AHLA's Speaking of Health Law

Corporate Practice of Medicine: Latest Trends and Developments

• American Health Law Association

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Glenn Prives, Partner, Epstein Becker & Green, Jessica Belle, and Kristen McDermott Woodrum, Partner, McGuireWoods, discuss the corporate practice of medicine (CPOM) doctrine and why it is so important to the health care industry. They cover the history and basis of the CPOM doctrine, how CPOM is applied in the health care industry, common exceptions to CPOM, consequences of not adhering to the principles of CPOM, issues related to private equity and telehealth, and practical tips. Glenn, Jessica, and Kristen are editors of the bestselling AHLA Corporate Practice of Medicine: A 50 State Survey, Third Edition.

Watch the conversation here.

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Speaker 1:

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Speaker 2:

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Speaker 3:

Welcome to a discussion about the corporate practice of medicine as part of ALA's ongoing podcast series. My name is Glenn Prives . I'm a partner at the National firm of Epstein Becker and Green. My practice focuses on , uh, healthcare transactional and regulatory issues for all different stakeholders in healthcare. And a large part of my practice is dealing with the various iterations of the corporate practice doctrine , both medicine and other professions in various states across the country. I'll turn it over to Jessica to introduce herself as well.

Speaker 4:

Good morning, Glen . Um, my name is Jessica Bell. I'm an in-house attorney with a managed care organization, and before that I worked both in private practice and in-house , um, supporting physician organizations really on their corporate structure. A lot of corporate practice and medicine, as you noted, and then the garden variety of physician practice issues .

Speaker 3:

And Kristen .

Speaker 5:

Thanks Glenn . I'm Kristen McDermott woodrum. I'm a partner in the National Healthcare Department of McGuire Woods. I also focus my practice on healthcare transactions and regulatory matters, which includes advising investors and PE-backed practices on compliance CPOM structures. I also advise telehealth companies and investors in digital health in navigating these requirements while expanding nationally. Um, and it was fun to work with you all and with the A HLA team and the group on this latest edition of the CP OM book, which was a big group effort. So I wanted to give a shout out to all the, I think 60 authors, the A HLA staff and the, the full editorial board of I think six. Well,

Speaker 3:

That's a great part to just intro the book right there, Kristen . So thank you for teeing that one up. So , uh, we , we do want to make mention of the third edition that's the latest edition of the A HLA 50 State Survey on the corporate practice of medicine doctrine. I use the term medicine loosely because we cover a number of professions , uh, in this book. So , um, not only is the book updated with the latest in these areas in all 50 states, but in particular we're expanded on some areas including behavioral health, which has become a very, very hot area for both the corporate practice doctrine , um, and for , uh, investments as well. So we certainly suggest everybody pick up a copy of that book. There's both a hard copy and an electronic copy 'cause we like to keep up with the times here. But , uh, expanding on that a little bit. So, Jessica, I'm going to start with you first. Not to put you completely on the spot , um, but, you know , tell , tell me a little bit for folks out there, what, what is the corporate practice of Medicine Doctrine and how did , how did it start?

Speaker 4:

