The Dilution of Texas Corporate Practice of Medicine

Until recently, Texas had one of the strongest corporate practices of medicine in the United States.  Basically, the corporate practice of medicine required that any entity providing clinical medical services in Texas had to be a professional entity wholly owned by a physician.  In addition, only a physician could be an officer or manager of that professional entity.  There are several states that have corporate practice of medicine statutes but most states are more diluted to the extent the statutes allow non-physicians to own a medical practice. 

On June 17, 2011, the Governor of Texas signed House Bill 2098, which immediately amended the Code of the Texas Business Organization Code and the Texas Occupation Code to authorize joint ownership of professional entities by physicians and physician assistants.  This is a significant change from the past limitations of the corporate practice of medicine in Texas.
 
Although this law does allow the physicians and physician assistants to partner together, these joint ownerships still have certain criteria that they must meet to be legal under the new corporate practice of medicine law.  These criteria include the necessity to have significant language as it relates to the governance and ownership of the professional entity.   For example, the physician assistant cannot contract or employ a physician to be the supervising physician of that physician assistant.  In addition, the physician assistant may have only a minority ownership interest in that entity and the physician assistant may not have any ownership that is equal to or exceeding that of any other individual physician owner.  Furthermore, the statute limits the control that the physician assistant may have in governing the entity.  Finally, physician assistants with these types of ownership will have annual reporting requirements with the physician assistant board.    

This law is the first considerable step into allowing non-physicians to own professional entities with physicians.  As previously noted, the law applies only to physician assistants and not to other medical professionals or non-medical professionals.  Nevertheless, there are new creative ownership models for physician practices.  Because of the regulatory constraints involved with physician assistants owning a part of a medical practice, it is imperative that the entity and governing documents be carefully developed.

By:  Bradford E. Adatto and Michael S. Byrd
 

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