I. What is a Multi-Discipline Practice?
Healthcare in America is becoming increasingly integrated. For instance, the American Medical Association (“AMA”) notes rapid changes in healthcare delivery and an expanding environment of integrated modes of practice. A strong impetus for this change was the enactment of the Affordable Care Act, which created a broad regulatory framework for such initiatives as clinical integration, care coordination, quality and other performance metrics, and cost containment. However, the AMA understandably focuses on physician-led practices that integrate several medical specialties.
By contrast, this article discusses multi-discipline practices, which delivers non-medical modalities alongside more conventional medical services. These non-medical modalities, such as physical therapy, chiropractic, naturopathy, and acupuncture, are often designated by the term “complementary and alternative medicine” (“CAM”) and are widely accepted in the general populace. Confusingly, such multi-discipline practices are also sometimes known as integrated medicine.
More particularly, this article focuses on multi-discipline practices that integrate medical services with a non-physician (MD/DO) provider (e.g. DC, NP, PA, PT) through ownership or operation, which we will refer to as integrated practices because of the joint control and/or ownership interests of the non-physician and physician. These practices are frequently set up by the non-physician because of Corporate Practice of Medicine restrictions (“CPOM”), who arranges with a physician to either oversee medical services provided by a mid-level medical practitioner, or to enter a contractual relationship whereby the non-physician provides administrative services through a management service organization (“MSO”) to a medical practice, and also offers complimentary and alternative medicine services to the patients.
Increasing numbers of non-physicians are utilizing or considering this model, and for good reason. For one, it allows the non-physician to offer more healthcare services to his/her current patients. Non-physician providers are able to financially benefit from the joint relationship with a physician’s scope of practice with careful compliance with federal and state laws. Meanwhile, the physician benefits through an additional income stream for his/her oversight role and/or through handing off the administrative side of the practice, allowing him/her to concentrate on the practice of medicine.
Despite the attractiveness of these arrangements to both parties under proper legal formation and operation, pitfalls abound, especially when the practice serves federal healthcare program (“FHP”) beneficiaries. Along with a discussion of a typical model of an integrated practice, this article presents some of the possible pitfalls of these arrangements, and is meant to be a cautionary tale.
II. Potential Pitfalls of an Integrated Practice
The possible pitfalls of an integrated practice that is either poorly structured or operated are many and potentially ruinous. As every practitioner surely knows, fraud in the healthcare arena can result in criminal liability at both the federal and state level. However, even well-intentioned practitioners can find themselves facing criminal charges, civil penalties, licensing board sanctions, and financial collapse. The following discussion presents the greatest areas of concern.
A. Legal Structure – the Corporate Practice of Medicine
Most states have some form of prohibition against CPOM. This doctrine generally prohibits a business corporation from practicing medicine or employing a medical doctor to provide professional medical services. Even where a distinct law may not exist, this doctrine is often embodied in the prohibitions against practicing medicine without a license and against fee-splitting between someone with a medical license and someone without. It is this doctrine that generally disallows a non-physician from co-owning an entity with, or employing – even as an independent contractor – a medical doctor.
The basic public policy reason behind the prohibition against CPOM is the conflict between the interests of a corporation and the needs of a patient. However, most states make some exceptions to their CPOM doctrine, such as for hospitals, health maintenance organizations, and professional corporations. Thus, the first step in setting up an integrated practice is to understand the CPOM doctrine of the state where the entity will be formed and operate, and to structure the entity or entities accordingly.
An additional source of rules and regulations concerning the CPOM is state medical licensing boards. For example, California’s Medical Board finds problematic a number of scenarios that are foreseeable in an integrated practice. In California, the following health care decisions 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 s/he must work.
Also, the following business or management decisions and activities, resulting in control over the physician’s practice of medicine, may not be made by an unlicensed person or entity:
· Selection, hiring/firing (as it relates to clinical competency or proficiency) of medical doctors, medical assistants, and allied health staff.
· Decisions regarding coding and billing procedures for patient care services.
· Approving the selection of medical equipment and medical supplies for the medical practice.
The Board states that these “business” or “management” decisions and activities cannot be delegated to an unlicensed person, “including management service organizations,” and that while they may consult with unlicensed persons in making these types of decisions, the medical doctor retains ultimate responsibility.
Additionally, the Board prohibits the following types of medical practice ownership and operating structures, deeming them the unlicensed practice of medicine:
· Non-physicians owning or operating a business that offers patient evaluation, diagnosis, care and/or treatment. . .
· Management service organizations arranging for, advertising, or providing medical services rather than only providing administrative staff and services for a physician’s medical practice . .
· A physician acting as ‘medical director’ for a business providing medical procedures.
Nevertheless, even in states which are widely considered to have robust CPOM laws, such as California, it is possible to set up an integrated practice that will not run afoul of state law.
B. Additional Legal and Regulatory Requirements
Laws and regulations governing the healthcare arena can apply to any healthcare entity or be specific to certain programs such as Medicare. For example, the Health Insurance Portability and Accountability Act (“HIPAA”) established national standards for electronic health care transactions that apply to nearly every healthcare practice. On the other hand, the federal Physician Self-Referral law applies specifically to Medicare and Medicaid. However, some states have their own versions of such laws that may be even broader than the federal version, such as applying to all healthcare payers and not just FHPs. The regulatory schemes where an integrated practice would most likely run afoul are briefly discussed below.
1. Anti-Kickback and Fee-Splitting Statutes
A medical practice operating in collaboration with a non-physician practice implicates both anti-kickback and fee-splitting prohibitions. Anti-kickback laws prohibit any kind of remuneration for referrals. A “safe harbor” in the federal anti-kickback statute (“AKS”) is that of referring a patient to a practitioner of another specialty in return for an agreement to refer that patient back, as long as there is no remuneration or splitting of a global fee for the referral other than the compensation each practitioner receives for his/her services. This would protect the passing back and forth of a patient between a physician and a non-physician in an integrated practice. However, states can have their own anti-kickback laws that could be broader than the AKS and not include such a safe harbor.
