When a chiropractor and medical doctor provide stem cell therapies together, how do they navigate healthcare law obstacles?

Stem Cells on Steroids

Jenna wants to open an integrative medicine, holistic health wellness center and clinic focusing on anti-aging and longevity medicine, functional medicine, nutraceuticals and cosmeceuticals, rejuvenation, hydration therapy, IV treatments, regeneration, and vitality.

Jenna is optimistic, because after all, who doesn’t want to look younger and more beautiful, and be biologically and physically more youthful?

There are no steroids, but Jenna is big on stem cells.

Jenna has lined up two physicians who are the biggest names among medical doctors and other clinical providers offering stem cells therapies.  Her clinical professionals are:

  • Chris the Chiropractor
  • Maddie the Medical Doctor

Chris the chiropractor has his own professional chiropractic corporation, where he is the sole shareholder. Maddie has her own professional medical corporation, in which she is the sole shareholder. The professional chiropractic corporation is organized to provide professional chiropractic services, and the professional medical corporate is organized to provide professional medical services.

In addition, the chiropractor and the medical doctor each wants to be a 3% shareholder in a medical, management services organization (MSO) which they will own, with Jenna getting 34% of the shares.

Jenna comes to her healthcare lawyer, seeking advice on the business structure and whether it runs afoul of corporate practice of medicine, anti-kickback and fee-splitting, Stark or PORA, HIPAA, or any other healthcare legal rules.

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Possible Arrangements for the Stem Cell Venture

Jenna’s healthcare lawyer advises here that there are several ways for the chiropractor and medical doctor to go into business together.

There’s the jointly owned MSO, which they are proposing.  The MSO can make money by charging a management and marketing fee at fair market value from each professional corporation.

There is another option.  State laws usually require that a professional corporation only provide services of the healthcare profession for which the professional corporation is organized (for example: chiropractic; or, medicine; or physical therapy, acupuncture, nursing, and so on).  Some states have an exception, whereby they allow healthcare clinicians from different professions to be housed together as shareholders within the same professional corporation.

For example, in California, the Moscone-Knox Professional Corporations Act provides:

13401. As used in this part:

(a) “Professional services” means any type of professional services that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act.

(b) “Professional corporation” means a corporation organized under the General Corporation Law or pursuant to subdivision (b) of Section 13406 that is engaged in rendering professional services in a single profession, except as otherwise authorized in Section 13401.5, pursuant to a certificate of registration issued by the governmental agency regulating the profession as herein provided and that in its practice or business designates itself as a professional or other corporation as may be required by statute. However, any professional corporation or foreign professional corporation rendering professional services by persons duly licensed by the Medical Board of California or any examining committee under the jurisdiction of the board, the California Board of Podiatric Medicine, the Osteopathic Medical Board of California, the Dental Board of California, the Dental Hygiene Committee of California, the California State Board of Pharmacy, the Veterinary Medical Board, the California Architects Board, the Court Reporters Board of California, the Board of Behavioral Sciences, the Speech-Language Pathology and Audiology Board, the Board of Registered Nursing, or the State Board of Optometry shall not be required to obtain a certificate of registration in order to render those professional services….

13401.5 Notwithstanding subdivision (d) of Section 13401 and any other provision of law, the following licensed persons may be shareholders, officers, directors, or professional employees of the professional corporations designated in this section so long as the sum of all shares owned by those licensed persons does not exceed 49 percent of the total number of shares of the professional corporation so designated herein, and so long as the number of those licensed persons owning shares in the professional corporation so designated herein does not exceed the number of persons licensed by the governmental agency regulating the designated professional corporation. This section does not limit employment by a professional corporation designated in this section to only those licensed professionals listed under each subdivision. Any person duly licensed under Division 2 (commencing with Section 500) of the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act may be employed to render professional services by a professional corporation designated in this section.

(a) Medical corporation.

(1) Licensed doctors of podiatric medicine.

(2) Licensed psychologists.

(3) Registered nurses.

(4) Licensed optometrists.

(5) Licensed marriage and family therapists.

(6) Licensed clinical social workers.

(7) Licensed physician assistants.

(8) Licensed chiropractors.

(9) Licensed acupuncturists.

(10) Naturopathic doctors.

(11) Licensed professional clinical counselors.

(12) Licensed physical therapists.

(13) Licensed pharmacists.

(14) Licensed midwives.

(b) Podiatric medical corporation.

(1) Licensed physicians and surgeons.

(2) Licensed psychologists.

(3) Registered nurses.

(4) Licensed optometrists.

(5) Licensed chiropractors.

(6) Licensed acupuncturists.

(7) Naturopathic doctors.

(8) Licensed physical therapists.

(c) Psychological corporation.

(1) Licensed physicians and surgeons.

