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In today’s video, we talk about what healthcare practitioners you can mix and match in your professional corporation.
We’ve had a lot of interest from our clients in our other videos about professional medical corporations, so let’s expand and fill in the picture.
My name is Michael H. Cohen and I’m founding attorney of Cohen Healthcare Law Group. Hundreds and hundreds of our clients have sought our legal counsel on whether they need a professional medical corporation and who they tuck inside that professional corporation or PC.
Let’s start with the basics. A professional medical corporation is one where at least the majority of shares, or 51%, are owned by a licensed medical doctor.
That’s the definition of a professional medical corporation in California, under a statute known as the Moscone-Knox ... you guessed it, Professional Corporations Act.
Now, the key to the Moscone-Knox Professional Corporations Act, which is codified in California Business & Professions Code Section 13000 through 13410, is that up to 49% of the shareholders in a professional medical corporation, can be shareholders, officers, directors, or professional employees of that professional medical corporation, so long as two things are true: first, 51% or more are MDs, and second, the 49% are licensed healthcare practitioners.
Now, Moscone-Knox provides a list of the kinds of healthcare licensees that can own the up to 49% of the professional medical corporation. This includes 14 different kinds of licensed healthcare providers: and here the list—podiatrists, psychologists, nurses, optometrists, marriage and family therapists, clinical social workers, physician assistants, chiropractors, acupuncturists, naturopathic doctors, professional clinical counselors, physical therapists, pharmacists, and midwives.
Let’s say for example that John is a medical doctor, he wants to have a chiropractic doctor work in the same office. Here’s where legal strategy comes in.
We can envision at least two different scenarios for John the MD. First, he can create a management services organization, or MSO. The MSO would charge the chiropractor rent, plus fees to manage and market the overall space or center. This means John is wearing two hats: his clinical hat, as an MD, and a second hat as business owner of the MSO.
Let’s say though that the chiropractor is the one driving a lot of the clients to the combined space or center; and the chiropractor wants to have a piece of the financial action. John (the MD) and the chiropractor, have to be careful; because they can’t split fees –that’s called “fee-splitting,” obviously. Under Moscone-Knox, the chiropractor could have up to 49% of the shares in John’s professional medical corporation.
Now there are many other considerations. For example, every time you have a shareholder in your company, the shareholder has certain rights and you have certain obligations. These situations can get very sticky. We’ve seen scenarios, for example, where the physician had a physician assistant (or PA) as a 49% shareholder in the professional corporation; the physician assistant was also an officer of the professional medical corporation, and, an employee. The two disagreed over billing—which is bad enough; but then tried to part ways, and the physician owner had a hard time disengaging from the PA because of the PA’s three very different roles: as shareholder, as director, as officer, and, as employee.
We won’t tease out all these threads on this one video—legal strategy can get complex. Just now for starters that while you cannot “partner” with an MD, Moscone-Knox provides one scenario for involving these other, non-MD licensed professionals in the financial success—and obligations—of the professional medical corporation.
Here are keys to understanding why a professional corporation can help you mitigate your overall legal exposure in any kind of professional practice—and especially, in an integrative medicine clinic, functional medicine center, or any kind of multidisciplinary healthcare enterprise.
First, a sole proprietorship doesn’t work well if you plan to have employees, and/or other clinicians to whom you want to refer inside your walls. While you should consult with your tax advisor for tax advice, and, while there are limits to the protection a corporation can afford you ... in general, corporations exist to help shield individuals from personal liability. And, if you want to hire a physician assistant or nurse practitioner, for example, this person can become the employee of the corporate entity—not you personally.
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