Issuu on Google+

PHYSICIAN ASSISTANT OWNERSHIP OF MEDICAL PRACTICES

Introduction While most PAs continue to deliver medical care in more traditional employment relationships, the ability of PAs to have ownership interests in state-approved professional entities is a growing trend throughout the country as the health care system evolves to find ways to extend quality, cost-effective medical and surgical care to patients. The physician assistant profession was created by physicians to train highly skilled individuals to practice medicine with physician delegation and supervision. PAs have embraced the concept of working under physician supervision. They count on physicians for advice, direction, and intervention for complex patient conditions. It is this team-based approach to health care delivery, with the physician as the head of the team, that is the tenet of the PA profession. Physicians, on the other hand, trust PAs to provide high quality care within their delegated scope of practice. While physicians provide direction and oversight in clinical matters, changing economics in the health care system have led to new roles for PAs in health care practices. In addition to taking on greater administrative duties, some PAs also participate in the management and ownership of practices. While the physician remains the clinical leader of the physician-PA team, some PAs have become owners or co-owners of health care practices. PAs’ adoption of these roles has often occurred due to very practical considerations. A PA practicing in a rural area may assume ownership of a clinic from a retiring physician when another doctor in a neighboring town agrees to take over supervision of the PA, but does not wish to take on additional ownership responsibilities. This allows the practice to remain open and ensures that the clinic’s patients do not have to drive for miles to access needed health care. Another common scenario is that a PA may be willing to fund the start up of a practice in a medically underserved community where no physician wants to do so, with a doctor in a neighboring community serving as the supervising physician. Often, a PA will share ownership in the practice with the supervising physician. In fact, the Medicare program has provided reimbursement to practices in which PAs share ownership since 2003. PAs have been authorized to own certified rural health clinics for over 30 years. The business of owning a health care practice can be organized in a variety of ways, depending on applicable state law and the needs of the practice’s owners. In order to protect their personal assets from business debts, many practice owners form a corporation. Many states require health care professionals who incorporate to use professional corporations rather than general business corporations. Many states now also recognize professional limited liability companies as a vehicle for owning a professional medical practice. Other less common forms of ownership permitted in some states include partnerships or professional limited liability partnerships. The differences between these types of entities are described in the “Choice of Business Entity” section below.

DLMR_628211.1


Employment and Supervision. The concept of PA ownership or co-ownership of a medical practice is not inconsistent with the role of the physician as clinical supervisor. Some early PA practice acts linked the role of supervising physician with a PA’s employer (i.e., the supervisor had to be the employer). This was understandable when almost all PAs worked in a physician’s outpatient office. But today many PAs work for hospitals, group practices, or other business entities. Often supervising physicians have separate business relationships with the employers of PAs, rather than serving as the PAs’ direct employers themselves. Most states and the Medicare program now recognize that employment and supervision are separate and unrelated aspects of medical practice, freeing PAs to be supervised by physicians who are not their employers. For example, a hospital-employed PA can provide first assisting services and be supervised by a surgeon who is not employed by the hospital. This can allow for a wider range of business relationships between corporations or other business entities, physicians, and PAs. Ultimate Responsibility of the Supervising Physician. In most cases where PAs have assumed a role in practice ownership, the PA and supervising physician co-own a professional practice entity that employs them both. It is less common for a PA to be the sole owner of a practice that employs or contracts with a supervising physician. A few states prohibit a PA from directly employing his or her supervising physician.1 However, in most states that permit PAs to be the sole owners of a medical practice, a PA-owned practice entity can structure its relationship with an employed or contracted supervising physician in a manner that preserves the required role of the physician as clinical supervisor. PAs are the agents of their supervising physicians and must always practice under the physician’s oversight. Regardless of the extent to which ownership of a practice is vested in a PA, the supervising physician retains professional authority over medical decisions and is ultimately responsible for the care provided by the PA to patients. Some might question whether the physician’s judgment and oversight responsibility could be compromised when the physician is employed by a PA-owned entity. The answer is a resounding, “No.” A physician would not put his/her license and ability to practice medicine on the line by allowing a PA to deliver care which the PA is not educated and trained to provide, or without appropriate supervision. Moreover, in many states physicians are employed by hospitals, HMOs or other lay entities and nevertheless maintain their clinical independence. The American Academy of Physician Assistants supports laws that allow for flexible and efficient utilization of PAs, consistent with physician supervision and the provision of quality health care, and opposes laws that link supervision and employment (AAPA Policy Manual HP-3400.2.1). While PAs are committed to practicing with physician supervision, under some circumstances full or partial ownership of a professional practice may provide the best avenue for them to meet patient needs. Choice of Business Entity One of the first decisions the founders of a medical practice must make is the form of business entity they will utilize. Although a professional practice can be operated as a sole proprietorship, without the use of an entity, it is preferable to establish an entity for two 1

These states include Maine, Oklahoma and Utah.

2 DLMR_628211.1


reasons. First, the use of certain types of entities can limit the personal liability of the entity’s owners for certain debts and liabilities, other than malpractice liability. (In most states a professional remains personally liable for his or her malpractice.) Second, there may be tax and employee benefit advantages in establishing an entity. State Law. State law determines which types of entities may own a medical practice. These laws vary from state to state and frequently do not specifically mention PAs. In many states, only licensed professionals and professional entities, such as professional corporations, professional limited liability companies and professional partnerships or professional limited liability partnerships, may own a medical practice. In these states, the law strictly limits who may be owners of the entity. Some of these states limit ownership to a single profession, while others permit ownership by two or more compatible professions. In some of the states which limit ownership to a single profession, a professional entity may be owned 100% by one or more PAs, or 100% by one or more physicians, but PAs and physicians may not be coowners. In some of the states which permit ownership by two or more compatible professions, a professional entity can be co-owned by PAs and physicians. A few states that permit joint ownership limit the percentage that a PA may own. For example, in California and Kansas, PAs may only own up to 49% of the shares of a medical professional corporation while the physician co-owner(s) must own at least 51%. A few states do not permit PAs to be either owners or coowners of professional entities. There are also some states that do not limit practice ownership to licensed professionals or professional entities, but permit general business corporations, limited liability companies or other lay entities to own a practice. In these states, any combination of owners, including non-professionals, is often possible. Usually, such states prohibit the lay owner from unduly influencing the professional judgment of the professionals. Appendix 1 summarizes the laws governing practice ownership in each state and the District of Columbia. As the Appendix indicates, many state laws do not specifically address either PA ownership or joint ownership, but simply state generally that professional entities must be owned by licensed professionals, either within a single profession or within two or more compatible professions, depending on the state. In states with general laws of this type, PA ownership and/or co-ownership is arguably permissible, in the absence of a prohibition on such arrangements. The state licensing boards in some of these states have adopted policies either permitting or prohibiting such arrangements. In states where the law is unclear, AAPA State Government Affairs staff, legal counsel or state regulatory authorities should be consulted before proceeding. Professional Corporations. The majority of professional practices are currently owned through a professional corporation, also known as a professional service corporation in some states. Corporations, including professional corporations, have two defining characteristics. First, a corporation’s shareholders are not liable for certain liabilities of the corporation, such as obligations under office or equipment leases, supply contracts, or tort liability for incidents such as “slip and fall” accidents that may occur on the practice premises. In most states, however, this protection does not extend to liability of a shareholder for his or her 3 DLMR_628211.1


own professional malpractice. In other words, each individual shareholder is liable for any damages resulting from his or her own professional negligence. For this reason, it is incumbent upon PAs who practice in any type of business entity, including professional corporations, to make sure they are adequately insured. Such insurance should cover both the entity and each individual practitioner. The second defining characteristic of a corporation, including a professional corporation, is that it has an indefinite life and its shares are freely transferable, subject to limitations under state law or any agreement between the shareholders limiting share ownership. In most states, shares in a professional corporation can only be sold or transferred to other “qualified persons,” which is typically defined as a practitioner who practices the profession for which the professional corporation was formed, or (in some states) a related profession. The shareholders of many professional corporations also enter into a “Shareholders’ Agreement” which further limits the circumstances under which any of the shareholders may transfer their shares to third parties. A Shareholders’ Agreement may also establish the price at which the corporation or other shareholders may purchase shares from a departing shareholder, e.g., upon retirement or termination. One of the potential disadvantages of a corporation is that its profits, if any, can be subject to “double taxation.” In other words, if the corporation has profit at the end of its tax year, that profit is taxable to the corporation. The profit is taxed a second time when it is distributed to its shareholders. This problem can be successfully addressed in either of two ways. First, if a corporation pays out all of its income in the form of reasonable compensation or pays other bona fide expenses prior to the end of the tax year, it will have no taxable profit. Secondly, a corporation can make an “S” election. By electing to be treated as a “Subchapter S” corporation, it is treated by the IRS as a “flow through” entity, which means that any profit at the end of the tax year is treated as having been received directly by the shareholders, thereby avoiding taxation at the corporation level. There may, however, be other consequences of making an “S” election which may depend on the individual circumstances of the parties. Therefore, whether to make an “S” election should be discussed with the practice’s accountant or attorney. Professional Limited Liability Companies. Professional limited liability companies are a relatively new type of entity that are increasingly used as a vehicle for ownership of a professional practice. A professional limited liability company is, in effect, a hybrid between a corporation and a partnership (discussed below). The owners of a professional limited liability company, who are known as “members,” enjoy limited liability from the professional limited liability company’s business liabilities to the same extent as shareholders in a professional corporation. In addition, a professional limited liability company is treated under tax law similar to a partnership or a Subchapter S corporation, i.e., it is a “flow through” entity, thereby avoiding double taxation. Most states permit a professional limited liability company to be owned by a single member, but there are a few states where they must be owned by at least two members. Because professional limited liability companies are a relatively new form of professional entity, it remains more common to own a professional practice through a professional corporation. However, the relative tax and other advantages and disadvantages of the two types of entities should be discussed with the practice’s legal counsel or accountant to

