Advantages to Allowing the Corporate Practice of Medicine

Wednesday, June 6, 2012
By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

There are many benefits to operating a business in a corporate form. These may include favorable income tax treatment and immunity from certain types of liability. A physician who practices under the structure of a sole proprietorship or a partnership mayor may not be able to enjoy similar advantages.

Practice of Medicine May Be Heading Towards Corporate Environment.

The practice of medicine appears to be heading toward a total corporate business environment for the delivery of medical services. In some circumstances, it would appear that state prohibitions on corporate practice of medicine are outdated. Nevertheless, both businesses and physicians must be aware of the state's law on the issue prior to entering into business arrangements and transactions, which might violate the corporate practice of medicine doctrine. To avoid allegations of violating the corporate practice of medicine prohibition in a state having one, the advice of experienced health care counsel should always be sought.

Corporate Structures in the Practice of Medicine Amid Prohibitions.

Often, even in states where the corporate practice of medicine prohibition is strictly interpreted and enforced, an organizational form may be structured and hiring arrangements organized so as to avoid violating the doctrine. All contracts, job descriptions and other documents used in the employment of physicians should consistently stress the requirement of the physician to exercise his or her own independent professional judgment at all times.

Additionally, a corporation entering into a transaction for a physician's services should fully explain that any existing quality assurance, utilization review, capitation bonus arrangement, or similar plan should not be interpreted to impede or interfere with the independent medical judgment of the physician. Furthermore, a physician's salary should not be calculated on the basis of a percentage of revenues generated by the physician; awarding a bonus based on fees generated from ancillary medical services ordered by the physician or for equipment or drugs ordered by the physician may violate federal and state laws on patient referrals in addition to those against fee splitting, as well. In any event, it is always advisable to obtain an opinion letter from qualified health care counsel after a detailed review of the corporation's proposed arrangement at the outset of any new venture.

Medical Practices May Find the Need to Meet the Expectations of an Increasingly More Demanding Consumer Group.

As the general public is increasingly aware of advances in medical technology and treatment, the medical profession is faced with an increasingly more sophisticated and demanding consumer group. Not only is the public in general expecting a higher quality of care from its physicians, but it is also expecting greater efficiency and lower costs.

A situation where a doctor must attempt to compete with competitive managed care organizations while attempting to maintain patient rapport and satisfaction may not be accomplished as easily as in a corporation structured for the delivery of medical services.

A corporation operated by non-physicians, appropriately delegating responsibilities, may be more efficient and be able to provide better services than otherwise the case in a traditional medical practice. The physician/employee may be able to devote more time to counseling and seeing patients and less time with reports, billings, personnel matters, and other tasks associated with the business end of the practice.

Physicians Can Not Accept Directions on How to Treat a Patient from Unlicensed Individuals.

Regardless of the relationship with respect to a physician's employment status, a layperson's dictating how a physician should treat his or her patient would constitute a direct violation of much state medical practice acts. This was the case in Iterman v. Baker, a 1938 Indiana Supreme Court case. In Iterman, a physician accepted directions and diagnoses from persons who were not licensed medical practitioners. Similar issues could probably be raised in many existing managed care arrangements requiring pre-approval of certain procedures.

For more information on the corporate practice of medicine, please read this article. More information can also be found on our website at


Iterman v. Baker, 15 N.E. 2d 365 (Ind. 1938).
About the Author:  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.  The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone:  (407) 331-6620.


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