For example, Arizona has a general prohibition on the corporate practice of medicine but has several exceptions. Non-physicians may own up to 49% of a professional corporation. Further, the state licenses several types of healthcare facilities that may be entirely owned by non-physicians.

Corporate practice of medicine rules are often nuanced and have can significant impacts on business models and corporate structures, especially for healthcare providers seeking to do business in multiple states. An experienced healthcare attorney can help a provider comply with corporate practice of medicine rules.

For over 35 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters, and our attorneys can assist providers and suppliers in navigating regulation of the corporate practice of medicine. If you or your healthcare entity has any questions pertaining to healthcare compliance, please contact an experienced healthcare attorney  at 248-544-0888 or wapc@wachler.com