Corporate Practice of Medicine
The following is to provide guidance to physicians on the prohibition against the
corporate practice of medicine.
A presentation on the corporate practice of medicine,
including frequently asked questions and common concerns, was provided at the Medical
Board of California’s Quarterly Board meeting on January 29, 2015. Watch the presentation
here for additional information pertaining to this important topic:
Corporate Practice of
Note: This area of law can be complicated, therefore physicians are encouraged to
discuss their medical practices and business enterprises with appropriately knowledgeable
legal experts. The Medical Board of California continues to receive complaints and
inquiries about the law, and some repeating issues are presented here.
The Medical Practice Act, Business and Professions Code section 2052, provides:
"Any person who practices or attempts to practice, or who holds himself or herself
out as practicing...[medicine] without having at the time of so doing a valid, unrevoked,
or unsuspended certificate...is guilty of a public offense."
Business and Professions Code section 2400, within the Medical Practice Act, provides
in pertinent part:
"Corporations and other artificial entities shall have no professional rights, privileges,
The policy expressed in Business and Professions Code section 2400 against the corporate
practice of medicine is intended to prevent unlicensed persons from interfering
with or influencing the physician's professional judgment. The decisions described
below are examples of some of the types of behaviors and subtle controls that the
corporate practice doctrine is intended to prevent. From the Medical Board's perspective,
the following health care decisions should be made by a physician licensed in the
State of 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 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.
In addition, the following "business" or "management" decisions and activities,
resulting in control over the physician's practice of medicine, should be made by
a licensed California 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.
- 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
The types of decisions and activities described above cannot be delegated to an
unlicensed person, including (for example) management service organizations. While
a physician may consult with unlicensed persons in making the "business" or "management"
decisions described above, the physician must retain the ultimate responsibility
for, or approval of, those decisions.
The following types of medical practice ownership and operating structures also
- 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."
In the examples above, non-physicians would be engaged in the unlicensed practice
of medicine, and the physician may be aiding and abetting the unlicensed practice
It is important to note that pursuant to Business and Professions Code section 2417.5,
a business organization that offers to provide or provides outpatient elective cosmetic
medical procedures or treatments that is not in compliance with the ban on the corporate
practice of medicine is guilty of knowingly making or causing to be made a false
or fraudulent claim for payment of a health care benefit pursuant to paragraph (6)
of subdivision (a) of Section 550 of the Penal Code.