4 DLMR_628211.1


determine whether, under the laws of a particular state, one type of vehicle may be preferable to the other. Partnerships. Some professional practices are formed as a partnership. Partnerships have the potential disadvantage of exposing each of the partners to joint and several liability for all of the debts of the practice. This means each partner is 100% liable for all partnership-related debts. While this disadvantage can be mitigated by having each partner’s ownership interest in the partnership held through the practitioner’s solely owned professional corporation, this adds a level of complexity to the organization which is generally not desirable or necessary in the context of a PA owned or co-owned professional practice. One favorable aspect of a partnership is that the income of the partnership is treated as “flowing through” to the individual partners, thereby avoiding double taxation for any profit remaining in the practice at the end of the tax year. As noted above, this same characteristic can be achieved by a corporation which elects Subchapter S status or a professional limited liability company. A variation of the partnership form is a professional limited liability partnership (“PLLP”). A PLLP consists of one or more general partners, who are jointly and severally liable for the entity’s debts, and limited partners, who are protected from those debts similarly to the shareholders of a corporation or the members of a professional limited liability company. Very few professional practices are owned through a PLLP. Issues that Arise in the Formation of a Practice Entity Because most practices are owned by either a professional corporation or a limited liability company, the following discussion focuses on those two types of professional entities. Organizational Steps. Formation of a professional corporation or professional limited liability company is fairly simple. In most states, a professional corporation is deemed formed upon the filing of “Articles of Incorporation” with the Secretary of State or similar state official. In addition, it is necessary to draft and adopt Bylaws, which typically set forth the rules prescribed by state law for the operation of the corporation. The Bylaws also set forth the number of directors, when the entity will hold its annual shareholder and director meetings, etc. The shareholders (or, if there is only a single owner, the sole shareholder) must also take and document certain other organizational steps, such as issuing stock, electing the initial directors and officers, authorizing the opening of a bank account, deciding whether to elect Subchapter “S” status, etc. If there is only a single shareholder, he or she will usually also serve as the sole director and officer. If the founders choose to form a professional limited liability company instead of a professional corporation, some of these issues are addressed in an “Operating Agreement” which is signed by the founding owners, who are called “members”. Shareholders’ and Operating Agreements. When a professional corporation or professional limited liability company has more than one owner, whether the additional owner(s) are other PAs or one or more supervising physicians, things become more complex than when there is only a single owner. When there are multiple owners, it is necessary for the co-owners 5 DLMR_628211.1


to agree upon their respective rights and responsibilities on a variety of issues. In a professional corporation, these issues are typically covered in a “Shareholders’ Agreement.” The Shareholders’ Agreement must be signed by the founding shareholders, and must also be executed by any new shareholder who is permitted to join the practice. In a professional limited liability company, these details are typically covered in the Operating Agreement. In many cases, the founding co-owners will agree in the Shareholders’ or Operating Agreement that no additional co-owners will be permitted to buy into the practice without their unanimous consent. In addition, as noted above, the co-owners frequently agree upon the circumstances under which the corporation or the other shareholder(s) can buy back the shares of a departing shareholder. Circumstances under which this is typically permitted include, for example, the death, disability or retirement of a co-owner; the loss of a co-owner’s license to practice as a PA or physician; loss of the DEA registration to prescribe controlled substances; loss of Medicare or Medicaid certification; or termination of the co-owner’s employment. In some states, such as California, where a medical professional corporation requires at least one of the owners to be a physician, these so-called “buy-sell” rights may need to be structured differently than in a state where PAs can own 100% of the practice entity. In states requiring partial physician ownership, in lieu of a provision giving the remaining PA the right to buy out the physician co-owner, the remaining PA may be provided with the right to designate a physician to whom the selling physician co-owner will be obligated to sell his or her interest. Even in a state where 100% PA ownership is permitted, the parties may want to use this approach if the departing co-owner is a physician and there is a desire to retain partial physician ownership. As discussed below, with the exception of rural health clinics, current law requires at least partial physician ownership in order for the practice to receive Medicare reimbursement and, in most states, Medicaid payment. Finally, the co-owners will often agree upon certain actions that require either unanimous or a super majority (e.g., 75%) agreement. Such actions typically include whether to admit additional owners, the execution of managed care contracts for the practice, decisions to incur debt in excess of a specified amount, the execution of office leases, the hiring or firing of certain key personnel (e.g., employed practitioners or the office administrator) and a decision to sell the practice. Compensation Issues. Another key issue that should be addressed by the founding co-owners at the inception of practice formation is how the practice revenues will be divided. Although the parties may each own an equal share in the stock or membership units of the entity, the parties should be clear regarding whether practice revenue will be distributed in the same proportion as their ownership. Frequently, medical practices divide net revenue based on the value or volume of the services each of the practitioners performs relative to the others, instead of based on percentage of practice ownership. For example, if a PA and a physician each own 50% of a practice, but the PA sees patients in the practice on a full time basis, whereas the physician serves primarily as a supervising physician and only periodically sees patients there, it will be inequitable for the physician to receive 50% of the = practice revenue. It is advisable to clarify this issue at the inception, either in the Shareholders’ Agreement or Operating Agreement, or in separate employment agreements entered into between the practice entity and each of the individual practitioners. 6 DLMR_628211.1


Non-Competition or Non-Solicitation Provisions. As part of their Shareholders, Operating or Employment Agreements, some practices require their practitioners to agree to noncompetition or non-solicitation restrictions that remain in effect after a practitioner’s departure from the practice. A typical non-competition provision may preclude a practitioner from performing medical services for a period of up to five years following departure from the practice, within a specified area (e.g., the city, the county, or a radius of “x” miles around the practice). A typical non-solicitation provision is more limited and simply prohibits the practitioner from soliciting the practice’s patients or in some cases its payors, but does not prohibit the departing practitioner from opening or joining another practice. The enforceability of such provisions after departure varies from state to state and depends on the circumstances. For example, in some states non-competition provisions are enforceable only against a co-owner who sells his or her interest in the practice. When enforceable, both types of provisions protect the remaining co-owners but can have a chilling effect on the departing co-owner’s ability to practice. As a compromise, in some cases the parties may enter into a non-solicitation provision, but agree to make an exception which permits the practitioner to inform his or her own patients of the departure and the address and location of the practitioner’s new office. This permits the departing practitioner to take her patients with her but precludes solicitation of other practice patients. Reimbursement Considerations It is vitally important to consider reimbursement rules before deciding on an ownership structure for a practice entity. Although the laws in many states permit PAs to own 100% of a professional corporation or other practice entity, current Medicare rules and Medicaid rules in most states prohibit reimbursement to individual PAs or to any entity which is wholly owned by PAs. The applicable Medicare rule is found in the Medicare Benefit Policy Manual promulgated by the Centers for Medicare and Medicaid Services, which states as follows: Employment Relationship Payment for the services of a PA may be made only to the actual qualified employer of the PA that is eligible to enroll in the Medicare program under existing Medicare provider/supplier categories. If the employer of the PA is a professional corporation or other duly qualified legal entity (such as a limited liability company or a limited liability partnership), properly formed, authorized and licensed under State laws and regulations that permit PA ownership in such corporation or entity as a stockholder or member, that corporation or entity as the employer may bill for PA services even if a PA is a stockholder or officer of the entity, as long as the entity is entitled to enroll as a “provider of services” or a supplier of services in the Medicare program. Physician Assistants may not otherwise organize or incorporate and bill for their services directly to the Medicare program, including as, but not limited to sole proprietorships or general partnerships. Accordingly, a qualified employer is not a group of PAs that incorporate to bill for their services. Leasing agencies and staffing 7 DLMR_628211.1


