What You Need to Know About Corporate Medicine: Part 2

The corporate practice of medicine: Do I need to worry about it?

BY MATTHEW ZIFRONY

Editor's note: This article is the second in a three-part series that seeks to help ophthalmologists who may be considering entering the world of corporate medicine. Part 1 discussed how doctor-vendor relationships vary depending on the state in which you conduct business; part 2 discusses the ins and outs of corporate-practice-of-medicine statutes and the reasons why ophthalmologists should not ignore these issues as they relate to doctor-vendor relationships; part 3 outlines steps that ophthalmologists can take to mitigate mistakes in complying with statutory regulations and ensure they are properly managing their relationships with vendors and management companies.

Most, if not all, states have some form of corporate-practice-of-medicine statutes. These statutes prevent a non–physician-owned company from hiring a doctor and using the company's authority as "boss" to control the doctor's medical decisions. Without these statutes, the company, through its non-licensed doctors, would effectively be practicing medicine.

Ophthalmologists who own the office where they work rarely have to worry about corporate-practice-of-medicine statutes. However, ophthalmologists who work for non–physician-owned companies must take heed of these statutes, but often do not.

In this article, I will discuss what restrictions are involved in these statutes, as well as reasons why many doctors may choose to ignore corporate-practice-of-medicine issues. Additionally, I will detail the implications for not complying with these statutes.

Different Types of Restrictions

Many states permit doctors to work for a company, as long as the company does not assert control over the medical decisions that the doctor makes or the manner in which the doctor practices medicine. In these states, companies are allowed to employ ophthalmologists as independent contractors instead of more traditional employees. Because the difference between these two forms of employment is often minimal, companies can easily structure their relationships with ophthalmologists so that a corporate practice of medicine violation does not take place. This has resulted in ophthalmologists being less inclined to worry about a violation.

However, even in these states, including the wrong language in an independent contracts agreement or receiving the wrong benefits from a company will convert a proper independent contractor's relationship into an improper employee relationship.

Other states are more restrictive in how they have enacted corporate-practice-of-medicine restrictions. In these states, an ophthalmologist is not permitted to work for a company as an independent contractor or otherwise. The ophthalmologist must instead hire the company to provide non-medical services. In doing so, he or she takes on the risk that there will be enough revenue generated from the medical services that the ophthalmologist provides to pay both himself and the company. Because a company's hiring him allows the ophthalmologist to avoid this risk, he is given an incentive to ignore corporate-practice-of-medicine issues in these states.

Convenience of Working for a Company

Doctors typically focus on providing medical services and nothing else. Many do not have the time or patience to deal with the administrative challenges of running their own offices. By working for a company, doctors can avoid these tasks.

In addition, most doctors dislike the marketing tasks and other steps in a business that are necessary to attract patients and grow their practices. Doctors are not trained in advertising and marketing, and rarely know how to do it effectively, let alone enjoy it. Working for a company usually means that the company takes care of these functions while leaving the doctor to focus on what he or she enjoys the most — the practice of medicine.

Impact of Violations on Doctors

Ophthalmologists seem less inclined to worry about corporate-practice-of-medicine issues because they believe that regulators will hold only the company responsible for violations. As long as an ophthalmologist is properly licensed to practice, the owner of the company where he practices is often of little consequence. Hence, many ophthalmologists believe that they cannot be impacted by a violation.

There are a variety of ways that corporate-practice-of-medicine violations can and will impact an ophthalmologist. First, and probably most important, corporate-practice-of-medicine violations often go hand in hand with violations of anti-fee sharing and anti-kickback statutes, for which an ophthalmologist could be held responsible. An ophthalmologist's violation of these statutes could not only impact his or her license to practice medicine, but could even result in criminal charges being filed against the ophthalmologist.

Second, an ophthalmologist's name and reputation could be harmed if the public learns of his involvement with a non-compliant company. For example, if the violation is picked up by the local news media, the public rarely understands the true nature of the violation. All people hear is the name of the company, the doctor involved, and the fact that the doctor was working for an illegal business.

Finally, an ophthalmologist's contract with a company may be voided if the company is found to have been conducting its business in a non-compliant manner. This will negate any goodwill that the ophthalmologist has built up due to his relationship with the company and force the ophthalmologist to have to deal with the hassles of changing the company for whom he works.

Know the Risks

The opportunity for ophthalmologists to guarantee their income while avoiding any involvement in the administrative functions needed to effectively operate their medical office is often too good to let pass. With a medical license in hand, many of these doctors fail to take into consideration the corporate-practice-of-medicine issues, as well as the impact of working for a company that violates statutes overseeing these regulations. The ramifications for being associated with a company found to be in violation of corporate-practice-of-medicine statutes can often be high, so ophthalmologists should consider this before signing a contract with a non–physician-owned company. OM

Matthew Zifrony is a partner with the law firm of Tripp Scott, P.A. in Fort Lauderdale, Fla. He serves as outside general counsel to a national LASIK surgery company and has overseen the legal needs of ophthalmologists and optometrists throughout a good part of his legal career. He can be reached at mzz@trippscott.com.