Can a non-physician own all or part of a for-profit company that employs doctors to provide medical care in Minnesota?  Pursuant to Minnesota’s corporate practice of medicine doctrine (“CPMD”) the answer is “no.” This legal doctrine is not found in a statute, regulation or rule. It comes from the common law of decisions by Minnesota judges and the law is different in other states.

What is the Corporate Practice of Medicine?

The starting point for this question is that Minnesota’s Medical Practice Act prohibits the practice of medicine by an individual without a license. Minn. Stat. Ch. 147. Minnesota has similar statutes for other licensed medical professions such as nursing and dentistry. The Minnesota Supreme Court articulated the doctrine that a for-profit corporation cannot employ a licensed physician at least as far back as 1933.  Granger v. Adson, 250 N.W. 722 (1933). In that case, the court held that It was “improper and contrary to statute and public policy for a corporation or layman to practice medicine” indirectly by hiring a licensed doctor
to practice medicine for the benefit or profit of the hirer. Granger, 250 N.W. at 723. The court further stated: “[w]hat the law intends is that the patient shall be the patient of the licensed physician not of a corporation or layman. The obligations and duties of a physician demand no less. There is no place for a middleman.” Id.

In Isles Wellness, Inc. v. Progressive Northern Insurance Co., 703 N.W.2d 513 (Minn. 2006) the Minnesota Supreme Court described the origin of the doctrine as follows:

“Historically, corporations were not permitted to engage in “learned professions” through the employment of licensed professionals except pursuant to specific statutory or regulatory exceptions. Cases applying a common law prohibition on corporate practice have addressed health care fields such as medicine, dentistry, optometry, and chiropractic. Several states have statutes expressly adopting a prohibition on the corporate practice of medicine. When adopted by state courts, the general prohibition on corporate employment of licensed health care professionals has been based on a corporation’s inability to satisfy the training and licensure requirements set out in state statutes and related public policy considerations. The related public policy considerations underlying the prohibition on corporate practice of a profession include concerns raised by the specter of lay control over professional judgment, commercial exploitation of health care practice, and the possibility that a health care practitioner’s loyalty to a patient and an employer will be in conflict.”

Id. at 517 (internal citations omitted).

The Professional Firms Act

The Court in Isles Wellness identified two very significant exceptions to the doctrine.  First, it noted, “the vast majority of states have enacted statutes expressly permitting the formation of professional corporations. In Minnesota, the Professional Firms Act specifically permits the formation of professional corporations to practice certain specified professions, including chiropractic, provided all ownership interests are held by licensed professionals.” See Minn. Stat. §§ 319B.02, .03, .07 (2004).  In other words, a for-profit corporation can employ physicians and provide health care services for a profit, but only if all of its shareholders are licensed physicians.

Non-Profit Corporations

The other exception to the corporate practice of medicine doctrine is that hospitals and nonprofit corporations may employ doctors. Isles Wellness  at 518, citing Minn. Op. Att’y Gen. No. 92–B–11 (Oct. 5, 1955) (reported in 1956 Report of the Attorney General No. 26 at 88) (stating that a nonprofit corporation may employ physicians and dentists without violating the corporate practice of medicine doctrine). Most of the largest healthcare providers in Minnesota, such as the Mayo Clinic, are non-profit or not for profit corporations and thus fall under this exception to the corporate practice of medicine doctrine.

What is the Practice of Medicine and What Other Professions are Covered?

In Isles Wellness, the court held that prohibition against the corporate practice of medicine does not apply to massage therapy and, as a matter of first impression, the prohibition does not apply to physical therapy; but the doctrine does apply to chiropractic services. A number of recent cases have involved challenges by insurance companies to submissions for reimbursement by companies providing magnetic resonance imaging (MRI) services. In Stand Up Mid America MRI, Inc. v. Allstate Insurance Company, No. A09-1108 (Minn. Ct. App. 2010), the Minnesota Court of Appeals held that that the MRI company, a for-profit corporation, violated the CPMD by paying a licensed chiropractor to make findings based on MRI images, but also held that the violation was not knowing or intentional and therefore the insurance company was not excused from paying the bill.

Conclusion

Anyone looking to start a business or become involved in a business that offers services that might be considered the practice of medicine such as a medical spa or Botox injections should be careful not to run afoul of the corporate practice of medicine doctrine. For more information on the CPMD or starting a professional firm contact the business attorneys at Trepanier MacGillis Battina P.A.

_________________

Bryan R. Battina is a Minnesota business and litigation attorney. He has successfully litigated corporate practice of medicine cases. He can be reached at 612.455.0505 or at bbattina@trepanierlaw.com.