Contracting 101: Tips for Physicians and Health Professionals-Part 12

Monday, April 14, 2014
By Christopher E. Brown, J.D., The Health Law Firm and George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

Tip 28-Verify That the Relationship Between the Physician and the Employer is Legal.

Our contracting blog series was created to identify and explain the different provisions of a physician's employment or independent contractor agreement.  However, sometimes it's necessary to look beyond the written language of the contract and determine if the very relationship between the physician and employer is legal.

More than 10 years ago, the Florida Legislature enacted the "Health Care Clinic Act."  The primary purpose behind this legislation was to require non-physician owners of health care entities to have the clinic licensed through the Agency for Health Care Administration (AHCA). There are some exemptions enumerated within the Act.


Requirements to Obtain Health Care Clinic License.

The Health Care Clinic Act requires that a non-physician owned clinic have a completely separate license issued by AHCA. This applies if any portion of the business is owned by a non-physician. So for example, if 99% of the clinic is owned by physicians and 1% is owned by a non-physician, the clinic must obtain a health care clinic license from AHCA. In order to obtain a health care clinic license from AHCA, several requirements must be met.

First the health care clinic must have a medical director to oversee the operation of that clinic.  It is the medical director's responsibility to ensure that all medical professionals are properly licensed and certified, to ensure record keeping compliance, to report noncompliance, and to personally review clinic billings for illegality or fraud. Physicians must be aware of whether or not they are expected to serve as the medical director for the clinic prior to entering into any employment relationship.  Medical directors have a heightened standard of supervision and legal responsibility and are subject to additional civil, administrative, or criminal actions. There should be a completely separate medical director's contract, in writing and signed by the parties, specifically the additional duties and responsibilities of the medical director of a health care clinic. We suggest that the additional duties, responsibilities and legal risks of liability this position carries with it warrants a separate salary just for this position.

The Health Care Clinic Act also has a number of requirements that must be met before a license will be issued.  These requirements include providing proof of financial ability to operate or the posting of a bond, background screenings, including screening of the director and chief financial officer, and disclosures of certain additional information.

Also, you should be aware that there are several health professions for which ownership or control by anyone outside of that profession is prohibited by law. This means that a health care clinic license may not be obtained for them. These professions are dentistry, optometry and chiropractic medicine. A business entity that is not owned, managed and controlled 100% by members of those professions may not operate such a practice.


Traps for the Unwary.

These situations should raise a suspicion in the reasonable physician's, nurse's or health professional's mind suggesting that you conduct additional due diligence before beginning work there:

1.    If a non-physician owns the clinic, practice or facility.
2.    If a non-physician controls all major decision making for the clinic, practice or facility.
3.    If all financial matters are controlled by a non-physician.
4.    If a corporation or limited liability company owns the clinic, practice or facility.

In such cases, your due diligence should include:

1.    Checking the Secretary of State's website to identify the business entity actually owning the practice.
2.    Identifying the office's directors, managers or members of the business entity and checking to see if they are all physicians.
3.    If they are not, inquire with AHCA as to the existence of a valid, current health care clinic license or exemption issued by AHCA.
4.    Inquire with the managers, officers or owners as to the identity of all owners (shareholders, members or partners).


Watch for Ownership Changes.

Even if the organization and ownership of the clinic or practice was at one time legal, if ownership has changed, it may no longer be legal. This may occur, for example, if a physician owned the clinic and the physician died, leaving the clinic to her husband, a non-physician. As soon as the physician is deceased, the non-physician is required to obtain a health care clinic license and operation of the clinic without one is a felony. A trust or estate owned or controlled by a non-physician also may not legally operate such a medical business without a health care clinic license. If a physician with a legally established medical clinic sells the clinic to a non-physician, it is illegal to continue the operation of the clinic without a health care clinic license.


Consequences.

Recently, we have encountered a number of physicians who have entered into contractual relationships with non-physicians without verifying that the practice was appropriately licensed as a health care clinic.  If improper, these relationships can have severe consequences for both the clinic and the physician.  Some of these include:

1.    The operation of a clinic without a license is a third-degree felony, with each day of continued operation being a separate offense;
2.    If an individual has an interest in more than one clinic and fails to obtain a license for any of the clinics, AHCA may revoke the license for all of the clinics;
3.    Administrative fines of up to $5,000 per day; and
4.    Potential recoupment of all claims and charges made to Medicare, Medicaid, and other third-party payors, including insurance companies, private payers and patients.

