The non-existent corporate practice of medicine prohibition in Oklahoma
Physicians, hospitals and healthcare organizations frequently ask us about corporate practice of medicine restrictions in Oklahoma. The corporate practice of medicine doctrine basically restricts physicians from being employed by entities other than professional entities owned by physicians. The principle behind the corporate practice of medicine doctrine is that business corporations and other entities, which are motivated by increased profits and decreased expenses, could undermine the independent medical judgment of physicians, interfere with the physician-patient relationship, and adversely affect the care provided by physicians to patients. In some states that restrict or prohibit the corporate practice of medicine, corporate ownership of a medical practice would constitute the unlicensed practice of medicine by the entity, and it may also constitute unprofessional conduct by physicians.
Occasionally, we see surveys and compilations of corporate practice of medicine laws in the 50 states, and they invariably list Oklahoma as a state that prohibits the corporate practice of medicine. Oklahoma law does not prohibit the corporate practice of medicine.
The Oklahoma Allopathic Medical and Surgical Licensure and Supervision Act (“Allopathic Act”) requires every person who practices medicine and surgery to hold a license to practice medicine. A person is regarded as practicing allopathic medicine if he or she uses the title “M.D.,” “Physician,” or any other title, letters, or designation representing that he or she is a physician, or who, for a fee or any other form of compensation, diagnoses or treats any disease, injury, or deformity by any allopathic legend drugs, surgery, manual, or mechanical treatment unless otherwise authorized by law. The Allopathic Act does not prohibit employment of allopathic physicians by an entity.
The Oklahoma Osteopathic Medicine Act (“Osteopathic Act”) requires practitioners of osteopathic medicine and surgery to be licensed by the State Board of Osteopathic Examiners (“Osteopathic Board”). Like the Allopathic Act, the Osteopathic Act does not prohibit employment of osteopathic physicians by an entity.
Both the Allopathic Act and the Osteopathic Act provide that a hospital or related institution, including a corporation, association, trust, or any other organization organized and operated as a hospital, may employ physicians without being regarded as practicing medicine. Also, the employment of a licensed physician by a hospital does not constitute an act of unprofessional conduct by the employed physician.
Entities other than hospitals may also employ physicians. For example, the Oklahoma Board of Medical Licensure and Supervision (“Medical Board”), which regulates allopathic physicians, has promulgated regulations providing that Oklahoma licensed physicians may practice medicine and surgery as employees of limited liability companies.
Additionally, the Oklahoma Professional Entity Act authorizes the rendering of professional services by licensed allopathic and osteopathic physicians through a professional entity, including a corporation, partnership, or limited liability company. The Professional Entity Act provides that a professional entity may render professional services only through its owners, managers, employees, and agents who are duly licensed to render the professional services. The Professional Entity Act does not restrict or prohibit physicians from practicing in entities that are not professional entities. Also, the Professional Entity Act does not require or specify that physicians who practice as employees of entities must utilize professional entities.
The Allopathic Act and the Osteopathic Act each provide that the employment of a licensed physician by a hospital is not considered an act of unprofessional conduct by the employed physician. Regulations promulgated by the Medical Board further provide that physicians may practice as employees of limited liability companies. Additionally, the Oklahoma Professional Entity Act permits licensed allopathic and osteopathic physicians to render professional services through a professional entity. That leaves unanswered the question of whether employment of physicians by other entities may be considered an act of unprofessional conduct by physicians.
The Allopathic Act lists activities and conduct that constitute unprofessional conduct by physicians, including aiding and abetting the unlicensed practice of medicine. If employment of a physician by an entity other than a hospital, a limited liability company, or a professional entity constitutes the unauthorized practice of medicine by the entity, then arguably the employed physician might be considered to be aiding or abetting, directly or indirectly, the unauthorized practice of medicine, which would constitute unprofessional conduct. We believe it would be a stretch for the Medical Board to reach that conclusion.
The Osteopathic Act also lists activities and conduct that constitute unprofessional conduct by physicians, but while there is no express prohibition in the Osteopathic Act or the regulations promulgated by the Osteopathic Board, the list is not all-inclusive. Again, we believe it would be a stretch for the Osteopathic Board to conclude that a physician would be aiding and abetting the unlicensed practice of medicine merely because the physician is employed by an entity that is not a hospital, a limited liability company, or a professional entity.
The Medical Board has promulgated regulations that define additional acts that constitute unprofessional conduct, including fee-splitting by a physician. Fee-splitting involves directly or indirectly giving or receiving any fee, commission, rebate, or other compensation for professional services not actually and personally rendered, though the prohibition does not prohibit the legal function of professional entities. Neither the Osteopathic Act nor the Osteopathic Board’s regulations address fee-splitting by osteopathic physicians.
As a practical matter, it would appear that employment of physicians by hospitals, professional entities, or limited liability companies would not form the sole exceptions to fee-splitting prohibitions. Many organizations that employ physicians in Oklahoma are organized as charitable organizations or corporations that are not professional entities. Even when physicians work for a hospital, they are rarely employed directly by the hospital, but instead are employed by a subsidiary or affiliate of the hospital.
As stated above, Oklahoma law does not prohibit the corporate practice of medicine. Neither the Allopathic Act, the Osteopathic Act. nor the regulations promulgated by the Medical Board and the Osteopathic Board prohibit employment of a physician by an entity that is not a hospital, a professional entity, or a limited liability company.
“Hospital” means any institution, place, building, or agency, public or private, whether organized for profit or not, devoted primarily to the maintenance and operation of facilities for the diagnosis, treatment, or care of patients admitted for overnight stay or longer in order to obtain medical care, surgical care, obstetrical care, or nursing care for illness, disease, injury, infirmity, or deformity. The term “hospital” includes general medical surgical hospitals, specialized hospitals, critical access and emergency hospitals, and birthing centers. References to “hospitals” in this article include related institutions.