companies do not qualify under the Medicare program as “providers of services” or suppliers of services. Medicare Benefit Policy Manual, Chapter 15, Section 190.D The AAPA is working to change this rule, which is not based on any statute or regulation. Many private plans follow Medicare’s lead and will not pay a practice entity that is wholly owned by one or more PAs. In light of these rules, in order for a practice entity to receive direct payment from Medicare, Medicaid and many private plans, it is necessary that there be some physician ownership in the practice entity. Notably, there is no required percentage of physician ownership needed to qualify for reimbursement. Therefore, if state law permits a PA to co-own 99% of a practice entity, a physician’s ownership of the remaining 1% will be sufficient to qualify the entity for Medicare reimbursement. Management Services Organizations In some states, PAs are precluded from holding an ownership interest in a medical practice. Even in states where such ownership is permitted, circumstances may arise where it is not feasible for the PA to assume an ownership role in the actual practice entity. In such cases, a PA may want to consider establishing a management services organization or “MSO” to provide management and administrative services to a medical professional corporation (or other practice entity) which is wholly owned by one or more physicians. All physician personnel are employed by the practice entity, which functions as the provider of professional services. As described in more detail below, the practice entity obtains some or all of its non-professional needs from the MSO on a “turnkey” basis and also leases some or all of its non-physician personnel from the MSO. A MSO is typically established as a separate entity, such as a general business corporation or a limited liability company. Because the MSO itself does not perform professional services, it need not be organized as a professional corporation or professional limited liability company. The MSO enters into a Management Services Agreement with the practice entity. Pursuant to the Management Services Agreement, the MSO agrees to provide some or all of the services and infrastructure the practice entity needs to support its delivery of professional services. In the most comprehensive type of MSO arrangement, the MSO leases office space from a landlord and subleases the space to the practice entity. The MSO also employs non-physician personnel, including nursing personnel, medical assistants and receptionists, and “leases” them to the practice entity. Depending on state law issues, the PA may either be employed by the professional entity or may be employed by the MSO and also leased to the practice entity. The MSO may also perform billing, financial, accounting and other services for the practice entity, or may subcontract with outside vendors for those services. The MSO is compensated for its services pursuant to a formula agreed upon by the parties in the Management Services Agreement. A variety of formulas is used, ranging from a percentage of gross collections to the MSO’s costs plus a percentage for profit. In general, the formula must represent fair market value for the services the MSO provides. In some states, a 8 DLMR_628211.1


formula which is based on a percentage of net profits or similar profit sharing arrangement is deemed to be illegal “fee splitting.” Some states also require that ultimate responsibility for any business decisions that significantly impact clinical issues must rest with the professionals in the practice entity. Because violation of these rules can result in criminal liability, it is important to obtain the assistance of knowledgeable legal counsel in setting up a MSO. APPENDIX SUMMARY OF STATE LAWS ON PA OWNERSHIP OF MEDICAL PRACTICES Alabama A medical practice in Alabama may owned by a professional corporation, a professional limited liability company or certain other types of entities. Alabama law does not specifically address PA ownership of such entities, or co-ownership by PAs and physicians, nor does it specifically prohibit such ownership or co-ownership. Alabama law indicates that a professional corporation formed to perform professional services “may only render professional services and services ancillary thereto within a single profession.”2 Only qualified persons may hold shares in a professional corporation. A “qualified person” means “an individual who is authorized by law . . . to render a professional service permitted by the articles of incorporation of such professional corporation.”3 The same rules that apply to a professional corporation apply to a professional limited liability company.4 Alaska A medical practice in Alaska may be owned by a professional corporation, a limited liability company or certain other types of entities. Alaska law does not specifically address PA ownership of such entities, or co-ownership by PAs and physicians, nor does it specifically prohibit such ownership or co-ownership. A professional corporation may render one type of professional service only. 5 A professional corporation may issue shares of its capital stock to persons licensed by a regulatory board of the state to render the professional service specified in the articles of incorporation.6 A limited liability company may be organized for any lawful purpose, including the rendering of a professional service.7 If an activity of a limited liability company or the 2

Code of Alabama, Section 10-8A-1010; Section 10-4-383.

3

Code of Alabama Section 10-4-380.

4

Code of Alabama, Section 10-12-45.

5

Alaska Statute Section 10.45.010.

6

Id..

7

Id.

9 DLMR_628211.1


purpose for which a limited liability company is organized is subject to another provision of law, the company shall also comply with the other provision of law.8 Arizona A medical practice in Arizona may be owned by a professional corporation, a professional limited liability company or certain other types of entities. Arizona law permits PA ownership of such entities or co-ownership with physicians. A corporation may elect professional corporation status for the purpose of rendering professional services within two or more categories of professional service, unless the combination of professional purposes is expressly prohibited by a licensing law of the state applicable to one or more of the professions in the combination or by a licensing authority with jurisdiction over one or more of the professions in the combination.9 No such limitation exists precluding PAs and physicians from co-owning a professional corporation. Similar rules apply to professional limited liability companies.10 Under recent revisions to Arizona corporate statutes, up to 49% of the shares of a professional corporation or of the equity interests in professional limited liability companies may be owned by non-licensed persons or entities.11 Arkansas A medical practice in Arkansas may be owned by a professional corporation, a limited liability company or certain other types of entities. Under the Arkansas Professional Corporations Act, one or more persons duly and properly licensed to render the same type of professional services may form a professional corporation.12 With respect to medical practices, the Arkansas Medical Practices Act states that “one or more persons licensed pursuant to the [Act] may associate to form a corporation pursuant to the Arkansas Professional Corporations Act to own, operate and maintain a medical practice.� PAs are not licensed under the Medical Practices Act, but are licensed pursuant to other provisions of the Arkansas Code.13 A medical practice owned by a limited liability company in Arkansas must also comply with the Medical Practices Act.14 8

Id.

9

Arizona Revised Statutes Section 10-2211.

10

Arizona Revised Statutes Section 29-841.

11

Arizona Revised Statutes Section 10-2220(A)(4).

12

Arizona Revised Statutes Section 4-29-201.

13

Arizona Revised Statutes Section 4-29-33.

14

Arizona Revised Statutes Section 4-32-1401.

10 DLMR_628211.1


California A medical practice in California may be owned by a professional corporation, a professional partnership or certain other types of entities, but not by a limited liability company. PAs are expressly permitted to own, or to co-own with certain other types of licensed health care practitioners, a physician assistant professional corporation in California. PAs must own at least 51% of the shares of the physician assistant corporation and the other 49% must be owned by other specified types of licensed healthcare professionals. Further, the number of non-PA shareholders may not exceed the number of PA shareholders.15 California law also expressly permits PAs (and other specified types of licensed healthcare professionals) to own up to 49% of the shares of a medical professional corporation, provided that 51% of the shares are owned by one or more licensed physicians. Further, the number of non-physician shareholders must not exceed the number of physician shareholders. PAs may not be partners with physicians in a partnership that owns a medical practice. Colorado A medical practice in Colorado may be owned by a professional corporation, professional limited liability company or certain other types of entities. All of the owners of such entities formed to practice medicine “shall be persons licensed by the Board [of Medical Examiners] to practice medicine in the State of Colorado.”16 PAs are licensed by that Board and Colorado law provides that a physician “may delegate to a physician assistant . . . the authority to perform acts that constitute the practice of medicine.” 17 The Board of Medical Examiners has issued a letter stating that “any person may form a corporation to provide surgical assistant services.” This would include a person who is licensed as a physician assistant. Connecticut A medical practice in Connecticut may be owned by a professional corporation, a professional limited liability company or certain other types of entities. Connecticut law expressly permits PAs to be owners of a professional corporation or to be co-owners of such an entity with physicians. A “professional corporation” means a corporation which is organized for the sole and specific purpose of rendering professional services and which has as its shareholders only individuals who themselves are licensed or otherwise legally authorized to render the same 15

California Corporations Code Sections 13401.5.

16

Colorado Revised Statutes Section 12-36-106.

17

Colorado Revised Statutes Section 12-36-106(5).

11 DLMR_628211.1


professional service as the corporation. It also includes a corporation which is organized for the sole and specific purpose of rendering professional services by (i) physicians, and (ii) physician assistants or advanced practice registered nurses, or both, and that has as its shareholders only individuals who themselves are licensed or otherwise legally authorized to render one of the professional services for which the corporation was specifically incorporated. 18 The law governing limited liability companies in Connecticut is less clear. A limited liability company may be formed to render professional services, provided that each member of the limited liability company must be licensed or otherwise authorized by law to render such professional services; and (2) the limited liability company will render only one specific type of professional services and services ancillary to them. Although limited liability companies may be formed to render two or more types of professional services in certain professions, unlike the law governing corporations, PAs are not included on this list. Delaware A medical practice in Delaware may be owned by a professional corporation, limited liability company or certain other types of entities. Delaware law does not specifically address PA ownership of such entities, or co-ownership by PAs and physicians, nor does it specifically prohibit such ownership or co-ownership.. However, Delaware law provides that “[a] physician assistant may not maintain or manage an office separate and apart from the office of the physician assistant’s supervising physician.” Further, “a physician assistant may not independently bill a patient for services rendered at the request of the supervising physician.”19 The term “professional corporation” means a corporation which is organized for the sole and specific purpose of rendering a professional service, and which has as its shareholders only individuals who themselves are duly licensed or otherwise legally authorized to render the same professional service as the corporation. “Professional service” means any type of personal service to the public which requires a license or other legal authorization. One or more persons, each of whom is duly licensed or otherwise legally authorized to render the same professional services, may organize and become a shareholder or shareholders of a professional corporation for the sole and specific purpose of rendering the same professional services.20 A limited liability company may carry on any lawful business, purpose or activity, whether or not for profit, with the exception of the business of banking.21

18

General Statutes of Connecticut Section 33-182a(2).

19

Delaware Code Annotated Title 24, Section 1772.

20

Delaware Code Annotated Title 8, Section 605.

21

Delaware Code Annotated Title 6, Section 18-106.