Yeah, great question, Glen . So , um, the corporate practice of medicine, the, the public policy behind it is that we want physicians to make decisions on what's best for their patients and not to be influenced by other considerations. For example , um, their ability to make money on seeing a patient or how much a medicine is gonna cost the patient. Um , and now in the age of managed care, how much it's gonna cost the insurance company and all of those considerations. Um, and while physicians like anyone else , um, wanna be successful in business and, you know, earn a good salary so they can pay for their rent and food and everything in this great day , uh, age of inflation , um, physicians are also bound by Hippocratic Oath as well as additional medical ethics , um, as, as professions professionals , um, that they're required to put patients' interests first. And the concern is that non-physicians that might employ employ physicians are not bound by these ethical considerations. Um, and if we look back , um, as, as happened so many times in law, what what's happening in the industry is gonna then dictate what happens in the laws and what's taken up by the legislature. So , um, the idea of the corporate practice of medicine , um, actually students back to the 1790s with Dr. Thomas Peral , he was a British physician and philosopher, and he created this revolutionary type , um, of medical ethics that was based on self-regulation, based on how physicians behaved not on their inherent character at this time, physicians were seen as gentlemen that , um, just inherently knew how to conduct themselves and turned out not to be true. Um, Dr. Thomas Als hospital was held up. They had to close during an epidemic because a couple of physicians on staff got a dual . So, you know, at the time there was just really this need to reevaluate, like, what are we doing people? Um, and so he was the first to argue , um, in as specifically as he did that physicians have a fiduciary responsibility for the ease health and the lives of those committed to their charge. And we see that in the corporate practice of medicine, right? That the physicians are obligated to put patients' interest first , um, as a fiduciary. And that is in fact how it's captured a lot in the law. Um, he was also one of the first to argue at this time, we saw the rise of institutions and hospitals, and he was one of the first to argue that physicians should really seriously consider thinking about the judgment of, of lay people . So if there was a hospital administrator or trustee at this time, anyone in a position of power that was not a physician, because , um, what was happening was that those types of individuals were again, like placing the cost of an expensive medicine to treat a patient over the patient's need for that medicine. Um, and what we see is that at this , um, at this time as America's kind of becoming a nation creating itself , um, a lot of personal's ideas come over and, and American physicians were really looking to the continent for both medical improvements and then also for ethical considerations. And so his ideas were really picked up by a lot of various state medical societies. And then in 1847 by the American Medical , um, associations code of ethics, which was the first national medical ethics code ever in the world . And here we see articulations , um, concerns about fee splitting, which is obviously very pertinent to the corporate practice medicine today. At that time, there were a lot of economic debates about physicians and surgeons getting referrals from like homeopaths and acupuncturists and other , um, non-traditional medicine practices and , and getting paid for that and how that all worked out. Um, and so this was really, these ethical considerations drove , um, how the society and public thought about the role of the physician. And in fact , um, the commonwealth of Massachusetts, they were one of the first to actually regulate physicians. And what they did is they copied and pasted from the medical society's code of ethics. And so we really see this idea of a physician as a fiduciary, a physician meeting independent judgment to really protect our patients. That is exactly how we get to this core of practice in medicine and captured in law. There are a lot of economic considerations as we get into the 19 hundreds where physicians are really want to protect themselves and become kind of , um, monopolists , um, in this regard. And , and now we're kind of seeing the backlash against that. Right. You mentioned there's a lot of , um, now laws about, you know, defining behavioral health and psychology and physical therapy and occupational therapy, like lots of cases about that too, where the role of physician in , in a physical therapist clash. I know that I dealt with that a lot in Washington state and, and it's all coming from this idea of like, how do we self-regulate as physicians and how do we protect and compare our patients first?

Speaker 3:

So Jessica, you mentioned cases, which, which spurs one place I just want to touch on. Uh , and then Kristen , I've got, I've got a question for you. You are not left out of this. Um, but, so one of the things that folks should realize is not all states have the corporate practice of medicine doctrine. And even among those states that do, the scope of it varies, and most importantly, where it comes from varies. So some states might have it in a statute, others might have it in a regulation, others might have it in case lessons . You mentioned cases, some might have it in an ag opinion or some sort of board opinion. In other words, if you simply do a case law search in a particular state and you're not seeing anything that that's not a big conclusion, that there's no corporate practice, doctorate in that state. And where it comes from in a state might also vary by the type of profession. So I can't help myself again, but here I'm gonna go again for the second time, which is essentially our 50 state survey from A HLA certainly makes a point of highlighting for each profession, for each state where the corporate practice doctrine is coming out of , uh, for that profession in the state . So certainly a another reason to check out the book, but switching gears for a second, Kristen . So why does the corporate practice doctrine matter today? As , as Jessica has really woke on through it , it dates back a long time, but it's loudly rearing its head today and in the last few years. Tell us a little bit about why that's the case.

