If someone asks you to be Medical Director, run….

There’s an old quote that says: “If you meet the Buddha on the road, kill him!” And what if your friendly neighborhood chiropractor asks you to be Medical Director, especially in California? Remember, we’re lawyers who counsel companies and practices involved in holistic healing. We navigate legal and regulatory strategies to bring your health and wellness products, and services, to market. As such, we advocate non-violence. Don’t kill the Buddha, and don’t hurt the chiropractor. But don’t let either have authority over you. (Find the Buddha within … but that’s another story…).

Last week a medical doctor told us that three investigators had shown up unannounced at her medical practice: one from the medical board, one from the district attorney’s office, and a third from another agency for good measure. They then grilled her for several hours. She was too surprised to even call her regulatory attorney.

Why the visit?

Because the MD had been having conversations about becoming “medical director,” with a chiropractor (DC) who was under investigation.

Now there’s nothing wrong with having conversations. Remember the First Amendment, protector of free speech? We’re all for creative business strategies. And the chiropractor was under investigation for something else. So theoretically, our doctor has done nothing wrong.

But if what our physician had agreed to become “medical director?”

Let’s do Einstein’s thought experiment. This kind of offer happens all the time:

“We’ll set up a venture; my cousin is an MD – he or she will be “Medical Director;” we’ll market some online product or service, perhaps with a brick-and-mortar here and there; my cousin MD is in another state, he or she can be on the phone once a week, or visit the brick-and-mortar here and there — it’s easy money for them, easy for us, we get the MD, we’ll make tons of money in this trillion-dollar industry (multiply a trillion by any whole digit and you still get a nice revenue projection)….yes, we’ll put our deck together and get venture capital….

Oh, by the way, can you put together the contract for us to hire the doctor – it should be a snap, just a few pages…”

We’ve seen lots of variations of the idea of “partnering” with an MD. People call all day long and talk about their “MD partner.”

There’s a little rule known as corporate practice of medicine.

The corporate practice of medicine doctrine states that non-physicians cannot practice medicine (because unlicensed medical practice, is a crime). Also, non-physicians cannot practice medicine via a corporate entity (i.e., a general corporation, LLC, or partnership).

Only a professional medical corporation can offer medical services (or in some cases, another professional corporation where the MD is a shareholder as allowed by state law). There must be a clear separation between the clinical, medical role on one hand, and the administrative, management, or marketing role on the other. This separation is the legal basis for the “management (MSO) model” that our law firm uses when non-physician entrepreneurs want to enter into a business arrangement with physicians.

In some states, such as California, there is a “strong” version of corporate practice of medicine, which includes, for example, the idea that a non-physician cannot hire a physician (i.e, can neither employ nor hire as independent contractor). A non-physician cannot enter into a “partnership” with a physician to deliver medical services.

Closely tied is the idea of fee-splitting. In California, one must consider a variety of statutes and regulations, including Business & Professions Code 650, which prohibits an MD from splitting patient revenues with non-physicians. Quite often, a corporate practice of medicine violation is also a kickback or fee-splitting violation as well.

The perils are thus clear enough when non-licensed persons, such as non-licensee entrepreneurs, want to work with MDs, but what about the chiropractor, who is a licensed healthcare provider? Are there still legal issues that the venture must worry about?

Again: a chiropractor cannot hire an MD, as the chiropractor (or acupuncturist, massage therapist, physical therapist, nurse, psychologist, etc.) cannot have clinical authority into medical decision-making. As laid out in Complementary & Alternative Medicine: Legal Boundaries & Regulatory Perspectives, medical doctors are said to have “unlimited licensure” to diagnose and treat disease, while other healthcare practitioners have their licensed tied to a specific and more limited scope of practice.

If you’re an MD who wants to be a medical director, the safer course is to be medical director among MD’s – ie, for your own medical practice or medical group.

We’ve seen a lot of variations of the medical director concept, all of which raise corporate practice of medicine and fee-splitting issues. These include:

When structuring any one of these ventures, be sensitive to legal and regulatory hurdles such as:

A simple title or designation can bring enforcement scrutiny upon the doctors involved, as well as those organizing and controlling the venture.

For better or worse, health and wellness is a highly regulated industry.

My own interest in this field goes back to my days as a Wall Street lawyer at Davis Polk & Wardwell, studying transcendental meditation (TM) to gain extra rest between all-nighters on large, corporate deals. My professional interests encompass legal issues associated with alternative, complementary and integrative medicine as well as stem cell therapeutics, nano-technology, robotics, genetics–everything health and wellness from ancient to modern, from spiritual to technological.

At this juncture of spirit and silicon, I am mindful of the regulatory hazards that await the unmindful. You may not meet the Buddha on the road, but if you meet a medical board investigator, get legal counsel — or better yet, design your future early on by seeking the best possible legal and regulatory advice. Contact the Cohen Healthcare Law Group now to assess your regulatory risk and design proactive solutions to bring your health and wellness products and services to market.


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