Corporate practice of medicine doctrine varies by state and by prohibition

Does the corporate practice of medicine bar apply to other allied health professionals, such as physical therapists, and prohibit a layperson or general corporation from directly hiring these health care practitioners?

The answer depends by state and by profession.  Physical therapy is treated differently in California than, for example, Maryland. Careful legal analysis is required, paying attention to all the relevant statutes, board regulations, cases, and Attorney General opinions.

The conclusions are by no means obvious. Here is a lengthy analysis by the Maryland Attorney General.

In it, the AG asked:

1) May a business entity ) such as a limited liability company
or a corporation ) provide physical therapy services by contracting
with a licensed physical therapist to treat customers?

(2) If a corporation may operate such a business, must the
corporation be organized as a professional corporation, in which
ownership is restricted to licensed persons?

The length opinion concluded:

In our opinion, an unlicensed individual or a business entity
that is owned by unlicensed individuals may operate a physical
therapy business by contracting with a licensed physical therapist or
licensed physical therapist assistant to provide services to its
customers. While a business that provides physical therapy services
may be organized as a corporation, it may not be organized as a
professional corporation even if the owners of the entity are licensed.
The Board retains authority to regulate the practice of physical
therapy by the licensed individuals who provide the services offered
by such a business, and to take action against the unlicensed practice
of physical therapy.

Thus, the AG looked to the Board's authority to enforce disciplinary actions against licensees (physical therapists) and did not read a corporate practice prohibition into the profession of physical therapy.

The AG stated:

We understand that the Board is concerned that an owner of a
physical therapy business who is not a licensed physical therapist
may interfere with the professional judgment of the physical
therapists and physical therapist assistants employed by the business.
However, the licensees who provide services as employees of such
a business remain obligated to comply with the Physical Therapy
Act, as well as the standards of practice and code of ethics
promulgated by the Board. HO §13-206(a)(2); COMAR 10.38.02,
10.38.03. Thus, the Board could prevent lay interference with the
professional judgment of its licensees through its standards of
practice and code of ethics. For example, the Board could adopt a
regulation as part of its code of ethics to prohibit licensees from
entering into an agreement or employment relationship that would
impede the licensee’s exercise of independent judgment in the
treatment of a patient.


In addition, if an unlicensed person engages in activities that
fall within the definition of “practice physical therapy,” the Board
may obtain an injunction against that activity. HO §13-318.1; see
also 81 Opinions of the Attorney General 74, 79 (1996). Such a
person would also be subject to criminal prosecution. HO §13-407.

The legal landscape can be quite different in a state (such as New York) which construes the corporate practice bar more strictly in that state regulators generally insist on strict separation between the delivery of professional services on one hand, and general business activities on the other.

In analyzing any given profession, from physical therapy to psychology, it is important to consult an attorney experienced with the corporate practice of medicine bar across states.  An attorney familiar with the corporate practice prohibition can advise on whether and to what extent the bar applies to a given professional practice in a particular state.

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