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LEGAL corner
The Corporate Practice of
Medicine and Management
Service Organizations
The key is to be familiar with your state law.
By Lawrence F. KoBaK, DPM, JD
hat is the corpo- tially expand their income flow by a dentist. A practitioner who is limited
rate practice of partnering with MDs, DOs, and den- to treating the lower extremity is not 47
medicine (CPOM)? tists. Being entrepreneurial is fine. allowed to profit by owning or par-
The legal concept
of CPOM gener-
W
ally prohibits corporations, entities, The legal concept of corporate practice of medicine
or individual non-physicians from
practicing medicine. It also prohib- (CPOM) generally prohibits corporations, entities,
its a business corporation from em- or individual non-physicians from practicing medicine.
ploying a physician to provide pro-
fessional medical services. By physi-
cian, it means physicians with plenary
licenses; this means MDs and DOs. Wanting to earn more money is fine. tially owning a practice that performs
It does not generally include podia- However, it must be done in a legally back surgery or oral examinations. In
trists, dentists, psychologists, DPTs, acceptable way. effect, it expands the scope of practice
or DNPs. It certainly does not include In states that follow the corporate of the podiatrist by allowing her/him
unlicensed non-medical personnel. practice of medicine, a podiatrist may to profit by it. The same extends to
The rationale is that people without a not employ an MD, or for that matter, unlicensed/non-medical personnel.
license to treat the They cannot own
entire body should or partially own a
not be able to ex- medical practice of
pand their scope of any kind. To sum-
practice by hiring marize, a podiatrist
those with a ple- can own a practice
nary scope of prac- that includes the
tice. Podiatrists, of full scope of what
course, can work podiatry consists
for podiatrists. of in that state
Why does this where she/he is
matter to podia- practicing. A civil-
trists? Some podi- ian cannot own or
atric practitioners partially own a po-
who are entrepre- diatrist’s practice.
neurial think this Some states have
is a way to expand exceptions. In New
their practice to be York, a licensed
a comprehensive Article 28 facility is
medical model. It a legal exception to
is a way to poten- Continued on page 48
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LEGAL corner
CPOM (from page 47) medical skill of a perspective medi- that location? The MSO can submit
cally licensed employee. It can evalu- its expenses on a periodic basis for
this rule. Article 28 facilities, which ate the skills of a secretary, biller, or reimbursement plus additional money
can be owned by unlicensed people, cleaning service. for its services. Percentage deals vary
usually are hospitals and skilled nurs- 2) An MSO may not evaluate by state law. For example, New York
ing facilities. which medicine to buy for office use. does not allow percentage of patient
31 states currently follow some It may evaluate and purchase cleaning revenue arrangements. Florida prohib-
form of CPOM. These include Arizo- supplies. It may negotiate the buying its a percentage for patient referrals.
na, Arkansas, California, Colorado, of medical supplies if it first obtained You must factor in federal rules and
Georgia, Illinois, Indiana, Iowa, Kan- the approval of the physicians in the regulations. Again, it is foolish to at-
sas, Kentucky, Louisiana, Maryland, office. The injectables are decided by tempt to navigate this terrain without
Massachusetts, Michigan, Minnesota, the physicians, not the MSO. an experienced healthcare attorney in
Montana, Nevada, New Jersey, New
York, North Carolina, North Dakota,
Ohio, Oregon, Pennsylvania, South Percentage deals vary by state law.
Carolina, South Dakota, Tennessee, For example, New York does not allow percentage
Texas, Washington, West Virginia,
and Wisconsin. of patient revenue arrangements.
19 states have no statutory pro-
hibition against CPOM. Keep in mind
that these states do have rules that
must still be followed, even if they 3) An MSO may not control the this area of the law. The “cleanest”,
48 allow a CPOM. Additionally, even if medical practice’s checkbook. If it but not the only way, is for the MSO
a state allows CPOM, that does not does, in fact, it controls the medical to get a set fee, based on FMV plus its
replace the need to obey the federal practice, and that is not allowed in expenses. Many MSO arrangements
Anti-Kickback Statute and the feder- states that recognize CPOM. Remem- include appropriately set-up efficiency
al Stark Law! The states that allow ber, the MSO is a separate entity. bonuses. What is legal varies from
CPOM are Alabama, Alaska, Connecti- 4) An MSO, may not make any state to state. However, it is perfectly
cut, Delaware, Florida, Hawaii, Idaho, medical/podiatric decisions. legal for an MSO to make a profit,
Maine, Mississippi, Missouri, Nebras- 5) An MSO may not terminate consistent with fair market value,
ka, New Hampshire, New Mexico, medical personnel. for its owners! Its owners may in-
Oklahoma, Rhode Island, Utah, Ver- 6) An MSO may not make or deter- clude or be exclusively podiatrists,
mont, Virginia and Wyoming. mine the need for a medical referral. even in states with CPOM laws.