The key to avoiding these penalties is simple.  When entering into a contractual relationship with a non-physician, make sure that you request a copy of the clinic's Health Care Clinic License or the reason for its exemption from this requirement.  Information on a clinic's or practice's license can be verified online through the AHCA, at http://www.floridahealthfinder.gov/facilitylocator/facloc.aspx.


Past and Future Blogs on Employment Contracting.
 
To review our previous blogs on physician contracting tips:

    -  Part 1    -  Part 6    -  Part 11
    -  Part 2    -  Part 7
    -  Part 3    -  Part 8
    -  Part 4    -  Part 9
    -  Part 5    -  Part 10

In our future blogs, we will continue to provide tips on various issues to watch for in health care employment contracts.

Contact a Health Care Attorney Experienced in Negotiating and Evaluating Physician and Health Professional’s Business Transactions.
 
At the Health Law Firm we provide legal services for all health care providers and professionals. This includes physicians, nurses, dentists, psychologists, psychiatrists, mental health counselors, durable medical equipment suppliers (DME), medical students and interns, hospitals, ambulatory surgical centers, pain management clinics, nursing homes, and any other health care provider.

The services we provide include reviewing and negotiating contracts, preparing contracts, helping employers and employees enforce contracts, advice on setting aside or voiding contracts, litigation of contracts (in start or federal court), business transactions, professional license defense, opinion letters, representation in investigations, fair hearing defense, representation in peer review and clinical privileges hearings, litigation of restrictive covenant (covenants not to compete), Medicare and Medicaid audits, commercial litigation, and administrative hearings.
 
To contact The Health Law Firm, please call (407) 331-6620 or (850) 439-1001 and visit our website at www.TheHealthLawFirm.com.


Comments?
 
As a physician, do you have any questions about contracts? Tell us your mistakes or triumphs in negotiating your contract below.


About the Authors: Christopher E. Brown, J.D., is an attorney with The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.

George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law. He is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.


Tag Words: Health Care Clinic Act, Agency for Health Care Administration, AHCA, physician employment agreement, physician employment contract, health professional contracting, negotiating business transactions, physician contracts, contracting tips, contract attorney, business law attorney, business lawyer, contract lawyer, contract litigation, business litigation, contract terms, physician agreements, business transactions, restrictive covenants, noncompetition agreements, shared overhead, physician specific overhead, covenants not to compete, business ventures, Florida health lawyer, Florida health law attorney, health attorney, health lawyer, health law firm, The Health Law Firm


"The Health Law Firm" is a registered fictitious business name of George F. Indest III, P.A. - The Health Law Firm, a Florida professional service corporation, since 1999.
Copyright © 1996-2014 The Health Law Firm. All rights reserved.
4/14/2014

Comments:

Response to: Contracting 101: Tips for Physicians and Health Professionals-Part 12
Thursday, May 1, 2014
Saul Acosta says:

We are a Miami base "Physician Staffing Agency" with over 10 years in business in the State of Florida. Our services are limited to supplying non Physician owned health care clinics registered with AHCA a license Physician to serve as "Medical Director". At current the majority of our business clients are concentrated in the South Florida area but we also have many clients in the Tampa,Orlando and west coast of Florida. At this moment we are only concentrating in rendering services of medical Director only to our clients however we have a great number of clients that are asking us Doctors to do "HANDS ON PATIENT CARE" we have contracts with our Doctors and clients but we would like to see if we can get your firms services in designing new contracts for us to protect my company's interest.

Response to: Contracting 101: Tips for Physicians and Health Professionals-Part 12
Thursday, May 8, 2014
The Health Law Firm says:

Mr. Acosta: I reached out to you via the phone number and e-mail address you provided. I am giving your information to Mr. Christopher Brown, an attorney with The Health Law Firm. He will try to contact you as well. Please feel free to contact our office by phone at your earliest convenience. Our office number is (407) 331-6620.

Response to: Contracting 101: Tips for Physicians and Health Professionals-Part 12
Wednesday, March 30, 2016
Clarisa says:

We are a non-physician LLC trying to purchase the assets of a medical practice owned by a physician in the state of Florida. Also we are internationals seeking an investor Visa. The problem is we cannot apply to AHCA license without social security numbers, which will be obtained through the purchase of the mentioned assets. Can we purchase and own the practice assets, and not manage them until we acquire our SS and AHCA license? Best regards,

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