The Legal Map to a Multi-discipline Practice
Legal Department
Written by Deborah A. Green, Esq.   
Friday, 22 April 2005 14:45 Read : 744 times

If done correctly, the multi-discipline practice is completely legal and will most likely have a longer life than the stand-alone chiropractic practice.

The reasons are simple. At one time, many states followed the corporate practice of medicine doctrine (the “Doctrine”). The Doctrine held that only a medical doctor was allowed to own shares in a corporation that rendered medical services. Today, more and more states are permitting allied health care practitioners to form professional entities together; this means that a chiropractor and a medical doctor may become shareholders in the same entity. Other states are eliminating the Doctrine entirely. In those states where the Doctrine has been eliminated, anyone may own an entity which renders medical care. The entity must, however, employ a medical physician who is responsible for making all medical decisions. The owner of the entity may have no input with respect to any medical decision concerning any patient unless she/he is a medical doctor or an osteopathic physician (hereinafter, “M.D.”) herself/himself.

Investigate Your State Laws

There are various sub-categories of the Doctrine in those states which still recognize it. Some states permit a chiropractor to hold shares in a medical professional entity, so long as an M.D. is also a shareholder; some states require that, in such a case, the M.D. hold a majority of shares, because the M.D. holds a plenary license whereas a chiropractor holds a limited license; other states require that the name of the entity not contain the word “medical” or “medicine” when a non M.D. owns shares in the entity, while other states consider the use of the word “medicine” or “medical” mandatory. Some states still do not permit anyone other than an M.D. to own shares in an entity which renders medical services. It is very important to ascertain what the status of the law is in your state with respect to the corporate practice of medicine Doctrine. Failure to comply with the Doctrine could result in contracts being declared void, loss of professional licensing, injunction against the practice’s business operation and a myriad of other sanctions.

Precautions in Billing

Regardless of what the law is in your state, you must be extremely careful in the way that services are billed. Never use the name and/or billing number of an M.D./D.O. who is not physically on the premises when a service is performed, except under very narrow circumstances. “Standing orders” (a situation where the M.D. sees patients once a month for a few hours and writes a “prescription” for chiropractic adjustments which are then performed by the DC but are billed in the name and number of the M.D., as if the M.D. were physically on the premises) should be avoided entirely. It is false billing and might land you in jail.

Setting up a Multi-disciplinary Practice

Establishing a multi-discipline practice owned by a chiropractor, in those states which have eliminated the Doctrine, is relatively simple. A single entity is formed, which is owned by the chiropractor. This entity enters into employment agreements with its employees, such as the M.D., nurse practitioner, chiropractor, physician assistant, and so on. Care must be taken that each health care practitioner renders services within the scope of his practice. The best way of ensuring this is to be familiar with the scope of practice of each practitioner that is hired.

In order to comply with the law of those states which uphold the Doctrine, certain contracts must be entered into by various entities. I recommend that three entities be formed:  A Management Company, a Professional Entity, and a Funding Company.

The following is an explanation, in a nutshell, of the interaction among the medical entity which is owned either solely by an M.D. or by both an M.D. and the chiropractor (the “Professional Entity”), a management company which is owned solely by the chiropractor (the “Management Company”) and a funding company which is also owned solely by the chiropractor (the “Funding Company”).

The Management Company

The Management Company charges a fee for every act and/or service that it performs on the Professional Entity’s behalf (e.g., all clerical duties, equipment rental, lease rental, etc.), pursuant to the terms of the Management Agreement in which it enters with the Professional Entity. The charges must be at a fair market value rate (value added if applicable), which is a set fee (under no circumstances should it be a percentage, as many states consider the payment of a percentage to the management company by the Professional Entity to be fee splitting), and payable regardless of whether the Professional Entity is actually paid for its services. Your accountant can help you determine the fair market value applicable to your area.

Caveat: Many doctors have found themselves in trouble because they did not treat the Management Company like an actual business. It is vital that you be familiar with all the terms of the Management Agreement and that you abide by them. You may no longer think of yourself as just a chiropractor—you are also the president of the Management Company and you must run that business properly.

The Medical Professional Entity

The shares of the medical professional entity  (“Professional Entity”) are owned by an M.D. (and, where permitted, also by the chiropractor). The chiropractor is named as Secretary of the Professional Entity for purposes of administrative convenience only. Under no circumstances may the chiropractor exercise control over any medical issues, which are left strictly in the purview of the M.D., who will also be the medical director of the Professional Entity.

The Professional Entity may employ various licensed health care professionals, such as physicians, physical therapists, chiropractors, etc., to render services to the Professional Entity’s patients. Each such health care professional enters into a written employment agreement for a term of no less than one year with the Professional Entity. Payment to each such health care professional is at a fair market value rate. Fair market value is determined by the going rate for such health care professionals in your community.

The Funding Company

The Funding Company is funded by you, personally. The Funding Company then provides a loan to the Professional Entity for any and all working capital requirements that the Professional Entity may have, e.g., the purchase of equipment, salaries, lease payments, management fees, taxes, your practice, etc. The Funding Company is repaid by the Professional Entity (interest only). The interest is paid to the Funding Company monthly. The principal amount is due on demand. In order to secure its loan, the Funding Company receives a Note and a lien on all accounts receivables and other assets from the Professional Entity, in addition to other security.

Caveat: The Funding Company will protect your investment in the event that the M.D. working in your practice gets divorced, dies, or goes bankrupt. Do not ignore this company—make sure that you use it properly. If you do not understand the reason for its existence, make sure that your lawyer explains it to you in detail.

If you have any questions with regard to the above or with respect to any other legal heath care issues, you may FAX your questions to Deborah A. Green, Esq., at 954-971-3787 or call 954-971-7778 or e-mail This e-mail address is being protected from spambots. You need JavaScript enabled to view it . In future issues, she will be answering those questions which are of interest to the broadest audience.

Ms. Green has been a practicing attorney since 1977. She is admitted to the practice of law in the State of New York and Florida and is a member of the American Health Lawyers Association, the New York State Bar Association Health Care System Design Committee, the New York State Bar Association Health Care Providers Committee, the American Bar Association Health Law Section and the Florida Bar Health Law Section. She has formed numerous multi-discipline practices throughout the country.

DISCLAIMER

Because this column is being presented to you by an attorney, it would not be complete without a disclaimer. This column is provided subject to and governed expressly by the terms of this disclaimer. This column is provided for educational purposes only. The accuracy or timeliness of the information presented herein is not warranted. The information presented herein is not intended to be advice as to a specific fact pattern with which you may be presented.  Accordingly, please note that the information contained herein is not being presented as legal advice with respect to any matter and that no attorney-client relationship is hereby established.


 
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