(2) Licensed doctors of podiatric medicine.

(3) Registered nurses.

(4) Licensed optometrists.

(5) Licensed marriage and family therapists.

(6) Licensed clinical social workers.

(7) Licensed chiropractors.

(8) Licensed acupuncturists.

(9) Naturopathic doctors.

(10) Licensed professional clinical counselors.

(11) Licensed midwives.

(d) Speech-language pathology corporation.

(1) Licensed audiologists.

(e) Audiology corporation.

(1) Licensed speech-language pathologists.

(f) Nursing corporation.

(1) Licensed physicians and surgeons.

(2) Licensed doctors of podiatric medicine.

(3) Licensed psychologists.

(4) Licensed optometrists.

(5) Licensed marriage and family therapists.

(6) Licensed clinical social workers.

(7) Licensed physician assistants.

(8) Licensed chiropractors.

(9) Licensed acupuncturists.

(10) Naturopathic doctors.

(11) Licensed professional clinical counselors.

(12) Licensed midwives.

(g) Marriage and family therapist corporation.

(1) Licensed physicians and surgeons.

(2) Licensed psychologists.

(3) Licensed clinical social workers.

(4) Registered nurses.

(5) Licensed chiropractors.

(6) Licensed acupuncturists.

(7) Naturopathic doctors.

(8) Licensed professional clinical counselors.

(9) Licensed midwives.

(h) Licensed clinical social worker corporation.

(1) Licensed physicians and surgeons.

(2) Licensed psychologists.

(3) Licensed marriage and family therapists.

(4) Registered nurses.

(5) Licensed chiropractors.

(6) Licensed acupuncturists.

(7) Naturopathic doctors.

(8) Licensed professional clinical counselors.

(i) Physician assistants corporation.

(1) Licensed physicians and surgeons.

(2) Registered nurses.

(3) Licensed acupuncturists.

(4) Naturopathic doctors.

(5) Licensed midwives.

(j) Optometric corporation.

(1) Licensed physicians and surgeons.

(2) Licensed doctors of podiatric medicine.

(3) Licensed psychologists.

(4) Registered nurses.

(5) Licensed chiropractors.

(6) Licensed acupuncturists.

(7) Naturopathic doctors.

(k) Chiropractic corporation.

(1) Licensed physicians and surgeons.

(2) Licensed doctors of podiatric medicine.

(3) Licensed psychologists.

(4) Registered nurses.

(5) Licensed optometrists.

(6) Licensed marriage and family therapists.

(7) Licensed clinical social workers.

(8) Licensed acupuncturists.

(9) Naturopathic doctors.

(10) Licensed professional clinical counselors.

(11) Licensed midwives.

(l) Acupuncture corporation.

(1) Licensed physicians and surgeons.

(2) Licensed doctors of podiatric medicine.

(3) Licensed psychologists.

(4) Registered nurses.

(5) Licensed optometrists.

(6) Licensed marriage and family therapists.

(7) Licensed clinical social workers.

(8) Licensed physician assistants.

(9) Licensed chiropractors.

(10) Naturopathic doctors.

(11) Licensed professional clinical counselors.

(12) Licensed midwives.

(m) Naturopathic doctor corporation.

(1) Licensed physicians and surgeons.

(2) Licensed psychologists.

(3) Registered nurses.

(4) Licensed physician assistants.

(5) Licensed chiropractors.

(6) Licensed acupuncturists.

(7) Licensed physical therapists.

(8) Licensed doctors of podiatric medicine.

(9) Licensed marriage and family therapists.

(10) Licensed clinical social workers.

(11) Licensed optometrists.

(12) Licensed professional clinical counselors.

(13) Licensed midwives.

(n) Dental corporation.

(1) Licensed physicians and surgeons.

(2) Dental assistants.

(3) Registered dental assistants.

(4) Registered dental assistants in extended functions.

(5) Registered dental hygienists.

(6) Registered dental hygienists in extended functions.

(7) Registered dental hygienists in alternative practice.

(o) Professional clinical counselor corporation.

(1) Licensed physicians and surgeons.

(2) Licensed psychologists.

(3) Licensed clinical social workers.

(4) Licensed marriage and family therapists.

(5) Registered nurses.

(6) Licensed chiropractors.

(7) Licensed acupuncturists.

(8) Naturopathic doctors.

(9) Licensed midwives.

(p) Physical therapy corporation.

(1) Licensed physicians and surgeons.

(2) Licensed doctors of podiatric medicine.

(3) Licensed acupuncturists.

(4) Naturopathic doctors.

(5) Licensed occupational therapists.

(6) Licensed speech-language therapists.

(7) Licensed audiologists.

(8) Registered nurses.

(9) Licensed psychologists.

(10) Licensed physician assistants.