Speaker 5:

Sure. Well, I , it seems like , um, there's a lot of attention right now to physicians who are leaving private practice and a staggering number of physicians have been making the decision to leave private practice. I think , um, the recent most recent numbers I've seen show that as of January of 20 24, 77 0.6% of US physicians were employed by hospitals, payers, or other corporations. And there are a lot of reasons, you know, driving this transition of physicians from small independent medical practices into employment by hospitals or by practices that may be affiliated with insurance companies or by private equity backed , um, practice practices , um, where the physicians may invest in, in their medical practice and scale it alongside private equity sponsors. Um, a MA did a survey and the majority of physicians who had sold their practices cited the need for , um, help negotiating higher rates with insurance and helping manage insurance and , um, insurers , administrative and regulatory requirements, prior authorization, paperwork, all of that billing and , um, you know, business part of healthcare also the need to , um, access expensive resources. The practice of medicine has become much more complicated , um, than the days when the gentleman could step outside and do all , we have the requirement to adopt electronic health records. We have reporting for CMS , um, you know, that is now tied to the, the Medicare reimbursement the physicians are receiving. There's compliance burdens, not just billing and coding and fraud and abuse, but data privacy and security. So really, you know, the business infrastructure is essential to support the physician practice . And, you know, perhaps many of the physicians are entering into these types of arrangements for employment so that they actually can focus on providing patient care and spending more time doing what they were clinically trained to do and less time with the administrative burdens. So shifting those burdens to a , an employer that might be a health system and health systems, do you employ the large majority of physicians , um, you know, heavy on the primary care or to a, a management company that can help them, you know , grow their practice without focusing day to day on that growth. And, and the financial piece of it , um, is , is a driver. And then the, the concern seems to be that the , um, you know , the duty of the physician to the patient will be overlooked and the duty of the investor to the the shareholder will be the priority.

Speaker 3:

So thank you Kristen . So Jessica, you already kind of touched on for us a little bit, kind of the basic rules of , of CPOM , the basic tenant behind it and, and on that and which is really helpful. And I know telehealth kind of creates a little bit of, of an extra variable in that, and we're gonna talk about that in a little bit. Um, one thing that comes up , um, kind of coming out , what you said is, is that physicians can be employed by corporations. And certainly people hear that and say , well, wait a second, that contradicts what Jessica was just laying out very well on the corporate practice of medicine doctrine. But, but it kind of doesn't. Um, because in states that have a corporate practice doctrine, and admittedly this will very little bit , um, most of those states will allow those folks to be employed by professional corporations. Um, and the state could have a professional corporation, sometimes you'll see it as a professional association. Um, the state also might have a professional limited liability company or PLLC and just to make things extra fun, some states don't have A-P-L-L-C per se, but will allow you to use an LLC if you operate it like A-P-L-L-C would operate if such a thing , um, existed. And typically, but it's gonna vary again, the ownership of professional entity is reserved for those who are licensed in that particular profession. But a couple asterisk there. So sometimes for certain states is as long as the majority is owned by somebody who's so licensed, that's sufficient. Other states needs to be, everybody is licensed. Some states will say you, you can be licensed for that profession in any state. We just need you to be licensed in any state to be licensed , uh, to , to own a PC in our state. Others say Uhuh Uhuh , you gotta be licensed in our state only. That's it, no if ands or buts. And this is gonna include not only domestic professional entities, but the criteria to be a foreign professional entity if do another asterisk, if that state even allows a foreign professional entity. 'cause some states don't even allow foreign professional entities. And again, because I can't help myself, the A HLA 50 state survey goes through all these different variations by state. So , uh, just because you can do it one way in one state doesn't mean you can do it , um, uh, that way in another. Now also , um, there might be certain criteria for directors, officers and managers for those professional entities as well. Again, some will say you must be a licensee. Some will say you don't have to. Some will say certain roles have to be licensees and not others. I think the, the message I'm trying to send here is no one size fits all and each day wants to do things differently. So you have to be very, very, very careful when you're going into one state. And, and this is gonna let me turn to Kristen with a question for a second. This makes things particularly, I don't wanna say difficult, I'll call it fun and interesting for investor backed entities who are trying to structure their arrangements in multiple states as what you do in one state may not be , um, what you do in other states. So I'm gonna let that lead to you, Kristen , in terms of how does this all work for investor based , uh, investor backed platforms.

