Many of us are aware that there are laws and regulations that limit the practice of medicine to those with a professional medical degree. Additionally, most would agree that a person who has not attended medical school, graduated with a licensed medical degree, or passed the required exams should not be able to provide patient care in the public sector.

But how do these laws and regulations impact corporations? Due to technological advancements and extensive monetary resources, corporations have the capability to improve patient quality of care. However, when the goal of a corporation is to increase profits, it is a direct conflict with the goal of the practice of medicine, which is holding patient care as its utmost concern.

To answer this question, the American Medical Association (AMA) developed the Corporate Practice of Medicine Doctrine. Through the Doctrine, the AMA:

prohibits corporations from practicing medicine or employing a physician to provide professional medical services. This doctrine arises from state medical practice acts and is based on a number of public policy concerns, such as (1) allowing corporations to practice medicine or employ physicians will result in the commercialization of the practice of medicine, (2) a corporation’s obligation to its shareholders may not align with a physician’s obligation to his patients, and (3) employment of a physician by a corporation may interfere with the physician’s independent medical judgment.

 This Doctrine is evident in today’s healthcare environment through state laws and regulations. These laws are set forth to monitor situations, such as when compensation is administered by a non-licensed entity. While laws vary from state to state, the Doctrine addresses the following four issues:

1. Prohibiting corporations from employing medical professionals to provide patient care
2. Requiring that medical service and healthcare entities be owned and operated by licensed medical professionals
3. Prohibiting fee-splitting between licensed medical providers and business entities
4. Any management fees/management service agreements must be set at fair market value

If you are involved in managing relationships with physicians or other medical professionals, through employment or service agreements, there are further implications involved. The following aspects must be considered:

1. If practicing or operating in a state affected by the Doctrine, applicable laws and regulations must be reviewed to ensure full compliance with the state.
2. Additionally, the physician employment laws vary by state. Non-profit and educational entities are allowed to employ physicians in some states, while others allow employment through a professional corporation.
3. Seek a third-party expert when creating the management service agreement to ensure it is set at fair market value. This will help protect your entity from future legal issues.

Medicine and the law can be complicated, so it is advised that medical professionals discuss their practices and any business ventures with a qualified legal expert.

Foster Crown, LLC is a boutique physician recruitment firm that works closely with candidates to understand education, experience, capabilities, employment history, and background to reduce the recruitment timeline. Time is a valuable commodity and we understand that ‘time is of the essence’ in meeting objectives. Visit our website, or call our office at 262.646.2860 to find out how Foster Crown can help you achieve your goals.