Over the past few years, ownership of medical practices has increasingly shifted from physicians to corporations. Changes in ownership models raise questions about compliance with state laws that regulate the corporate practice of medicine, as large healthcare systems may span states with different regulations, and the impact of these changes on the quality of healthcare for patients.
Corporate practice of medicine doctrines restrict corporations from employing physicians or providing medical services, aiming to protect the patient-physician relationship and promote physicians’ independent medical judgment (2). More than 30 states have some form of corporate practice of medicine laws in place that vary in stringency (4). These laws have been enacted over the years through a combination of state legislation, court cases, actions by state medical licensing boards, and attorney general opinions (2). However, even states like California and Texas–which have some of the regulations–allow numerous exceptions to the doctrine (4). Exceptions and loopholes have contributed to increasing corporate ownership in medicine in the United States.
For example, every state with corporate practice of medicine laws allows for the creation of professional corporations to provide medical services (2). Many of these states restrict shareholders and directors of these professional corporations to licensed physicians working in the same area of medicine as the physicians employed by the corporation (2). However, some states allow other shareholders or directors to be included at a minority percentage; for example, in Colorado, physician assistants can also be shareholders of a professional medical corporation (2). Some states also permit the creation of multi-service corporations that combine various medical specialties (2). For instance, Rhode Island allows physicians, nurses, optometrists, psychologists, physical therapists, and other medical practitioners to create joint professional corporations (2). Most states also allow certain entities, notably hospitals, to employ physicians (2). Some states only allow nonprofit hospitals to employ physicians, while others provide an official exemption from the corporate practice of medicine doctrine to all hospitals (2).
In recent years, there has been an increase in the consolidation of medical practices and in private equity investment in healthcare services. Multi-billion dollar corporations–especially insurance companies–have been buying up primary care offices nationwide to create multi-state chains of primary care centers (1). Furthermore, private equity firms have been acquiring nursing homes and fertility treatment centers across the country (4). According to a study of hospice agencies from 2021, private equity ownership of hospice care facilities increased by over 200% between 2011 and 2019 (4). Another study from 2020 found that between 2017 and 2019, twice as many fertility care centers were acquired by private equity firms compared to the previous seven years combined (4). Nursing homes and fertility treatment centers often charge patients and payers higher out-of-pocket costs than other medical centers, creating an incentive for increased profits for corporations (4).
Higher rates of corporate ownership in medicine may have negative consequences for patients and payers, with healthcare in the United States already facing a cost crisis. A study published in the BMJ in July found that private equity investment correlated with a 32% increase in healthcare costs (3). The authors systematically reviewed 55 research studies on private equity in healthcare, focusing on four dimensions: healthcare quality, price to payers and patients, cost to healthcare operators, and health outcomes (3). Of the four dimensions, private equity investment in healthcare was most closely associated with higher patient healthcare costs (3). Insurance companies argue that corporate ownership of medicine helps consolidate medical services, facilitating the transition from pay-per-service to value-based care (4). However, the benefit of corporate ownership of medicine for patients is yet to be determined.
References
- Abelson, Reed. “Corporate Giants Buy Up Primary Care Practices at Rapid Pace.” The New York Times, May 12 2023, https://www.nytimes.com/2023/05/08/health/primary-care-doctors-consolidation.html
- “Issue brief: Corporate practice of medicine.” American Medical Association, 2015, corporate-practice-of-medicine-issue-brief_1.pdf
- Niewjik, Grace. “New findings show private equity investments in healthcare may not lower costs or improve quality of care.” Uchicago Medicine, July 25 2023, https://www.uchicagomedicine.org/forefront/research-and-discoveries-articles/private-equity-investments-in-healthcare-may-not-lower-costs#skipToContent
- Weiss, Haley. “What Happens When Private Equity Buys Your Doctor’s Office?” TIME, July 31 2023, https://time.com/6299770/private-equity-health-care-impact/
- Wilmott, Matt et al. “Corporate Practice of Medicine Doctrine: Increased Enforcement on the Horizon?” The National Law Review, Jan 17 2023, https://www.natlawreview.com/article/corporate-practice-medicine-doctrine-increased-enforcement-horizon