In today’s video, we’ll give you some examples of strong prohibitions against corporate practice of medicine and how these can bite you.

Hi, I’m Michael H. Cohen, founding attorney of Cohen Healthcare Law Group. We help healthcare industry clients like you, navigate healthcare and FDA legal issues so you can grow your healthcare business.

Today’s healthcare startup wants to structure its venture so as to mitigate risks of Corporate Practice of Medicine.  Let’s say they’re starting out in Texas.

Texas law has a strong prohibition against corporate practice of medicine.

In Texas, case law has interpreted the statute to prohibit a lay person or corporation from even employing a physician to practice medicine.  Employment suggests control.  Just like in California, a layperson cannot hire and fire doctors, normally.

Here are some of the factors Texas looks at to assess whether there is a Corporate Practice of Medicine violation:

1. The MSO has hired the medical doctor as an employee.
2. The MSO gives the physician a salary.
3. A layperson or general corporation has a financial interest in a professional medical corporation.
4. A layperson or general corporation has the right to fire the medical doctor.
5. The MSO takes a huge percentage of profits from the physician’s practice.
6. The MSO weighs in on clinical matters like diagnosis and treatment.
7. The MSO determines the professional fees to be charged.

No single factor is dispositive, but enforcement authorities look to these as evidence of too much control by the MSO.

In some States, some of our clients do or they might have the legal right for the MSO to employ or hire and fire the physicians.  The idea is that the State has a very weak, or weakly enforced corporate practice of medicine doctrine. But it’s still a risky strategy because all States have some kind of prohibition against unlicensed corporate practice. And there was the general understanding that LLCs and general corporation can’t practice medicine.  And, employment means control, so if you put them altogether it means that there is a corporate practice of medicine issue waiting in the wings even if no one is particularly excited about it for the moment.

Sometimes it’s worth taking enforcement risks and sometimes, the more buttoned-down model works better and you just employ that more conservative model across States. It’s strategy.

Thanks for watching. We look forward to questions. We have helped a lot of ventures just like you and we look forward to working with you soon on your journey to success!