Corporate Practice

The long-standing bar on the corporate practice of medicine in California is being skirted in the struggle to control the structuring of health care.

What is the "Corporate Practice of Medicine" and why is it important? The policy in Business and Professions Code Section 2400 is intended to prevent unlicensed persons from interfering with or influencing the physician's professional judgment; thereby, protecting patients from commercial exploitation.

The following represents the Medical Board of California's perspective on the corporate practice of medicine ¹and some behaviors and subtle controls the doctrine is intended to prevent. These health care decisions should be made by a physician licensed in California and would constitute the unlicensed practice of medicine if performed by an unlicensed person:

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

In addition, from the MBC's perspective, the following "business" or "management" decisions and activities resulting in control over the physician's practice of medicine should be made by a licensed physician and not by an unlicensed person or entity:

• 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.
  
  
• Selecting (hiring/firing as it relates to clinical competency or proficiency) of professional, physician's extender or allied health staff.
  
  
• Setting the parameters under which the physician will enter into contractual relationships with third-party payers.
  
  
• Making decisions regarding coding and billing procedures for patient care services.
  
  
• Approving the selection of medical equipment for the medical practice.
  
  

These decisions and activities cannot be delegated to any unlicensed person, including (for example) management service organizations. Unlicensed persons may be consulted on such decisions, but the physician must retain the ultimate responsibility for, or approval of, them.

There is a "looking glass" quality to the principals above. Sacramento physicians are experiencing progressive encroachment of their professional autonomy. Hospital systems such as Sutter and Catholic Healthcare West routinely acquire the assets of physicians and skirt the corporate practice issue by segregating the physicians into professional corporations (which may not hold up to scrutiny). UC Davis pioneered the corporate strategy now being implemented by UCLA. Finally, HMOs have routinely crossed the line into clinical decision-making.

The clinical decision-making activities of the HMOs are precipitating a groundswell of litigation in state courts. The Kaiser Family Foundation recently documented that doctors overwhelmingly experience HMOs denying coverage for treatments that they and their patients felt were necessary, and that these denials often resulted in a decline in patient health. ²

• These findings have been substantiated by a state audit of hospital services by HMOs in Maryland that found many denials to be improper. After a random sample of more than 300 denials by a large HMO, the state's insurance commissioner concluded in August that "a pattern of denying benefits" exists.
  
  
• A Washington state study earlier this year found a pattern of improper denials for emergency room treatments.
  
  
• In October, Massachusetts' Secretary of the Commonwealth concluded that the care provided by the state's biggest HMOs "is falling woefully short and endangering the lives of its citizens."
  
  
• Last month an Illinois State Court ruled, "Where an HMO effectively controls a physician's exercise of medical judgment and that judgment is exercised negligently, the HMO cannot be allowed to claim that the physician is solely responsible for the harm that results."
  
  

Society has a significant stake in this issue. In a recent provocative book, ³James Robinson, Professor of Health Economics at the UC Berkeley, School of Public Health, contends that how physicians are organized is central to determining the structure of the health care system. Physician organizations - multispecialty medical groups, Independent Practice Associations, physician practice management firms and physician-hospital organizations - have adopted the larger corporate sector's forms of ownership, governance, finance, compensation and marketing. Robinson argues that health care corporatization is irreversible and parallels trends in the world economy. He highlights similarities of competition and consolidation in medicine with other sectors of the economy. ⁴

Arguments for eliminating the Corporate Practice of Medicine generally are based on economics. They include hidden costs in fee-for-service medicine - overtreatment, rampant infiation, and uncritical professional dominance of treatment decisions. Not everyone shares Robinson's views of health care, but he challenges any return to the inefficient and inequitable era of medicine from which we've just emerged.

The struggle to control the structuring of health care and defining of the physician's role in the system is now joined. The central role of physician entrepreneurship is a critical component in California's evolving health care future. Physicians should not be passive observers as this issue evolves in the courts and in the public policy arena in California.

davidjgibson@email.msn.com

References
1. January 1999 issue of the Medical Board of California's Action Report
2. Kaiser Family Foundation survey; 1999.
3. The Corporate Practice of Medicine Competition and Innovation in Health Care; by James C. Robinson; (California/Milbank Series on Health and the Public, 1); The University of California Press, November 1999
4. Review: http://www.ucpress.edu/books/pages/8764.html.