Meanwhile, fee-splitting is the sharing of fees across professions for services provided to a single healthcare consumer. Fee-splitting is generally prohibited because it raises similar issues to that of CPOM laws, in that financial considerations may run counter to professional judgment. It also raises issues similar to those addressed by anti- kickback laws, in that healthcare referrals may be made for financial reasons, rather than the patient’s best interests.
Fee-splitting prohibitions derive from state statutes and professional licensing boards. Therefore, while prohibiting similar behavior, these laws are state specific. In Florida, for example, it is a criminal offense for a healthcare provider or facility to split fees, a practice known there as “patient brokering.” The prohibition does not apply to a group practice, but a non-physician and physician could not form a group practice in Florida by statutory definition, each member of the group must provide “substantially the full range of services which the health care provider routinely provides, including medical care, consultation, diagnosis, or treatment.” However, in Florida as elsewhere, integrated practices can operate legally and compliantly.
2. False Claims Act
The federal False Claims Act (“FCA”) prohibits the knowing presentation of false claims to the government. While every healthcare practice must avoid submitting claims known to be false to any FHP, an integrated practice can create particular opportunities to run afoul of this law, especially where a non-physician owns the MSO and is submitting claims on behalf of the physician’s practice.
The FCA allows private persons to file a false claims suit in their own name and in the government’s stead. This is known as a qui tam action, and is designed to bring to light wrong-doing that only an insider would know about. The government may decide to intervene, taking over the action as its own after examining the complaint and supporting evidence. While a qui tam action is a powerful tool for genuine whistleblowers, this law is sometimes invoked in retaliation, often by a disgruntled ex-employee terminated for good cause. Even where meritless, such actions destroy a healthcare practice.
3. Physician Self-Referral (“Stark”)
Self-referral is the practice of referring patients to healthcare entities in which the referring provider has a financial interest. Due to the inherent conflict this creates between the provider’s financial considerations and his/her medical judgment regarding the patient, such referrals are prohibited by most states and under federal law. The federal physician self-referral law is known as the “Stark” law, after the bill’s initial sponsor, California Congressman Pete Stark. Stark specifically prohibits self-referral by physicians regarding eleven “designated” healthcare services that are reimbursable by Medicare or Medicaid. However, state self-referral laws may be even broader, perhaps applying to all healthcare providers, or entailing even more healthcare services, or involving any healthcare payer.
An integrated practice, unless properly structured, could implicate federal and/or state self-referral laws. Each scenario needs to be carefully evaluated on a state by state basis.
4. Scope of Practice, Collaboration Agreements, and Supervision
Finally, states have laws governing the scope of practice and supervision of mid-level medical practitioners (e.g. NP, PA, PT). Scope of practice refers to the services a licensed practitioner is authorized to provide. For example, a chiropractor looking to expand services to offer to his/her patients might choose to develop a pain management and physical therpay practice. The diagnosis and treatment of chronic pain due to causes beyond spinal subluxations would involve medical diagnosis and treatment that can often be provided by a mid-level provider (e.g. NP or PA). Depending on applicable state law, a NP may function largely autonomously, giving injections and even prescribing medications, but must usually have a collaboration and supervision agreement in place with a supervising physician that provides for regular oversight, education, and training.
Such an arrangement usually means that the physician is off-site but immediately accessible by phone or email to help with questions or concerns. This can become a secondary income stream for the physician and will usually pass regulatory muster if the physician’s compensation for this arrangement is determined to be legally compliant in advance.
However, such services must be billed under the practice, with the rendering mid-level NPI accurately billed in accordance with each payer’s policy. For Medicare/Medicaid, mid-level rendered services may be billed under the physician’s NPI under “incident to” billing, resulting in reimbursement at the doctor’s rather than the mid-level’s rate if the physician is onsite, directly in contact with the patients during administration of services, and in compliance with a number of other key requirements. Understanding the difference between just being a supervising physician for state law oversight of a mid-level and proper administration of incident to billing can mean the difference between a clean, successful integrated practice and a potentially devastating end to a physician’s career.
This article is meant only to provide broad caution and to affirm that integrated practices can operate legally and successfully in every state to some degree. However, careful due diligence and proper legal counsel are essential in the complex and budding arena of integrated practice.
· Healthcare is becoming increasingly integrated, and the American healthcare consumer expects convenience and a wide array of options in making healthcare choices.
· Integrated practices are attractive to both physicians and non-physicians because of the benefits to patients and financial incentives.
· Integrated practices are not illegal, but significant care must be exercised to structure them in compliance with state law and professional licensing boards.
· The potential pitfalls of integrated practices multiply if federal healthcare program beneficiaries are served.
· Integrated practice is inevitable, and all providers should educate themselves on the opportunities and risks to come.
 “Nearly 40 percent of adults report using complementary and alternative medicine.” http://www.mayoclinic.org/healthy-lifestyle/consumer-health/in-depth/alternative-medicine/art-20045267 (posted Oct. 18, 2014).
 See http://docplayer.net/2325422-Physicians-and-hospitals-law-institute-february-2-4-2015-las-vegas-nevada.html.
 See www.mbc.ca.gov/Licensees/Corporate_Practice.aspx (accessed August 18, 2016).
 42 C.F.R. §1001.952(s)
 Fla. Stat. § 817.505(1)(a).
 Fla. Stat. § 456.053(3)(h)(1).
 31 U.S.C. §§ 3729–3733.
 Codified at 42 U.S.C. § 1395nn.