12 DLMR_628211.1


District of Columbia A medical practice in the District of Columbia may be owned by a professional corporation, professional limited liability company or certain other types of entities. District of Columbia law does not specifically address PA ownership of such entities, or co-ownership by PAs and physicians, nor does it specifically prohibit such ownership or co-ownership. A “professional corporation” means a corporation organized solely for the specific purposes of performing professional services, and which has as its shareholders only individuals who themselves are duly licensed to render the same professional service as the corporation. “Professional service” means any type of personal service to the public which may be lawfully rendered only pursuant to a license.22 “Professional limited liability company” means a limited liability company organized solely for the purpose of rendering professional services through its members, managers, employees, or agents.23 Florida A medical practice in Florida may be owned by a professional corporation, a professional limited liability company or certain other types of entities. Florida law does not specifically address PA ownership of such entities, or co-ownership by PAs and physicians, nor does it specifically prohibit such ownership or co-ownership. A professional corporation is organized for the sole and specific purpose of rendering professional services and its shareholders are individuals who are licensed or otherwise legally authorized to render the same professional services as the corporation. One or more individuals, professional corporations, or professional limited liability companies, in any combination, duly licensed or otherwise legally authorized to render the same professional services may organize and become a shareholder or shareholders of a professional corporation for the sole and specific purpose of rendering the same and specific professional service.24 A professional limited liability company is organized for the sole and specific purpose of rendering professional services and its members are licensed to render the same professional services as the limited liability company. A group of professional service corporations, professional limited liability companies, or individuals, in any combination, duly licensed or otherwise legally authorized to render the same professional services may organize and become members of a professional limited liability company for the sole and specific purpose of rendering the same and specific professional service.25

22

District of Columbia Official Code Section 29-401.

23

District of Columbia Official Code Section 29-1005.

24

Florida Statutes Section 621.05 (2008).

25

Florida Statutes Section 621.051 (2008).

13 DLMR_628211.1


Georgia A medical practice in Georgia may be owned by a professional corporation, professional association, limited liability company or certain other types of entities. Georgia law does not specifically address PA ownership of such entities, or co-ownership by PAs and physicians, nor does it specifically prohibit such ownership or co-ownership. A professional corporation may practice only one profession. “Profession” means the profession of certified public accountancy, architecture, chiropractic, dentistry, professional engineering, land surveying, law, pharmacy, psychology, medicine and surgery, optometry, osteopathy, podiatry, veterinary medicine, registered professional nursing, or harbor piloting. Shares in a professional corporation may only be issued to, held by, or transferred to a person who is licensed to practice the profession for which the corporation is organized.26 “Professional association” means an unincorporated association organized for the purpose of rendering one type of professional service. A professional association may issue its capital stock if it is a stock-type association or accept as members of the professional association, if a nonstock association, only persons who are duly licensed or otherwise legally authorized to render the same professional service as that for which the professional association was organized.27 A limited liability company may be formed for any lawful purpose. If the purpose for which a limited liability company is formed makes it subject to a special provision of law, the limited liability company shall also comply with that provision.28 Hawaii A medical practice in Hawaii may be owned by a professional corporation, limited liability company or certain other types of entities. Hawaii law does not specifically address PA ownership of such entities, or co-ownership by PAs and physicians, nor does it specifically prohibit such ownership or co-ownership. A professional corporation may have the sole purpose of rendering professional services and services ancillary thereto within a single profession. In addition, a professional corporation may be incorporated for the purposes of rendering professional services within two or more professions, to the extent that any combination of professional purposes or of professional and business purposes is permitted by the licensing laws of the profession. A “professional service” is defined as any service which lawfully may be rendered only by persons licensed under certain specified chapters of the Hawaii Code, including the chapter governing PAs and physicians, Chapter 453.29 26

Official Code of Georgia Annotated Section 14-7-2, 3, 4 and 5.

27

Official Code of Georgia Annotated Section 14-10-10 (2008).

28

Official Code of Georgia Annotated Section 14-11-201.

29

Hawaii Revised Statutes Section 415A-2, 3.

14 DLMR_628211.1


A limited liability company may be organized for any lawful purpose, subject to any law of Hawaii governing or regulating business.30 Idaho A medical practice in Idaho may be owned by a professional service corporation, a limited liability company or certain other types of entities. According to the Idaho Board of Medicine, it is proposing legislation that will permit PAs to be owners or co-owners with physicians of professional service corporations or professional limited liability companies that own medical practices. PA owners will need to have been in practice for at least two years. Pending passage of such legislation, which the Medical Board says is likely to happen in either the 2009 or 2010 legislative session, it is the policy of the Medical Board that PAs can own or co-own such entities as provided in the proposed legislation. Under current Idaho law, the term “professional corporation” means a corporation organized for the sole and specific purpose of rendering professional service and which has as its shareholders only natural persons who themselves are duly licensed or otherwise legally authorized to render one or more of the same professional services as the corporation. The term “professional service” means any type of service to the public which can be rendered by a member of any profession within the purview of his profession. The professions covered by the Idaho Professional Service Corporation Act include law, medicine, nursing, medicine, certain other specified professions, and no others. PAs are not on the list. An individual or group of individuals duly licensed or otherwise legally authorized to render the same or allied professional services may organize and become a shareholder or shareholders of a professional corporation. The term “allied professional services” means professional services which are so related in substance that they are frequently offered in conjunction with one another as parts of the same service package to the consumer.31 Illinois A medical practice may be owned by a professional service corporation, a limited liability company or certain other types of entities in Illinois. Illinois law does not permit PAs to own a professional corporation for the purpose of owning a medical practice. The Illinois Medical Corporation Act states that only “persons licensed pursuant to the Medical Practice Act of 1987. . . may form a corporation . . . to own, operate and maintain a medical practice.” Illinois law further states that all officers, directors and shareholders of a medical corporation must be licensed pursuant to the Medical Practice Act. PAs are not licensed under the Medical Practice Act; they are licensed under the Physician Assistant Practice Act. 32 A limited liability company may be formed for any lawful purpose or business, except certain professions, unless all of the members and managers are licensed in that 30

Hawaii Revised Statutes Section 428-101.

31

Idaho Code Annotated Section 30-1303, 1304.

32

225 West’s Smith-Hurd Illinois Compiled Statutes Annotated Section 15/2.

15 DLMR_628211.1


profession. An limited liability company may practice medicine if all the managers and members are either licensed to practice medicine under the Medical Practice Act of 1987 or are a medical professional corporation.33 Indiana A medical practice in Indiana may be owned by a professional corporation, limited liability company or certain other types of entities. Indiana law does not specifically address PA ownership of such entities, or co-ownership by PAs and physicians, nor does it specifically prohibit such ownership or co-ownership. However, PAs may not engage in independent practice or receive payment directly from patients or third party payors. One or more health care professionals may form a professional corporation to render services that may legally be performed by a health care professional.” A “healthcare professional” is defined as “an individual who is licensed, certified, or registered by a board (as defined in IC §25-1-9-1).” This includes PAs.34 Additionally, “a professional corporation may issue shares to individuals who are authorized by Indiana law or the laws of another state to render a professional service permitted by the articles of incorporation of the corporation…”35 A limited liability company has the same powers as an individual to do all things necessary or convenient to carry out its business and affairs, including practicing a profession.36 Administrative Rules of the Indiana Medical Board prohibit and will sanction a PA who “has engaged in independent practice or has received remuneration for medical services directly from the patient or a third party on his or her behalf…”37 Iowa A medical practice in Iowa may be owned by a professional corporation, limited liability company or certain other types of entities. Iowa law does not specifically address PA ownership of such entities, or co-ownership by PAs and physicians, nor does it specifically prohibit such ownership or co-ownership. A professional service corporation may be organized only for the purpose of engaging in the practice of one specific profession, or two or more specific professions which could lawfully be practiced in combination by a licensed individual or a partnership of licensed individuals, and for the additional purpose of doing all lawful things which may be incidental to or necessary or convenient in connection with the practice of the profession or professions.38 A 33

805 West’s Smith-Hurd Illinois Compiled Statutes Annotated Section 180/1-20.

34

Indiana Code Section 23-1.5-2-3(a) (4).

35

Indiana Code Section 23-1.5-3-1(a).

36

Indiana Code Section 23-18-2-2.

37

844 Indiana Administrative Code Section 2.2-2-6 (9).

38

Iowa Code Section 496C.4.

16 DLMR_628211.1


“profession” is defined to include “medicine and surgery” and a number of other professions, but does not specifically include PAs.39 A “physician” is defined by statute as “a person who is currently licensed in Iowa to practice medicine and surgery . . .”40 A physician assistant is defined by regulation as “a person licensed as a physician assistant by the medical board.”41 Legislation was proposed in Iowa regarding PA ownership of a medical practice but it was not successful. A professional limited liability company may be organized only for the purpose of engaging in the practice of one specific profession, or two or more specific professions which could lawfully be practiced in combination by a licensed individual or a partnership of licensed individuals, and for the additional purpose of doing all lawful things which may be incidental to or necessary or convenient in connection with the practice of the profession or professions. A “profession” is defined to include “medicine and surgery” and a number of other professions, but does not specifically include PAs.42 Kansas A medical practice in Kansas may be owned by a professional corporation, professional limited liability company or certain other types of entities. PAs are permitted to own a professional corporation or limited liability company or to be co-owners of up to 49% of such entities with physicians.43 A professional corporation may be organized only for the purpose of rendering one type of professional service and services ancillary thereto, except that a single professional corporation may be organized to render professional services in two or more of certain specified professional categories, including physicians and PAs. However, when a PA is a co-owner with a physician in a professional corporation, the PA may own only up to 49% of the shares in the corporation. A professional limited liability company may have and exercise all powers which may be exercised by a Kansas professional corporation, which shall be limited to the practice of one profession, except that a single limited liability company may be organized to render professional services in two or more of certain specified professional categories, including physicians and PAs. However, when a PA is a co-owner with a physician in a limited liability

39

Iowa Code Section 496C.2(3)(4).