Speaker 5:

Sure. And Glen , jump in here. I know you have experience as well. Sure . So you've probably heard of the M-S-O-P-C structure, and that is the legal mechanism that enables investors to have an economic interest in the practice. So, you know, back to the CPOM restrictions, the, in a , in a corporate practice of medicine state, we would see a professional entity that would be owned by the professionals. So in medicine it would be owned by the physician or physicians. So that's the practice. But we would bifurcate the clinical operations from the administrative and management operations of the business. So a new entity, which is the management services organization or MSO would assume responsibility for all of those nonclinical functions and would typically hold all of the nonclinical assets of the practice. So these are things like marketing, managed care , um, billing and collections, budgeting, accounting, finance tax benefits administration, payroll processing, risk management, compliance support, information technology support and office equipment supplies, contract administration and all of that. So you can see sort of the, the burden that that would place on, on physicians trying to do that in practice medicine. Um, so there's an agreement for the provision of those services by the MSO to the pc. And as Glen said, it may not be a pc, it may be A-P-L-L-C, it may be an LLC , it may be , you know, some other form of entity. Um, and we might call this administrative , um, service agreement instead of a management service agreement in some states. Yep . And in many states, we have to be very careful about the services that are being provided , um, to make sure that they haven't crossed the line into requiring clinical judgment. California is an example of a state that has a strict corporate practice of medicine doctrine, but which is pretty prescriptive, but also provides a lot of transparency on what they consider to be the practice of medicine and requiring, you know, to be held by the, the practice. So things like medical records, those would be a clinical asset held by the professional association or the pc , um, decisions on hiring and firing clinicians, including in some states medical assistance . You know, some of the setting of the fees, certain equipment purchases, the ownership of certain pieces of equipment all would reside within the pc. And so there's a structure where the PC is billing and collecting for services, but then some of the economics of the practice or transferred to the management company via a management fee. Which , um, Glen , do you wanna jump in and talk about the management fee and some of the ancillary documents in the M-S-O-P-C structure?

Speaker 3:

Yeah, so on the management fee, and first of all, and you , you kind of alluded to a little bit of Kristen , some states have a, I like to call it a companion rule. Uh, again, theme of could come out of very different places, bit by state, state by state there on fee splitting, which essentially blocks a professional or professional practice from sharing fees with a non-clinician or a non licensee . And that would usually lend itself to blocking a management fee that's based upon a percentage of revenue. Again, some states have that, not all, even some states that have a corporate practice and medicine doctor don't have that. However, I I will say typically I do, I do caution folks that if your state doesn't have it, but they otherwise have a very strong corporate practice of medicine doctrine, you may still think twice , um, about doing a percentage of revenue. Um, what you do typically see when you don't see a percentage of revenue is , um, some or both of a per a cost plus model where the cost to the management company to provide the services is marked up by a percentage , um, typically on a fair market value basis. So it's not outrageous and unreasonable or one or a series of flat fees. Again , um, tied to fair market value. Uh, what's what's truly important , um, is to have an arrangement whereby the fees being paid , um, essentially our value for the services being offered , uh, and not outrageously higher than the value of the services being offered, but also in a fee splitting state, having a structure that doesn't have a direct correlation with the revenue of the practice. One is to be careful , um, you know, on that. Um, but again, this is gonna vary by state, which is the running theme here. And we do , um, touch on fee splitting and which states they're in , in, right . This is the fourth plug thus far. But hey, can't help ourselves. A very, very well done publication by a lot of hardworking folks. The A HLA third Ann <laugh> , uh, third edition of the 50 State Survey. Um, our couple of common exceptions to the corporate practice doctrine. Um , there may be many, many more , uh, depending upon which state you're looking at, but you know, kind of a very common one on the nonprofit . And do want to turn that back to you for a second, Kristen , if you could go over that please.

Speaker 5:

Sure. So the scope of the prohibition varies by state and most states have some exceptions. Common exceptions include , um, employment of physicians by hospitals or by nonprofits, FQHCs , um, community mental health or other behavioral health services, or for independent contractors with the caveat that just calling a physician and independent contractors different than truly having what , um, could be considered an independent contractor relationship for purposes of CPOM. Um, in, in terms of the level of control that the entity might have over the physician or the other professionals judgment, those are HMOs as well. I should jump in with that one, especially with Jessica on our panel here. And since Glenn is plugged it, I'm gonna only hold it up once 'cause it's really heavy. But this is the third edition of our corporate practice of medicine 50 State Survey, and we still call it medicine, but it's got , um, it addresses many professions and many of these issues. It's really a great go-to source. I, somewhere in my office have the first edition and I think it's probably half the size or less. Um, so this is a really significant tone and a good upgrade for your, for your health law library.

