The Illinois Supreme Court recently confirmed that the corporate practice of medicine doctrine is still alive and well in the state of Illinois. In Vine Street Clinic, et al. v. HealthLink Inc., the court concluded that percentage-based fees charged by the owner of a healthcare provider network were illegal under the state's medical practices act.
The prohibition of the corporate practice of medicine began in the early 1900s. It was viewed as an ethical restriction on the types of relationships in which physicians could engage.
The concern was that business interests would too heavily influence the practice of medicine, and thereby inappropriately affect medical judgment, patient treatment and outcomes.
Primarily a law based on case law precedent, this doctrine prohibits lay corporations from engaging in the practice of medicine through physician-employees or sharing in the profits of physician practices by contract.
While the courts have found some support for their rulings in state medical practice acts (which were often a stretch), the doctrine is largely based on the courts' public policy concerns. Of the various rationales articulated by the courts, the most common reason was the belief that physicians should avoid any influence over the exercise of their professional judgment. In other words, diagnosis and treatment of patients should be based on medical judgment and not be affected by outside business objectives.
The Illinois case involved a class action brought by providers that participated in a PPO network against the proprietor of the network. The plaintiffs sought to strike down a relatively common PPO practice: (1) providers would provide services to insured persons and send their claims to the network for repricing before payment by the insurer, and (2) the network would deduct its administrative fee, which was a percentage of the providers' charges, from the amount ultimately paid to the providers. This arrangement was agreed to up front by the providers pursuant to their participation agreements.
Relying on a statute that was more specific than exists in most states, the Illinois court found that a fee based on a percentage of charges constituted an improper sharing of fees derived from the provision of professional services, and declared the arrangement void. It declined, however, to strike down another contract which required the providers to compensate the network on a flat fee-per-claim basis.
It also declined to require the network to repay the improper fees it had charged, concluding that the providers knew what they were doing when they entered into their participation agreements.
It is hard to imagine how the professional judgment of these plaintiffs was adversely affected under the arrangement in question. The providers were independent contractors, and the network exercised no influence of any kind on the diagnosis and treatment of their patients.
The corporate practice relic is a barrier to continued modernization.
Barry Senterfitt is a partner in the insurance industry practice of Akin Gump Strauss Hauer & Feld LLP in the firm's Austin, Texas, office.
This column is written for informational purposes only and should not be construed as legal advice.
In this second part of a two-part podcast episode, Managed Healthcare Executive's Managing Editor Peter Wehrwein spoke with CeCi Connolly and Margaret "Meg" Murray about Medicare Advantage utilization and challenges, highlighting proposed CMS payment cuts and prior authorization issues.
Listen
2024 Emerging Leaders in Healthcare — Submit For a Chance to Be Featured in MHE's August Issue
March 26th 2024MHE Editors are seeking diverse healthcare professionals from different backgrounds and healthcare sectors, with individual interests. Eligible candidates are early or mid-career leaders with less than 10 years of experience. Award winners will enjoy complimentary passes to the PBMI Annual National Meeting in Orlando, Florida, from Sept. 4-6. Additional perks include a feature in our August issue, a subscription to MHE and more!
Read More
In this first part of a two-part podcast episode, Managed Healthcare Executive's Managing Editor Peter Wehrwein kicks off our new podcast series "DC Roundtable," with guests Margaret "Meg" Murray, CEO of the Association of Community Affiliated Plans, and member of MHE's Editorial Advisory Board, and CeCi Connolly, president and CEO of the Alliance of Community Health Plans, for a discussion on healthcare policy issues.
Listen
What States are Doing to Regulate Pharmacy Benefit Managers
March 26th 2024In a poster presented at the 2024 American Pharmacists Association Annual Meeting and Exposition, researchers found that state-level PBM reform focused on more transparent drug pricing, better patient access to prescription drugs, and more stringent auditing and reporting requirements.
Read More
FDA Approves Combination Therapy for Pulmonary Arterial Hypertension
March 26th 2024J&J’s Opsynvi is single-tablet combination of macitentan, an endothelin receptor antagonist, and tadalafil, a PDE5 inhibitor. It will be priced on parity with Opsumit, which is also a J&J product to treat patients with PAH.
Read More