40

Iowa Administrative Code Section 645.327.1.

41

Iowa Administrative Code Section 645.327.1.

42

West’s Iowa Code Annotated Section 490A.1501

43

Kansas Statutes Annotated Section 100-28a-18; 100 Kansas Statutes Annotated Section 17-2707 -28a-

18(b).

17 DLMR_628211.1


company, the PA may own only up to 49% of the membership equity in the limited liability company.44 Kentucky A medical practice in Kentucky may be owned by a professional service corporation, professional limited liability company or certain other types of entities. Kentucky does not specifically address PA ownership of such entities, or co-ownership by PAs and physicians, nor does it specifically prohibit such ownership or co-ownership. However, Kentucky law states that “[a] physician assistant shall not submit direct billing for medical services and procedures performed by the physician assistant.45 Additionally, “a supervising physician shall…prohibit a physician assistant from independently billing any patient or other payor for services rendered by the physician assistant.”46 The Kentucky Professional Service Corporations Law provides that “one or more individuals, each of whom is licensed to render the same professional service or who are licensed to render related professional services . . . may incorporate and form a professional service corporation . . .”47 This law defines a “professional service” as “any type of personal service to the public which requires as a condition precedent to the rendering of such service the obtaining of a license or other legal authorization . . .”48 The Kentucky Professional Limited Liability Law defines “professional limited liability company” as “a limited liability company . . . organized. . . for purposes that include, but are not limited to, the providing of one or more professional services.”49 Unlike the Professional Service Corporations Law, the Professional Limited Liability Law does not define “professional services” as including any services requiring a license. Rather, it defines “professional services” as specifically covering only services performed by a list of specified types of practitioners, which does not include PAs. Louisiana A medical practice in Louisiana may be owned by a professional corporation, limited liability company or certain other types of entities. Louisiana law provides that “a physician assistant may receive compensation, salary or wages only from his or her employer and may neither render a statement or service directly to any patient nor receive any payment, compensation or fee for services directly from any patient.”50 Further, Louisiana law provides 44

Kansas Statutes Annotated Section 100-28a-18; 100 Kansas Statutes Annotated Section 17-2707 -28a-

45

Baldwin’s Kentucky Revised Statutes Annotated Section 311.858(5).

46

Baldwin’s Kentucky Revised Statutes Annotated Section 311.856(6).

47

Baldwin’s Kentucky Revised Statutes Annotated Section 274.015(1).

48

Baldwin’s Kentucky Revised Statutes Annotated Section 274.005(2).

49

Baldwin’s Kentucky Revised Statutes Annotated Section 275.015(25).

50

Louisiana Administrative Code Title 46, Section 4503.

18(b).

18 DLMR_628211.1


that in order to qualify as a supervising physician, a physician may “not be employed by or serve as an independent contractor to a physician assistant or be a party to any other or similar employment, contractual or financial relationship.” The Professional Medical Corporations Act provides that only individuals “duly licensed to practice medicine . . . in the state may form a corporation . . . for the purpose of practicing medicine or podiatry.”51 “Physician assistants” are defined as personnel who are authorized to “perform medical services under the supervision of a physician or group of physicians . . .” A limited liability company may be organized and may conduct business for any lawful purpose, unless a more limited purpose is stated in its articles of organization. “Business” means any trade, occupation, profession, or other commercial activity, including, but not limited to, professions licensed by a state or other governmental agency whether or not engaged in for profit. A limited liability company that is subject to regulation under another provision of state law may be formed if not prohibited by such other law, but is subject to all limitations of such other law. 52 Maine A medical practice in Maine may be owned by a professional corporation, limited liability company or certain other types of entities. Maine law permits PAs to be owners of professional corporations and limited liability companies or to co-own such entities with physicians. “Professional corporation” means a corporation formed to provide professional services. A “professional service” means the professional services provided by certain specified persons, which specifically includes physician assistants. A corporation may elect professional corporation status solely for the purpose of rendering professional services, including services ancillary to them, solely within a single profession. Alternatively, a corporation may elect professional corporation status for the purpose of rendering professional services within two or more professions, to the extent the combination of professional purposes or of professional and business purposes is not prohibited by the licensing law of Maine applicable to each profession in the combination.54 53

A “professional limited liability company” means a limited liability company formed to perform a professional service. A “professional service” means the professional service provided by certain specified persons, which specifically includes physician assistants.

51

West’s Louisiana Revised Statutes Annotated Section 12:902.

52

West’s Louisiana Revised Statutes Annotated Section 12:1303.

53

Maine Revised Statutes Annotated (West) Title 13, Section 723, Section 741(1) (A).

54

Maine Revised Statutes Annotated (West) Title 13, Section 732.

19 DLMR_628211.1


The Board of Medicine regulations state that “nothing in these rules shall be construed to prohibit physician assistants from incorporating as a professional association or being a principal in an incorporated professional association, so long as all applicable rules contained herein are executed and followed.”55 Maryland A medical practice in Maryland may be owned by a professional corporation, limited liability company or certain other types of entities. Maryland law does not specifically address PA ownership of such entities, or co-ownership by PAs and physicians, nor does it specifically prohibit such ownership or co-ownership. The Maryland Professional Service Corporation Act provides that a professional corporation may be formed “solely for the purpose of rendering professional services within a single profession,” or for the “purpose of rendering professional services within two or more professions, if the combination of professional purposes is authorized by the licensing law of the state applicable to each profession in the combination.”56 “Professional service” means a service that may lawfully be rendered only by a person licensed or otherwise authorized by a licensing unit in the state to render the service.57 A limited liability company may be organized and may conduct activities related to any lawful business, except the business of acting as an insurer. Unless otherwise provided by law or its articles of organization, a limited liability company has the general powers to perform professional services.58 Massachusetts A medical practice may be owned in Massachusetts by a professional corporation, professional limited liability company or certain other types of entities. Massachusetts does not specifically address PA ownership of such entities, or co-ownership by PAs and physicians, nor does it specifically prohibit such ownership or co-ownership. In Massachusetts, “[a] professional corporation may be organized for the purpose of rendering professional services within two or more professions, except to the extent expressly prohibited by the licensing laws of the commonwealth applicable to such professions or the regulations of any of the applicable boards.59 Practice as a PA qualifies as a “professional service,” as defined by Massachusetts’ law.60 The relevant licensing laws do not prohibit 55

Board of Medicine Regulations; 02-373 Chapter 2; Board of Osteopathic Medicine Regulations 02-383, Chapter 2(16). 56

West’s Annotated Code of Maryland, Corporations and Associations, Section 5-102.

57

West’s Annotated Code of Maryland, Corporations and Associations, Section 5-101(g)(1).

58

West’s Annotated Code of Maryland, Corporations and Associations Section 4A-203.1

59

Massachusetts General Laws Annotated (West), ch. 156A, Section 3(b).

60

Massachusetts General Laws Annotated (West), ch. 156, Section 2(b).

20 DLMR_628211.1


corporate rendering of the services of physicians and physician assistants in combination. A professional corporation may issue shares to an individual licensed “to render professional service permitted by the articles of organization of the corporation.”61 Massachusetts’ Limited Liability Company Act also provides for the provision of multiple professional services. Mass. Gen. Laws ch. 156c, §6(c) mandates that a limited liability company that is organized to render a professional service must indicate in its licensing certificate “the specific professional services which it shall render” and be subject to “any applicable regulating boards,” clearly implying that multiple professional services may be provided. Michigan A medical practice in Michigan may be owned by a professional corporation, limited liability company or certain other types of entities. Michigan law does not specifically address ownership of such entities by PAs, or co-ownership by PAs and physicians, nor is there any specific prohibition on such ownership or co-ownership. Under Michigan’s Professional Service Corporation Act, if a professional corporation renders a professional service that is included within the Public Health Code, then all shareholders of the corporation shall be licensed or legally authorized in this state to render the same professional service.62 Practice as a PA is a “professional service” as defined in Michigan law and a license is required under the Public Health Code to perform it. This suggests that a PAs may own a professional corporation so long as all other shareholders, if any, are also PAs. It is less clear whether PAs may co-own a professional corporation with a physician. Because physicians and PAs are licensed under different provisions of the public health code, they may be considered to render “different professional services.” On the other hand, Michigan law defines practice as a physician assistant as a “health professional subfield of the practice of medicine.”63 Pursuant to a 1994 bulletin from the Department of Consumer and Industry Services (formerly Department of Commerce; herein, the “Department”), the language of the Professional Service Corporation Act does not necessarily require that shareholders in a professional corporation possess the same license, but rather that the persons be licensed to provide the same professional service.64 For professional services that are not listed in the statute, the Department will accept a determination by the regulatory authority that the licensees are authorized to render the same professional services although they hold different licenses. The Department will defer to the judgment of the governing regulatory authority to make a 61

Massachusetts General Laws Annotated (West), ch. 156, Section 10(a)(1).