Speaker 3:

Can can we take a second? 'cause you just mentioned a , a good thing , um, Jessica, if we could take a second to turn to you , um, for what you might have seen in terms of an HMO exception or some other payer exception on occasion in, in some states, not all. I see a little bit of it , um, and can speak to a little bit of myself, but would love it from your point of view, if you wouldn't mind for a second.

Speaker 5:

I'm actually gonna give that back to you. I

Speaker 3:

Don't <crosstalk> . That's fine. I'm sorry . I , I That's okay. That , that's all right . So some states do allow , um, direct employment by HMOs , uh, or some other payer , um, the scope, again, running gonna vary, going to be a little difficult and not every state has it. Um, but did want to go over that as a common exception. That's okay. Um, didn't wanna , didn't want to kill you there , Jessica. It's alright . So I'm gonna turn it up a little bit here to what happens if these arraignments are not set up for correctly. We, we, lawyers are always a fun bunch to say, can't do this, can't do that, careful and do that. So, so what's the, what's the risk here? It's a few different ones and it's gonna vary by stakeholder. Um, so in some states it is , um, a criminal act to hold yourself out as being able to practice a profession , um, without a license. And I know some folks will come with me and say, okay, Glen , well just because I'm providing management services doesn't mean I'm actually practicing medicine in another profession. Well, what management services mean, how they impact the clinical delivery of care? You may be unwittingly crossing a line is particularly because again, running theme here states vary on where that line is and it's important to stay behind the line because you don't wanna be in that criminal part. But , um, you may run into that which could have you excluded and your practice that you're managing excluded from certain payers or providers, which could be a death nail for a practice. Um, it could also be a crime for one, two aid an vet the , uh, criminal practice of medicine without a license. And that would fall to the clinician , uh, who was working with the non-clinician to essentially practice medicine without a license. Um, you could find that your contracts that are involved in setting up your arrangement run afoul of the laws in the particular state you're at. And if contracts are running afoul of laws, they can be found by court to be illegal and therefore unenforceable. And so your investment may prove to be nothing , um, at that point.

Speaker 5:

And Glen , sure, Kristen , what kind of contracts are the most important that might be avoided?

Speaker 3:

So , um, you talked about the friendly, the friendly arrangement, Kristen . So one component of that sometimes is the agreement that links the owner of the practice with the management company in terms of , uh, what it might be called a restricted stock agreement, restricted unit agreement, succession agreement, continuity agreement . We , we see all different names, but an agreement whereby essentially the owner of the practice , um, cannot transfer his or her ownership interest in the practice except under certain circumstances with the consent of the management company. That's an agreement , uh, that is workable in some states, but some folks tend to make that basically workable in all states where there's a corporate practice doctrine and there is a prohibition on that exact arrangement in some states. And, and even where there may not be an explicit prohibition, you may find that that's a risky agreement to have in certain other states. Um, therefore if that agreement fell into the illegal and therefore unenforceable category, that's kind of your greatest risk of loss of investment. So good prompt there, Kristen , thank you for being down that way. Yes. Hey, Jessica.

Speaker 4:

Yeah, I mean I think we're gonna talk about this later, but this is like this, remember this point when we talk later about how important it is when we bet the physician owner Yeah . Because , um, I don't think enough entities think thoughtfully about the personality and disposition, including the litigiousness of physician owners. And if you don't think about it, this is where it's gonna come back to bite you because they'll take that document to court and even if they don't win in court, they can still win in the court of public opinion. And then that stuff directly gonna impact your , um, the viability of the practice.

Speaker 3:

That , that's an absolute excellent point. Thank you for bringing that up, Jessica. A couple other risks too . Um, if you are improperly structured, an insurance company that is providing reimbursement for the services that the practice is providing may deem the claims to essentially be false claims for an improper structure and therefore there may be insurance fraud involved there, which can be actually criminal in certain states as well. Um, and uh, finally with the rise in state transaction laws, which is a whole nother topic that we are not gonna be able to truly talk about on this podcast, but I'm sure there's an HLA podcast on that one as there definitely well should be. Um, if you are in a state with the state transaction law and you do need to , uh, apply for consent to go through with the transaction, if you're in a corporate practice state , um, and the regulator has the ability to peek into your structure, you may find yourself unable to consummate the sale if you are structured or intending to be structured incorrectly. Um, so addressing private equity a bit more, you know , head on . Jess , I'm , I'm gonna turn it back to you for a second there. Um, have you seen any recent efforts to kind of crack down harder on the corporate practice of medicine and possible overreach in certain states?