7) An MSO may not determine In many states, the MSO comes
Management Service Organization which tests are necessary for a pa- up in the No Fault context. Non-phy-
Next, what is a management ser- tient or condition. That is clearly a sicians seek a way to capitalize on
vice organization (MSO)? It is a cor- medical judgment. the “system” and in effect, set up and
porate entity that provides various 8) An MSO may not govern how finance a medical No Fault practice.
functions such as coding, billing and many patients a physician must see The MSO “calls the shots” and con-
collection services, human resourc- in a set time period. trols the practice, lock, stock, and
es, including non-clinical employee 9) An MSO may not “incentivize” checkbook. In many of these prac-
management, marketing, purchasing any of the staff to increase the use tices, the physicians act as “rent-a-
of supplies, performing the admin- of the facilities that might maximize docs”. In short, they do as they are
istrative credentialing tasks, over- practice income. told, for a fee. This is frowned upon.
seeing compliance issues and sched- 10) Purchase of medical equip- Licenses are lost. People are impris-
ules, and obtaining and managing ment should be overseen by the phy- oned. Several physicians have told
the physical office. An MSO cannot sicians, not the MSO. me that the MSO used experienced
practice medicine in any way. A good 11) The physicians should have attorneys to set up the MSO. They
rule of thumb is that it cannot per- the final say in which billing codes and were assured by the MSO’s attorneys
form any function that requires a procedures are used, not the MSO. that it was totally legal. However, the
medical license to perform. 12) The physicians have the final MSO’s attorneys do not work for the
An MSO can be owned by the say when it comes to contracts with employed physician. This might come
owners of the practice itself or sep- third party vendors and contractual as a shock to the podiatric profession,
arate people, or a combination of relationships, not the MSO. but as in every profession, there are a
both. However, the MSO is a sepa- few “substandard” attorneys out there
rate entity from the medical practice How does an MSO get paid? The that will do things for money that
in fact as well as deed. The following term of art that applies is “fair mar- they should not be doing. Sometimes,
are some examples of what an MSO ket value”, otherwise referred to as the same attorneys are owners of the
cannot legally do in most states: FMV. For the services being provided, MSO. That alone should be a red flag.
1) An MSO may not evaluate the what is the FMV for those services in Continued on page 49
FEBRUARY 2021 | PODIATRY MANAGEMENT www.podiatrym.com
LEGAL corner
CPOM (from page 48)
From the physician/podiatrist point of view, any con-
tract between you and an MSO should show that you, the
podiatrist/owner of the podiatry practice, has the final
authority to run your practice. You cannot avoid your
state’s laws by transferring responsibility to an MSO,
even if you own all of it or part of it.
Something else cannot be minimized. Violations of
the corporate practice of medicine regulations are action-
able against your license to practice podiatry. Most states
do not allow you, a licensed professional, to facilitate
what is, in effect, the unlicensed practice of medicine/
podiatry. Additionally, if you are found guilty of commit-
ting a crime, by illegally being involved in the corporate
practice of medicine, that is disciplinary in and of itself
against your professional license. The devil is in the details
when it comes to what is and what is not allowed in each
state concerning the corporate practice of medicine. One
comma that is misplaced in your corporate papers can
cause the loss of both your professional license and even
Violations of the corporate practice of
medicine regulations are actionable
against your license to practice podiatry.
your personal liberty. There are a lot of moving parts. You
have your state statutes, your federal statutes, as well as
your administrative rules and regulations. If that were not
enough, you also have your state and federal case law.
Every state has its own wrinkles as to what is al-
lowed and what is not. The complexities, which also
involve federal statutes, require experienced health law
attorneys to set up a management service organization
that complies with the various state and federal statutes
and case law. Even after you are appropriately running
a legally created MSO, the ball is still in your hands to
follow the rules. You cannot give a wink and a nod to
the MSO for expediency sake. You must exercise real
control over the medical aspects of your practice. Err on
the side of caution.
While there are many rules concerning operating a
management service organization, it is a viable option for
additional income for the entrepreneurial podiatrist. PM
Dr. Kobak is Senior Counsel in Frier Levitt’s
Healthcare Department in the Uniondale, New
York. Larry has extensive experience represent-
ing physicians in connection with licensure issues,
as well as successfully defending physicians before
Medical Boards, OPMC, OPD investigations, as
well as Medicare Fraud, Fraud & Abuse, Hospital
Actions, RAC Audits, Medicare Audits, OIG
Fraud, Healthcare Fraud, Medical Audits, and
Health Plan Billing Audits. As a licensed podiatrist
prior to becoming an attorney, he served as the international president of
the Academy of Ambulatory Foot and Ankle Surgery.
www.podiatrym.com FEBRUARY 2021 | PODIATRY MANAGEMENT
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