62

Michigan Compiled Laws, Section 450.224(3).

63

Michigan Code Section 333.17008

64

Department of Consumer and Industry Services (formerly Department of Commerce), Michigan Corporation and Securities Bureau release 94-1a-C(March 14, 1994).

21 DLMR_628211.1


determination as to whether licensees with different licenses are authorized to perform the same specific professional services.65 The Department has further stated that “a physician assistant does, in fact, provide the same service as a medical doctor or doctor of osteopathic medicine and surgery. . . [The] practice of a physician assistant is defined as the practice of medicine, or osteopathic medicine and surgery, performed under the supervision of a physician.”66 One or more licensed persons may organize and become members of a professional limited liability company. If a professional limited liability company renders a professional service that is included within certain provisions of the Public Health Code which include PAs and physicians, then all members and managers of the company shall be licensed or legally authorized to render the same professional service.67 Minnesota A medical practice in Minnesota may be owned by a professional corporation, limited liability company or certain other types of entities. Minnesota law specifically permits PAs to be owners or co-owners of a “professional firm” that provides medical services. A “professional firm” includes a professional corporation, a professional limited liability company or professional limited liability partnership.68 A professional firm may perform professional services, which are defined as services required to be furnished by a professional under a license, registration or certificate issued by the state to practice the listed profession. Physician assistants are included on the list of professions for purposes of this provision. Ownership interests in a professional firm may be held by professionals who, with respect to at least one category of the pertinent professional services, are licensed.69 Individuals who furnish professional services pursuant to a license to practice medicine or as a physician assistant are specifically authorized to practice in combination if the individuals are organized as a professional firm.70

65

Michigan Department of Consumer and Industry Services (formerly Department of Commerce) Memorandum to Ron Basso, Acting Director, Bureau of Occupational and Professional Regulations, to Carl L. Tyson, Director, Corporation and Securities Bureau, dated February 9, 1996. 66

Michigan Department of Consumer and Industry Services (formerly Department of Commerce) Memorandum or letter to Carl L. Tyson, Director, Corporation and Securities Bureau, from Acting Director, Bureau of Occupational and Professional Regulations, from Robert D. Ulieru, Director, Health Licensing Division, dated February 26, 1996. 67

Michigan Compiled Laws Annotated (West) Section 450.4904.

68

Minnesota Statutes Section 319B.02(5), (17), (19).

69

Minnesota Statutes Section 319B07.

70

Minnesota Statutes Section 319B.40(a).

22 DLMR_628211.1


Mississippi A medical practice in Mississippi may be owned by a professional corporation, limited liability company or certain other types of entities. Although Mississippi statutes and regulations do not include any prohibition on the ownership or co-ownership of such entities by a physician assistant, a policy statement by the Medical Board states that “shareholders of a professional corporation rendering medical services shall only be licensed physicians.”71 This appears to fly in the face of other provisions of Mississippi law, which appear to permit PAs to be owners or co-owners of a professional corporation or a limited liability company. More specifically, Mississippi statutes state that: “A corporation may elect professional corporation status for the purpose of rendering professional services within two or more professions . . . to the extent the combination of professional purposes or of professional and business purposes is not prohibited by the licensing law of this state applicable to each profession in the combination.” 72 “A limited liability company may elect professional limited liability company status for the purpose of rendering professional services within two or more professions . . . to the extent the combination of professional purposes or of professional and business purposes is not prohibited by the licensing law of this state applicable to each profession in the combination.” 73 Nothing in the Mississippi statutes governing the licensure of physicians or physician assistants prohibits the combined practice of the two professions. Therefore, the Medical Board policy appears to be inconsistent with the law. Under the Mississippi Professional Corporation Act, a professional corporation may issue shares only to “individuals who are authorized by law . . . to render a professional service described in the corporation’s articles of incorporation.”74 Similar language is found in the Mississippi Limited Liability Company Act.75 Further, it may be permissible for PAs and physicians in Mississippi to be co-owners of a general business corporation or other entity. Missouri A medical practice in Missouri may be owned by a professional corporation, general business corporation, limited liability company or certain other types of entities. Missouri law does not permit PAs to be owners or co-owners of a professional corporation but there is no such prohibition as to general business corporations or limited liability companies.

71

Section 3, Mississippi State Board of Medical Licensure Policies, Section 3.02.8.

72

West’s Annotated Mississippi Code Section 79-10-13(2).

73

West’s Annotated Mississippi Code Section 79-29-904(2).

74

West’s Annotated Mississippi Code Section 79-10-31(a).

75

West’s Annotated Mississippi Code Section 79-29-909(1)(a).

23 DLMR_628211.1


A professional corporation in Missouri may be owned by persons who are authorized to render a “professional service” as defined by Missouri law.76 “Professional service” is defined as the services performed by a list of specified professionals, which is exclusive and does not include physician assistants.77 This interpretation is confirmed by the Missouri Corporations Divisions website.78 Notwithstanding this apparent prohibition on PAs being shareholders in professional corporations, it may be possible for PAs to be owners or co-owners of general business corporations, limited liability companies or other non-professional entities. The foregoing restriction does not apply to any of these entities, and there is no prohibition on ownership of a medical practice by any of these entities in Missouri. Montana A medical practice in Montana may be owned by a professional corporation, limited liability company or certain other types of entities. Montana law does not specifically address ownership of such entities by PAs, or co-ownership by PAs and physicians, nor is there any specific prohibition on such ownership or co-ownership. Professional corporations and professional limited liability companies in Montana “may be organized for the purpose of rendering professional services within two or more professions . . . to the extent that the combination of professional purposes or professional or business purposes is permitted by the licensing laws and rules of this state applicable to the professions.79 “Professional service” under Montana law means “any service that may lawfully be rendered only by persons licensed under a licensing law of this state and that may not be rendered by a corporation organized under the Montana Business Corporation Act.”80 Shares in a professional corporation may be issued to, among other parties, natural persons authorized by law to render a professional service permitted by the Articles of Incorporation of the corporation.81 Similar rules apply under the Montana Limited Liability Company act, as applied to professional limited liability companies.82

76

Missouri Revised Statutes Section 356.111.

77

Missouri Revised Statutes Section 356.021(5).

78

See “Professional Corporations,” www.sos.mo.gov\business\corporations\startBusiness.asp#entity

79

Montana Code Annotated Section 35-4-205, Section 35-8-1301.

80

Montana Code Annotated Section 35-4-109(5).

81

Montana Code Annotated Section 35-4-301.

82

Montana Code Annotated Section 35-8-102(25(26).

24 DLMR_628211.1


Nebraska A medical practice in Nebraska may be owned by a professional corporation, limited liability company or certain other types of entities. Nebraska law does not specifically address ownership of such entities by PAs, or co-ownership by PAs and physicians, nor is there any specific prohibition on such ownership or co-ownership. However, Nebraska law appears to permit it. A “professional corporation” means “a corporation which is organized under the Nebraska Professional Corporation Act for the specific purpose of rendering professional service and which has as its shareholders only individuals who themselves are duly licensed or otherwise qualified within the state to render the same professional service as the corporation.”83 “Professional service” is defined as “any type of personal service to the public which requires as a condition precedent to the rendering of such service the obtaining of a license or other legal authorization . . .”84 There is a long laundry list of different types of professions which does not include PAs, but the list is not exclusive. The Professional Corporation Act states that “[a] professional corporation shall render only one type of professional service and such services as may be ancillary thereto and shall not engage in any other profession.”85 However, the Act further states that “[f]or purposes of the Act, those professions pertaining to the diagnosis, care and treatment of humans shall be considered to be of the same profession . . .” Similar provisions are found in the Limited Liability Company Act. That Act also authorizes a limited liability company to provide professional service, so long as it provides only one type of professional service and such services as may be ancillary thereto, and not any other profession. Like the Professional Corporation Act, it states that “those professions pertain to the diagnosis, care and treatment of humans shall be considered to be of the same profession.”86 Nevada A medical practice in Nevada may be owned by a professional corporation, professional limited liability company or certain other types of entities. Nevada law does not specifically address ownership of such entities by PAs, or co-ownership by PAs and physicians, nor is there any specific prohibition on such ownership or co-ownership. However, Nevada law appears to permit it. Nevada law provides for the formation of “professional entities,” which may either be professional corporations or professional limited liability companies.87 A professional 83

Revised Statutes of Nebraska Section 21-2202(2).

84

Revised Statutes of Nebraska Section 21-2202(3).

85

Revised Statutes of Nebraska Section 20.1-2205.

86

Revised Statutes of Nebraska Section 21-2601.01(2).

87

Nevada Revised Statutes Section 89.020(8).