Speaker 4:

Yes. Let's, let's go out west , um, to California, the birthplace of all wonderful and horrible laws. Um, so what we've seen in California is a really famous, I think now really famous defining case in the court practice of medicine today. The American Academy of Emergency Medicine Physician Group alleged that their management company in vision healthcare , um, inappropriately exerted control over clinical matters in violation of the California , um, court practice of medicine law. And so they brought lawsuit , um, and their specific allegations were that envision determined which and how many physicians the provider group could hire determine the terms and the amount of compensation could perva paid to the group's physicians determine work schedule, employment terms , um, determine the nature of physician employment related advertising, and then negotiated provider contracts with third party payers. So if you think back, if you're like, that list sounds familiar , uh, didn't Kristen say something about that? Yeah, so these are all common pieces that might be at an MSO agreement. And so the trick is always in the details, right? Like how exactly if those might be topics where the management company wants to make a proposal or provide some like business guidance, but the final decision to address with the position . So it ties in with what Kristen said , um, it's just how you do it, right? And I'm sure Kristen works closely with , Kristen works closely with all of her clients and exactly how do you do those things . But here the physician said, no, no, no, you guys did it wrong. You're , it's too much control. Um, and this case is really notable because Envision is a private equity backed group , um, and they staff at least one third of us ER departments, right? That's pretty significant number. That's a lot of control throughout our country. Um, we are seeing a rise in the nationalization of healthcare, including physician services, behavioral health services, like you mentioned Glen . Um, but that's still staggering in control over , um, a portion of the market. And so what happened is that Envision unfortunately was having some hard times. They went down to the southern district of Texas and filed for , um, chapter 11 bankruptcy. Um, the physician group still wanted to fight. Um, the bankruptcy court said, no, that's not gonna be acceptable right now. And so what happened in the end is they entered into a confidential settlement and the case was dismissed , um, because the court no longer had jurisdiction because Envision pulled out of the state of California as part of the bankruptcy . So no clear lessons. Um, we do know that the friendly PC model that you and Kristen are , you know, drew out is still permissible in California. But we, we do see this appetite by plaintiffs, plaintiff's counsel and judges to really look at this issue , um, seriously in California, like Kristen said, the the laws are very specific and so in a lot of ways that kind of makes it great from an operation perspective, but also great for plaintiff's counsel, right, when you're bringing a lawsuit. Um, and then we've also seen a lot of laws that try to target this. So this year , um, governor Newsom vetoed California assembly Bill 3 1 29 , um, which would've allowed the ag , um, to enforce , um, a requirement that private equity gives notice and obtain approval part prior to closing transactions with healthcare facilities or provider groups , um, of certain sizes if they've engaged in a similar transaction within the last seven years. Um, and I'm sure that you guys have seen in your, I mean, I don't know how common this is in practice, but at least like, it seems like it's common based on the news is that, that we have private equity, okay, I'm gonna acquire this physician , I'm gonna work with this physician group on a friendly PC model, and then I'm gonna get the next one in the state and then the next one, and really kind of creating a market share. Um, and this law specifically targets that is really against it. And what's interesting is that the ag was driving this bill and the ag was pretty feisty. So the Attorney General said, private equity ownership in the healthcare industry has more than doubled in the last decade, often leading to higher healthcare costs , poor quality and less access to care. And too often private equity serves corporate profiteers by maximizing the profits at the expense of access, quality and affordability of healthcare for California. So that is exactly what Kristen was talking about. When you're setting up these corporate , the corp , these like friendly PC models and the concern of who is more important, right? Is it your investor or is it your patient? Um, there was a similar bill in Oregon that also died in session, but they're likely to pick it up again here. We're regulating the physician again on how they can be both on the PC side and then the management side and , and kind of maybe have a conflict of interest. So I'm thinking we're gonna see more and more of this. Um, I think that private equity's hitting the news, I'm sure that , um, they try to do their best to stay out of the news. Um, but I think it's a serious concern .

