Medical Board of California confirms ban on the corporate practice of medicine
E-mail to Medical Board of California:
I have a question about non-profits. My understanding, is that, in California, it is illegal for a non-physician to hire physicians.
I wrote a piece for O’Shaughnessy’s last year reporting on the MBC decision to be published in the upcoming Winter 2008 issue of O’Shaughnessy’s Journal of Cannabis in Clinical Practice; Board Makes Mikuriya Ruling “Precedential”
In this article, I made the statement that, in California, it is illegal for a non-physician to hire physicians and got the below response from a lay-owner of a chain of clinics.
So what is the rule, and under what circumstances can this lay-ownership ban be ignored?
I am not out to get anyone in trouble, but want a level playing field.
Frank H. Lucido MD
State of California
Department of Consumer Affairs
RE: Corporate Practice of Medicine Inquiry
Dear Dr. Lucido:
I write on behalf of the Medical Board of California (Board) and in response to your electronic mail message to the Board regarding the corporate practice of medicine. Specifically, you inquired as to whether California’s ban on the prohibition of the corporate practice of medicine (“the prohibition”) extends to nonprofit corporations and clinics that may be operated by a nonprofit corporation.
As I am sure you are aware, section 2400 of the Business and Professions Code establishes California’s prohibition against the corporate practice of medicine. Section 2401 of the Code sets forth certain exceptions from the prohibition. I have enclosed that section for your review.
We also note that the courts have held that a corporation is not exempt from the prohibition simply because it is organized under the nonprofit corporation law. (See California Physicians Service v. Aoki Diabetes Research Institute [ADRI] (2008) 78 Cal.Rptr,3d 646,653; See also 83 Ops.Cal.Atty.Gen. 170, fn 2 (2000).) The ADRI court noted that previous courts have recognized the danger of lay control, a danger that attends all types of corporations. (Ibid.)
Please be advised that your inquiry does not provide the Board with sufficient facts to offer additional guidance on a specific set of circumstances. Please contact me if you have any questions.
Deputy Director, Legal Affairs
By KURT HEPPLER
Senior Staff Counsel
Corporations and other artificial legal entities shall have no professional rights, privileges, or powers. However, the Divisionof Licensing may in its discretion, after such investigation and review of such documentary evidence as it may require, and under
regulations adopted by it, grant approval of the employment of licensees on a salary basis by licensed charitable institutions, foundations, or clinics, if no charge for professional services rendered patients is made by any such institution, foundation, or clinic.
(a) Notwithstanding Section 2400, a clinic operated primarily for the purpose of medical education by a public or private
nonprofit university medical school, which is approved by the Division of Licensing or the Osteopathic Medical Board of California, may charge for professional services rendered to teaching patients by licensees who hold academic appointments on the faculty of the university, if the charges are approved by the physician and surgeon in whose name the charges are made.
(b) Notwithstanding Section 2400, a clinic operated under subdivision (p) of Section 1206 of the Health and Safety Code may
employ licensees and charge for professional services rendered by those licensees. However, the clinic shall not interfere with, control, or otherwise direct the professional judgment of a physician and surgeon in a manner prohibited by Section 2400 or any other provision of law.
(c) Notwithstanding Section 2400, a narcotic treatment program operated under Section 11876 of the Health and Safety Code and regulated by the State Department of Alcohol and Drug Programs, may employ licensees and charge for professional services rendered by those licensees. However, the narcotic treatment program shall not interfere with, control, or otherwise direct the professional judgment of a physician and surgeon in a manner prohibited by Section 2400 or any other provision of law.
(d) Notwithstanding Section 2400, a hospital owned and operated by a health care district pursuant to Division 23 (commencing with Section 32000) of the Health and Safety Code may employ a licensee pursuant to Section 2401.1, and may may charge for professional services rendered by the licensee, if the physician and surgeon in whose name the charges are made approves the charges. However, the hospital shall not interfere with, control, or otherwise direct the physician and surgeon’s professional judgment in a manner prohibited by Section 2400 or any other provision of law.