25 DLMR_628211.1


entity may be organized to render multiple types of professional services only in limited circumstances, including an entity that is composed of persons engaged in the practice of medicine as provided in chapter 630 of NRS, persons engaged in the practice of homeopathic medicine as provided in chapter 630A of NRS and persons engaged in the practice of osteopathic medicine as provided in chapter 633 of NRS.88 Like physicians and osteopathic physicians, PAs are licensed pursuant to Chapters 630 and 633 of Nevada Revised Statutes. Those statutes further provide that “[a] physician assistant may perform such medical services as he is authorized to perform by his supervising physician.”89 The same rules apply to professional limited liability companies. Nevada law further provides that a professional entity may not “issue any of its ownership interests to anyone other than a natural person who is licensed to render the same specific professional services as those for which the professional entity was formed.”90 New Hampshire A medical practice in New Hampshire may be owned by a professional corporation, professional limited liability company or certain other types of entities. New Hampshire law appears to permit the ownership or co-ownership of such entities by a PA. New Hampshire law provides for the formation of professional corporations and professional limited liability companies for the purpose of practicing a professional service. A “professional service” is any service which may be rendered only by specified professionals, including physicians and physician assistants, among others.91 A professional corporation may be incorporated for the purpose of rendering multiple professional services “to the extent that the combination of professional purposes or of professional and business purposes is permitted by the licensing laws of this state applicable to such professions and rules adopted under those laws.”92 The statutes governing the organization of a professional limited liability company and the provision of multiple professional services by such entities employs the exact same language.93 A professional corporation may issue shares to individuals authorized to render a professional services permitted by the Articles of Incorporation. Similarly, membership in a professional limited liability company is open to any individual who is licensed to render professional services permitted by the Certificate of Formation.94 88

Nevada Revised Statutes Section 89.050(2).

89

Nevada Revised Statutes Section 630.271.1.

90

Nevada Revised Statutes Section 89.050.

91

New Hampshire Revised Statutes Annotated Section 294-A:1.

92

New Hampshire Revised Statutes Annotated Section 294-A:2.

93

New Hampshire Revised Statutes Annotated Section 304-D:2.

94

New Hampshire Revised Statutes Annotated Sections 294-A:8(i); 304-D:7.

26 DLMR_628211.1


New Jersey A medical practice in New Jersey may be owned by a professional corporation, limited liability company or certain other types of entities. New Jersey law does not specifically address ownership of such entities by PAs, or co-ownership by PAs and physicians, nor is there any specific prohibition on such ownership or co-ownership. However, the New Jersey Board of Medical Examiners has indicated that PAs may be owners of such entities or co-owners with physicians. Under New Jersey law, shares of a professional corporation may only be issued to an individual who is duly licensed or otherwise legally authorized to render the same professional service as that for which the corporation was incorporated.95 A “professional service” is defined as “any type of personal service to the public which requires as a condition precedent to the rendering of such service the obtaining of a license or other legal authorization . . .”96 New Jersey law provides a list of personal services which does not include PAs, but the list specifically indicates that it is not exclusive (“by way of example, and without limiting the generality thereof”). “Professional corporation” is defined as a corporation which is organized for the sole and specific purpose of rendering the same or closely allied professional service as its shareholders. “Closely allied professional service” means and is limited to, among other things, “any branch of medicine and surgery.” In its meeting on July 18, 2003, the Physician Assistant Advisory Committee of the State of New Jersey determined that a PA may be a joint shareholder in a professional service corporation. Physician assistants (like physicians) are considered licensees of the Board of Medical Examiners. See N.J. Admin. Code 13, §35-2B. As such, the scope of their ability to practice is outlined by the provisions of N.J. Admin. Code 13 §35-6.16(f), which enumerates “acceptable professional practice forms” for all Board of Medical Examiner licensees. These include limited liability companies and partnerships, as well as professional service corporations. The professional services offered by each practitioner, whether a partner, member or shareholder, shall be the same or in a closely allied medical or professional health care field. For the purpose of this rule, “closely allied fields” shall be deemed to include the health care professions licensed by the State Professional Boards under the Division of Consumer Affairs, which includes physician assistants. New Mexico A medical practice in may be owned by a professional corporation, limited liability company or certain other types of entities. New Mexico law does not specifically address ownership of such entities by PAs, or co-ownership by PAs and physicians, nor is there any specific prohibition on such ownership or co-ownership. A “professional corporation” means a corporation which is organized under the Professional Corporation Act for the sole and specific purpose of rendering professional services 95

New Jersey Statutes Annotated Section 14A:17-10.

96

New Jersey Statutes Annotated Section 14A:17-3.

27 DLMR_628211.1


and which has as its shareholders only individuals who themselves are licensed or otherwise legally authorized within the state to render the same professional service as the corporation. A “professional service” means any type of personal service to the public which requires, as a condition precedent to the rendering of such service, the obtaining of a license or other legal authorization. New Mexico law includes a non-exclusive list of the types of persons who render professional services that does not specifically mention PAs.97 A professional corporation may be organized only for the purpose of rendering one specific type of professional service and services ancillary thereto, and shall not engage in any business other than the rendering of the professional service for which it was organized and services ancillary thereto. Although there are no specific provisions under New Mexico law governing professional limited liability companies, there is a reference in a New Mexico statute indicating that certain types of professions can organize themselves in a professional limited liability company.98 New York A medical practice in New York may be owned by a professional corporation, a limited liability company or certain other types of entities. New York law does not specifically address ownership of such entities by PAs, or co-ownership by PAs and physicians, nor is there any specific prohibition on such ownership or co-ownership. A professional service corporation may issue shares only to individuals who are authorized by law to practice in New York a profession which such corporation is authorized to practice.99 With respect to a professional service limited liability company formed to provide medical services, each member of such limited liability company must be licensed pursuant to Article 131 of the Education Law to practice medicine in New York.100 PAs are also licensed pursuant to Article 131. In addition, PAs “perform medical services” under physician supervision.101 However, the New York Department of Health has recently opined that “[a] physician assistant or physician assistant’s entity may not employ a physician supervisor or hire a physician supervisor through an independent contractor or other mechanism.”102

97

West’s New Mexico Statutes Annotated Section 53-6-3 and 53-6-4.

98

West’s New Mexico Statutes Annotated Section 61-8-14.

99

New York Consolidated Law Service Bus. Corp. Section 1507.

100

New York Consolidated Law Service Limited Liability Company Section 1203.

101

McKinney’s Consolidated Laws of New York Annotated Section 6542.1.

102

Letter from Thomas G. Conway, General Counsel, New York Dept. of Heath, to Karen Bolan, R PA-C, New York State Society of PAs, dated January 7, 2009.

28 DLMR_628211.1


North Carolina A medical practice in North Carolina may be owned by a professional corporation, limited liability company or certain other types of entities. North Carolina law authorizes PAs to be owners or co-owners with physicians of such entities. A professional corporation is a corporation engaged in rendering professional services pursuant to a Certificate of Registration issued by the licensing board regulating the profession or service. A professional service is any type of personal or professional service which requires a license from a licensing board to render the service. Although a professional service corporation may only render one specific type of professional service, North Carolina law specifically states that a professional corporation may also be formed by and between or among a physician and a physician assistant who is licensed, registered, or otherwise certified under North Carolina law to render medical and related services.103 A limited liability company formed to engage in professional services in North Carolina may do so only to the extent that a professional corporation acting pursuant to the professional corporation law would be authorized to do so.104 Therefore, a professional limited liability company is treated the same as a professional corporation for purposes of PA ownership or co-ownership. Legal counsel for the North Carolina Medical Board has opined that a practice solely owned by PAs may pay medical doctors to serve as supervising physicians but they can not employ a medical doctor to provide actual medical services. Furthermore, if for any reason the supervising doctor needs to provide care for a particular patient (if the patient’s illness is outside the scope of the PA scope of practice), the PA can not receive any fees from that service.105 North Dakota A medical practice in North Dakota may be owned by a professional corporation, professional limited liability company or certain other types of entities. North Dakota law does not specifically address ownership of such entities by PAs, or co-ownership by PAs and physicians, nor is there any specific prohibition on such ownership or co-ownership. Pursuant to the Professional Organizations Act, medical practices can be owned by professional corporations, professional limited liability companies, and professional limited liability partnerships.106 Owners must be licensed or “otherwise legally permitted to practice within the state� to render the services the organization is providing.

103

General Statutes of North Carolina Section 55B-14(c).

104

North Carolina Administrative Code (West) Section 57C-2-01.

105

Marcus B. Jimison, NP and PA Ownership of Professional Corporations, The Forum (Volume 3, 2006).

106

North Dakota Century Code Section 10-31-04.

29 DLMR_628211.1


A “professional corporation” is a corporation incorporated “for the purpose of rendering professional service and which has as its shareholders only individuals who themselves are licensed or otherwise legally authorized . . . to render the same professional service as the corporation . . .”107 Similar language is found in the laws governing professional limited liability companies and professional limited liability partnerships.108 Ohio A medical practice in Ohio may be owned by a general business corporation, a professional association, a limited liability company or certain other types of entities. Ohio law permits PA ownership of such entities and co-ownership with physicians. Ohio specifically amended its general corporation statutes to permit general business corporations to perform professional services. A general business corporation may be formed for the purpose of carrying on the practice of any profession, including PA services.109 A general business corporation may be formed under Ohio law for any purpose or combination of purposes for which individuals lawfully may associate themselves, subject to any specific limitations found in other provisions of law.110 There is no provision that would limit PAs from owning or co-owning such an entity with physicians. The law governing limited liability companies in Ohio is similar to the law governing general corporations and permits them to practice a profession, including PA services.111 Ohio’s limited liability company law also provides that if a limited liability company is formed under Ohio law for the purpose of rendering a professional service, each manager, member, employee, or other agent of the company who renders a professional service must be licensed or otherwise legally authorized to render that service in Ohio.112 “Professional association” means an association organized for the sole purpose of rendering one of the professional services authorized under several specified chapters of the Ohio Code, including chapter 4730, which covers PAs, or a combination of the professional services authorized under certain specified chapters, which do not include chapter 4730 or PAs. “Professional service” means any type of professional service that may be performed only pursuant to a license, certificate, or other legal authorization, specifically including PAs.113 A professional association may issue its capital stock only to persons who are duly licensed,

107

North Dakota Century Code Section 10-31-01(6).