Speaker 3:

Thank Jessica, that that's a real helpful summary of , of what we're seeing and what we, what we might see , uh, in the future, which I think everybody is kind of on the edge of their seat about a little bit. Um, so we, we've mentioned a couple times , um, in this podcast that corporate practice of medicine is a misnomer , um, and that it exists and is even expanding into other professions. Um, Kristen , why , why do you think we're seeing , uh, this truly rear its head in other professions and we struggle to figure out a better acronym? 'cause C om rolls off the tongue so well, but it's kind of a misnomer.

Speaker 5:

Sure. Well, I think we're seeing interest in investment in , um, other professions. I mean, the corporate practice of dentistry and optometry have been around maybe even predating medicine in some states and in some states are actually stricter , um, than the prohibition on the corporate practice of medicine. But it's really the same policy considerations. Um, I I think that through some of the work I've seen in telehealth and some of the consumer oriented healthcare businesses, we've um, kind of moved into other professions as well. So some of the , um, chronic care management type companies focused on diabetes or nutrition, you've gotten into, you know, do you require a registered dietician for the type of work this company's providing? If it's a behavioral health and telebehavioral health is really huge, is it a counselor, a psychologist, a social worker? What's the practice? What is the scope of practice there? Um, and so it's the same exercise in our book , um, has been expanded to cover, to cover a lot of the other professions. Um, and, and look to see if, again, is that in the statute? Is it in the professional licensing board guidance? Is it in the case law? What is the source of that particular prohibition? Um, another, another consideration is to look, if you are scaling a business like that, what is the, what is the scope of that practice? Are you actually in one profession or another? What are your options for finding the right person to provide the service and to own the company? Um, a majority of states have interstate compacts in medicine and nursing. There's a growing number in some of the other professions, but that can make it a little bit easier to get licensure , um, which is, is very important. And , um, so those are considerations, you know, when it comes to the, the individual state, it's not that daunting when you're trying to grow a business across states. That's where you have to start thinking about the, some of the considerations Glenn flagged earlier, can you foreign register a particular entity? Perhaps that entity could have non-physician owners in one state, but can you register it in another state with physician owners or , um, an officer that's a non-physician? Um, so so many considerations and kind of the, the calculus of that is fun but challenging.

Speaker 3:

Well, and , and picking up on one thing you referred to, 'cause I I did promise we would get to this a little bit later and we're kind of at that point, can you just talk for a brief moment, Krista , the kind of the interplay you see with corporate practice, doctorate and of course telehealth, you know, just popping up all over the place and, and kind of the, the tension there a little bit.

Speaker 5:

Yeah, so I mean, telehealth, we see a lot of companies who are trying to provide tel telehealth services across state lines. And , um, to provide a service in a state requires a license if it's within the scope of practice of whatever that profession is, and to own the practice, you know, is also this corporate practice analysis. Um, and so with this proliferation of companies that are trying to operate in multiple states, it becomes increasingly important to, to do this , um, exercise upfront . There's kind of a related but different question as to whether the, the service is actually the scope of telehealth or telemedicine, which can have different requirements. Um, so a whole other layers of considerations there. But there is a lot of focus on compliance in this area , um, from, from a lot of different angles. And, you know, for these companies who are looking to get paid from payers or who are looking to, you know, raise capital from investors or from lenders, there is a lot of scrutiny on this model and, and I've seen a lot of, of deals, you know, hit pause for our restructuring. It's definitely easier to try to do this upfront . Um, sometimes there's a little bit of a , a readjusting the business model to do something that will work temporarily with the thought that then there'll be a shift down the line and that's acceptable. There's sort of this new industry , um, of, kind of for higher physician networks , um, and which is, you know, a whole nother whole nother , uh, webinar or or podcast.

Speaker 3:

That that one definitely is <laugh> . Yeah .

Speaker 5:

Um , but yeah, so with telehealth it really is, you know, something that the corporate practice is one of the very first issues that these companies should be looking at.

Speaker 3:

Thank you , Kristen . So as , as we start to bring this to a close, just wanna go over a couple of practical takeaways. Jessica, if I could turn back to you for a second, might you have a practical tip in mind? We, we, the three of us could go on and on forever on this, so I'll , I'll just ask for ell If you wanna get more than one, that's okay too. You have , you have a practical tip for folks.