(11) Licensed midwives.

(q) Registered dental hygienist in alternative practice corporation.

(1) Registered dental assistants.

(2) Licensed dentists.

(3) Registered dental hygienists.

(4) Registered dental hygienists in extended functions.

(r) Licensed midwifery corporation.

(1) Licensed physicians and surgeons.

(2) Licensed psychologists.

(3) Registered nurses.

(4) Licensed marriage and family therapists.

(5) Licensed clinical social workers.

(6) Licensed physician assistants.

(7) Licensed chiropractors.

(8) Licensed acupuncturists.

(9) Licensed naturopathic doctors.

(10) Licensed professional clinical counselors.

(11) Licensed physical therapists.

There is a long list here in the Moscone-Knox Professional Corporations Act.  You have to go to the exact professional corporation contemplated.  And you’ll see, for example, that a chiropractor can be a shareholder in a professional medical corporation, and a chiropractor can be a shareholder in a professional chiropractic corporation.  So long as the 51% rule is observed—i.e., the MD must be 51% shareholder or more in his or her professional chiropractic corporation; and the chiropractor must be 51% shareholder of more in his or her professional medical corporation.

Which means that Chris the chiropractor could potentially own up to 49% of the shares in Maddie’s professional medical corporation; and/or, Maddie could potentially own up to 49% of the shares in Chris’s professional chiropractic corporation.

That’s a possibility; and then the business side has to be analyzed.  For example, making someone a shareholder implies certain legal duties.  And, it isn’t to remove a shareholder.  The parties would be well advised to have a buy/sell agreement, and other legal documents.  There are pros and cons to this kind of involvement in one another’s professional corporations.

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Corporate Practice of Medicine Issues in the Stem Cell Venture

Moscone-Knox doesn’t answer everything.  The statute only allows certain kinds of combinations in terms of ownership of a professional corporation.  Moscone-Knox also addresses who can be a director, officer, and employee of the professional corporation.

While the chiropractor can potentially own up to 49% of the shares of a professional medical corporation, and, the medical doctor can potentially own up to 49% percent of the shares of a professional chiropractic corporation — and, each can be an employee in the other’s professional corporation – this does not address the question of control over medical decision-making.

If the medical doctor is an employee of the professional chiropractic corporation, this suggests that the chiropractor has control over the employee.  And if the chiropractor has 49% of the shares in the medical doctor’s corporation, this suggests a great deal of influence.

The legal challenge here is that the chiropractor cannot practice “medicine.”

And, the fact that stem cell therapies are involved suggests that there is a potential scope of practice issue anyway, as to what the chiropractor can and cannot do.

California Takes Corporate Practice of Medicine Seriously

On its webpage, Corporate Practice of Medicine, the Medical Board of California (“MBC”) describes its expansive view of what constitutes CPM.  MBC lists a broad range of activities that constitute corporate practice of medicine.

First, CMB includes as “examples of some of the types of behaviors and subtle controls that the corporate practice doctrine is intended to prevent,” the following:

  • Determining what diagnostic tests are appropriate for a particular condition.
  • Determining the need for referrals to, or consultation with, another physician/specialist.
  • Responsibility for the ultimate overall care of the patient, including treatment options available to the patient.
  • Determining how many patients a physician must see in a given period of time or how many hours a physician must work.

Second, CMB points to the following “‘business’ or ‘management’ decisions and activities, resulting in control over the physician’s practice of medicine,” as those that “should be made by a licensed California physician and not by an unlicensed person or entity” such as an MSO:

  • Ownership is an indicator of control of a patient’s medical records, including determining the contents thereof, and should be retained by a California-licensed physician.
  • Selection, hiring/firing (as it relates to clinical competency or proficiency) of physicians, allied health staff and medical assistants.
  • Setting the parameters under which the physician will enter into contractual relationships with third-party payers.
  • Decisions regarding coding and billing procedures for patient care services.
  • Approving of the selection of medical equipment and medical supplies for the medical practice.

CMB points out that these “types of decisions and activities” can be made by a physician who consults with the MSO, but not by the MSO. In other words, MBC also looks to whether in its view, non-physicians are exercising control over a physician’s medical practice, even where physicians own and operate the business.

Last, MBC states that the following types of ownership and operating structures are prohibited:

  • Non-physicians owning or operating a business that offers patient evaluation, diagnosis, care and/or treatment.
  • Physician(s) operating a medical practice as a limited liability company, a limited liability partnership, or a general corporation.
  • Management service organizations arranging for, advertising, or providing medical services rather than only providing administrative staff and services for a physician’s medical practice (non-physician exercising controls over a physician’s medical practice, even where physicians own and operate the business).
  • A physician acting as “medical director” when the physician does not own the practice. For example, a business offering spa treatments that include medical procedures such as Botox injections, laser hair removal, and medical microdermabrasion, that contracts with or hires a physician as its “medical director.”