Speaker 4:

Um, I think one thing people often forget about is that , um, you need to make sure that your, the people operating in a friendly PC model understand the structure. Um, I always worked with my clients when they onboarded a new provider, a new ma, anyone really to explain how the structure is set up and who they work for. Um, because the last thing you want is you've spent all of this money on outside council to set up a great corporate structure and make sure it's compliant. A regulator pops in, asks the doctor who they work for, and they say , um, a lay corporation and not a physician or our pc. Um, it's an easy, easy thing for regulators. And so, and it's also just an easy thing to educate your , um, your team about of how, how is a corporate corporation set up? Why is it it set up that way? And I think it's another way just to revalidate for providers that your independent judgment is respected here and they're , if you're gonna be questioned by someone on that, it's gonna be another provider who's also duly licensed. And so it's another way just to empower providers as well.

Speaker 3:

Thank you. Thank you Jessica . Kristen , you have a , uh, practical tip for folks?

Speaker 5:

Oh, sure. Um, it's hard to choose just one. I would, I would,

Speaker 3:

I know, I know I , I'm boxing boxing in here.

Speaker 5:

I would say just, you know, initially just for, for the listeners who may not be that familiar with, with this topic, I think there's a lot of negative connotations with the M-S-O-P-C structure. Um, yet it is structured to ensure that the physicians , physicians do maintain the clinical oversight and control over the practices, and that is possible to do correctly. Um, and to achieve the dual objective of enhancing and providing, making available clinical care and providing some economic support to grow the practices and to handle the administrative burdens. And in many cases, it's to help the practices develop models of care that are innovative. I do a lot of work with value-based care where the clinicians are spending more time with patients and achieving better outcomes and are really focused on access and equity. Um, so I, I don't want someone to see M-S-O-P-C and just automatically think, okay, this is just a dirty for-profit structure. Um, you know, just, just my 2 cents having worked with health systems and , um, physician practices, but, you know, they're good eggs and bad eggs in , in every basket. Um, and then I would say it's not one size fits all . Um, for, for the model, it's really, you know, not just picking up a set of forms, it's how it's operationalized, it's the relationships of the people. Um, and so that's really key to structuring and operating the business in a way that's gonna be successful long term and to kind of walk the line and, and respect the formalities that are required to have a compliant corporate practice of medicine structure.

Speaker 4:

Can I just jump in and ask you one question more about that , Kristen , about relationships? So can you tell us like how you work with your clients in terms of thinking about like a physician owner and, and why that's so important? I know we , we talked about it a little bit earlier, but love to kind of hear your thoughts on that.

Speaker 5:

Yeah, so I mean, I, it workers in a range of , um, types of clients, but in general, the physician leadership is really key on the clinical. The physicians have to , um, you know, make those decisions, own the clinical operations, have input on all of those decisions. Who are we hiring, what services are we providing, how are we shifting care protocols? That's all physician led . It has to be. And you know, we, we sometimes call the physicians the friendly physician because, you know, they , they are friendly to the corporate interest and in many cases they're heavily invested in the corporate interest as well. Um, so kind of a split duty there, which is inherent in independent practice. Um, so, you know, I , I think that having, you know, some sort of clinical governance in addition to having someone that's running the , the business machine , um, and giving the physician's insight into that so that everyone feels like there's some transparency and trust is really what's key.

Speaker 3:

Got it. Thank you both. I'm, I'm gonna wrap up with just one last practical tip from myself. Um, and this is actually not new . We've been kind of banging the scene a little bit, which is you check the state you are looking to be in, and this goes both ways because the state you might be seeking to be in may be stricter than you think or you're prepared for, or it actually may be looser than you thought or prepared for. Um, and I, I just can't emphasize enough the differences. This is not a federal doctrine, this is not federal law. This is very state by state specific with variations. And so if you check the state you're in, it's a good foundational starting point. Um, and last I will once again as we wrap up, just remind folks , uh, that a great resource to get you going is the third edition . There you go, Kristen . Hold that up. 50 state corporate practice medicine survey. Jessica came prepared too. Mine , mine is on the shelf, which you can see actually back there. A little crooked to the side. Not, not the best looking , but it's there. Um, we, we may be, we may be editors, but I will tell you right now that we all use this book on a regular basis so we're not just editors, we are avid users of the book. Um, and so it's a great, great, great resource.

Speaker 2:

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