MBC explains that the rule is “intended to prevent unlicensed persons [and companies] from interfering with or influencing the physician’s professional judgment.”  In all of the above examples above, CMB asserts, it would find a CPM violation, and “the physician may be aiding and abetting the unlicensed practice of medicine.”

As well, each of the medical doctor and the chiropractor will be in dual roles—one, in their licensed capacity as a clinician, and the other, as a co-owner of the MSO.  These roles have to be kept separate, as the MSO cannot engage in or intrude on, decision-making.

Last, remember that the scope of practice issues regarding stem cell practices by the chiropractor also raise issues of unlicensed medical practice.  And this raises potential aiding and abetting of unlicensed practice of medicine by the physician.

Among other things, the two clinicians must work out operationally—with the advice of their healthcare lawyer who understands the legal ins and outs of stem cell therapies—who will do what, with what patients, when, with regard to stem cell therapeutics.

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Fee-Splitting

Fee-splitting and anti-kickback analysis is always important when you have a healthcare venture run by a non-MD, such as Jenna, and the intersection of the two healthcare professionals.

States have their individual anti-kickback and fee-splitting rules, which often mirror the federal landscape under Medicare.

In California, Business & Professions Code (“BPC”), Section 650(a) provides:

… the offer, delivery, receipt, or acceptance by any person licensed under this division or the Chiropractic Initiative Act of any rebate, refund, commission, preference, patronage dividend, discount, or other consideration, whether in the form of money or otherwise, as compensation or inducement for referring patients, clients, or customers to any person, irrespective of any membership, proprietary interest, or coownership in or with any person to whom these patients, clients, or customers are referred is unlawful.

The Medical Board of California notes on its webpage, Inducements (Kickbacks) for Patient Referrals:

Violation of the above is punishable by imprisonment, a fine of up to $50,000, or both. This law applies to referrals by physicians, dentists, nurses, and other health care professionals including chiropractors. The intent of the law is to protect the public from excessive health care costs, from referrals based on considerations other than the best interests of the patients, deceit and fraud, and payment to a licensee where professional services have not been rendered.

This basic prohibition against kickbacks and fee-splitting, applies, among other things, to “any person licensed under” Division 2 (Healing Arts).

Section 652.5 provides that any violation constitutes a misdemeanor “as to any and all persons, whether or not licensed under this division, and is punishable by imprisonment in the county jail not exceeding six months, or by a fine not exceeding two thousand five hundred dollars ($2,500), or by both the imprisonment and the fine.  (emphasis added)

Here, because you also have two healthcare professionals—a chiropractor and an medical doctor—who are referring to one another, an additional layer of analysis is required under the state’s applicable “mini-Stark” statute.  Mini-Stark, like the federal statute, prohibits (with a dizzying array of exceptions) physician conflict of interest in the form of referring the patient to an entity in which the physician has a financial interest. In California, the statute is the Physician Ownership and Self-Referral Act (“PORA”).

PORA, in Business and Professions Code Section 601.01(a), states:

Notwithstanding Section 650, or any other provision of law, it is unlawful for a licensee to refer a person for laboratory, diagnostic nuclear medicine, radiation oncology, physical therapy, physical rehabilitation, psychometric testing, home infusion therapy, or diagnostic imaging goods or services if the licensee or his or her immediate family has a financial interest with the person or in the entity that receives the referral.

Putting the Stem Cell Venture Together

In this case study, you have a non-MD who is putting together the stem cell venture; a medical doctor; and a chiropractor.  The three intend to co-own an MSO; while the two clinical professionals each have their own professional corporation.

Our healthcare lawyers are used to this kind of complexity.  There isn’t one answer that you can find in one statute or some guidebook or White Paper.  There are multiple layers that apply, and many of these apply to healthcare ventures in general, while you also have rules applicable specifically to stem cell therapies.

Many chiropractors and medical doctors like to work together to bring stem cell therapies and other healthcare technologies and systems to patients.  As the therapeutics evolve, it makes sense to collaborate and practice in a more multidisciplinary fashion.

At the same time, while the enterprise is holistic, the legal rules governing the stem cell venture are more fragmented.  We want to be “disruptive,” in a good way!  Our healthcare lawyers are experienced in complex healthcare arrangements that cross party lines, so to speak, whether between medicine and chiropractic, or medicine and physical therapy, or other kinds of practices, whether they style themselves as holistic, wellness-oriented, integrative, or otherwise.

Contact Cohen Healthcare Law Group today to make sure your multidisciplinary healthcare venture comply with legal requirements governing a broad range of medical procedures and healthcare situations.

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