108

North Dakota Century Code Sections 10-31-01(7) and 10-31-01(8).

109

Baldwin’s Ohio Revised Code Annotated Section 1701.03(b).

110

Baldwin’s Ohio Revised Code Annotated Section 1701.03(a).

111

Baldwin’s Ohio Revised Code Annotated Section 1705.04.

112

Baldwin’s Ohio Revised Code Annotated Section 1705.04.

113

Baldwin’s Ohio Revised Code Annotated Section 1785.01.

30 DLMR_628211.1


certificated, or otherwise legally authorized to render within this state the same professional service as that for which the association was organized.114 Oklahoma A medical practice in Oklahoma may be owned by a “professional entity,” which means a domestic corporation, limited partnership or limited liability company formed for the purpose of rendering professional service.” Oklahoma law does not specifically address ownership of such entities by PAs, or co-ownership by PAs and physicians, nor is there any specific prohibition on such ownership or co-ownership. A professional entity may be formed for the purpose of rendering one specific type of professional service or related professional services and services ancillary thereto and shall not engage in any other business. Except as otherwise provided, no person shall hold an interest in a professional entity who is not duly licensed in accordance with the licensing laws for the profession or related profession to render the same professional services or related professional services as those for which the entity is organized”.115 “Professional service” means the personal service rendered by a number of specified licensed professions, including “a physician, surgeon or doctor of medicine pursuant to a license under Sections 481 through 524 of Title 59 of Oklahoma Statutes.” Although PAs are not specifically mentioned in the verbiage of this statute, they are licensed under Sections 518 through 522 of Title 59, which are included in the referenced statutes. Although this provision is ambiguous, one interpretation is that the legislature intended to include PAs within the definition of “professional services.” Similarly, “related professional services” means those professional services which can be combined with each other and includes “a physician, surgeon or doctor of medicine pursuant to a license under Sections 481 through 524 of Title 59 of the Oklahoma Statutes.” Again, while PAs are not specifically mentioned in the verbiage, they are licensed under the referenced sections 518 through 522.116 Regardless of whether PAs can actually own medical practices, they cannot employ their supervising physician.117 It is unclear whether this prohibition would extend to an entity wholly owned by PAs. Oregon A medical practice in Oregon may be owned by a professional corporation, a limited liability company or certain other types of entities. Oregon law does not specifically 114

Baldwin’s Ohio Revised Code Annotated Section 1785.05.

115

Oklahoma Statutes (West) Title 18, Section 809.

116

Oklahoma Statutes (West) Title 18, Section 803.

117

Oklahoma Statutes (West) Title 59, Section 519.6.

31 DLMR_628211.1


address PA ownership of such entities by PAs, nor is there any specific prohibition on such ownership. However, a PA may co-own a professional corporation with one or more physicians, provided the physician(s) own a majority of each class of stock. “Professional corporation” or “domestic professional corporation” means a corporation organized for the specific purpose of rendering a professional service. Professional service” means personal service or services rendered to the public which may be lawfully rendered only pursuant to a license by a professional. “Professional” is defined to include physicians and certain other practitioners, but does not include PAs.118 A corporation may elect professional corporation status for the purpose of rendering professional service or services within two or more professions, and for the purpose of engaging in any lawful business authorized by law, to the extent the combination of professional purposes or of professional and business purposes is expressly authorized by the regulatory board in Oregon applicable to each profession in the combination. In a professional corporation organized for the purpose of practicing medicine, the holders of the majority of each class of shares entitled to vote shall be physicians who are licensed in Oregon to practice medicine.119 The Professional Corporation Act does not affect the right of persons licensed to render professional service or services from doing so in any other business form permitted them by law, rules and regulations of the regulatory board of their profession and standards of professional conduct of their profession. A medical practice in Oregon can also be owned by a professional limited liability company or professional limited liability partnership. The laws governing those entities do not expressly include the same limitations as are found in the law governing professional corporations.120 Pennsylvania A medical practice may be owned by a professional corporation, a professional limited liability company (called a restricted professional company) or certain other types of entities in Pennsylvania. Pennsylvania law does not specifically address ownership of such entities by PAs, or co-ownership by PAs and physicians, nor is there any specific prohibition on such ownership or co-ownership. A professional corporation may be incorporated to render two or more specific kinds of professional services, but only if the government agency regulating each profession involved in the professional corporation has by rule or regulation expressly authorized the

118

Oregon Revised Statutes Section 58.015.

119

Oregon Revised Statutes Section 58.375.

120

Oregon Revised Statutes Section 58.375.

32 DLMR_628211.1


combined practice of the profession with the other profession.121 The Pennsylvania Administrative Code states that physicians are allowed to practice with other health care professionals, but only if they are licensed to practice “without the supervision of other health care practitioners.”122 Multiple purpose corporations also are permitted if “the several shareholders of the professional corporation, if organized as a partnership, could conduct a combined practice of such specific kinds of professional services.”123 A restricted professional company shall not engage in any business other than conducting the practice of the restricted professional service or services for which it was specifically organized, except as otherwise provided.124 Except as otherwise provided by a statute, rule or regulation applicable to a particular profession, all of the ultimate beneficial owners of membership interests in and all of the managers, if any, of a restricted professional company shall be licensed persons.” “Licensed person” is defined as a natural person who is duly licensed or admitted to practice his profession by a court, department, board, commission or other agency of the Commonwealth or another jurisdiction to render a professional service that is or will be rendered by the association of which he is, or intends to become, a shareholder, partner, owner, director, officer, manager, member, employee or agent.125 Rhode Island A medical practice in Rhode Island may be owned by a professional corporation, a professional limited liability company or certain other types of entities. Rhode Island law allows PAs to own medical practices through corporations and limited liability companies. Further, Rhode Island law appears to authorize PAs and physicians to be co-owners. “Professional services” means the rendering of personal services by a person authorized to practice one of the listed professions, including PAs. The practice of the following combinations of professions is not prohibited: physicians, dentists, registered nurses, podiatrists, optometrists and PAs.126 Rhode Island also permits the practice of medicine through limited liability companies. The limited liability company statute cross-references the professional corporation statute, thereby incorporating the same rules.127 South Carolina A medical practice in South Carolina may be owned by a professional corporation, a professional limited liability company or certain other types of entities. South 121

15 Purdon’s Pennsylvania Consolidated Statutes Annotated (West) Section 2903.

122

49 Purdon’s Pennsylvania Consolidated Statutes Annotated (West) Section 16.21.

123

15 Purdon’s Pennsylvania Consolidated Statutes Annotated (West) Section 2903(d).

124

15 Purdon’s Pennsylvania Consolidated Statutes Annotated (West) Section 8996.

125

15 Purdon’s Pennsylvania Consolidated Statutes Annotated (West) Section 102.

126

Code of Rhode Island Rules Section 7-5.1-2,-3.

127

Code of Rhode Island Rules 7-16-3.2.

33 DLMR_628211.1


Carolina law does not specifically address ownership of such entities by PAs, or co-ownership by PAs and physicians, nor is there any specific prohibition on such ownership or co-ownership. A corporation may elect professional corporation status under South Carolina law solely for the rendering of professional services, including services ancillary to them, within a single profession. In addition, a corporation may elect professional corporation status for the rendering of professional services within two or more professions, to the extent the combination of professional purposes or of professional and business purposes is authorized by the licensing law applicable to each profession.128 Although South Carolina licensing law does not specifically authorize PAs and physicians to practice in combination, the nature of the two professions strongly suggests that this is permitted. South Dakota A medical practice in South Dakota may be owned by a professional corporation, a professional limited liability company or certain other types of entities. South Dakota law specifically provides for PA corporations and medical corporations. All the shareholders of a medical corporation must be physicians.129 Similarly, all the shareholders of a PA corporation must be PAs.130 PAs and physicians may also own medical practices through limited liability companies. Again, however, it appears that each type of practitioner must be the sole owner of its specific type of professional limited liability company.131 The following section creates some ambiguity: “One or more authorized licensees may form a professional corporation for the purpose of rendering two or more kinds of professional services and services ancillary thereto. A professional corporation may not employ a person who is an authorized licensee unless at least one shareholder of the professional corporation is an authorized licensee of the same profession.�132 This appears to permit professional corporations owned by multiple types of practitioners, even though the provisions described above do not. Tennessee A medical practice in Tennessee may be owned by a professional corporation, a professional limited liability company, a general business corporation or certain other types of entities. A PA may own shares in a medical professional corporation in combination with licensed physicians, except radiologists, pathologists and anesthesiologists.133 Although the law

128

Code of Laws of South Carolina 1976 Annotated (West) Section 33-19-110.

129

South Dakota Codified Laws (West) Section 47-11-3.

130

Id.

131

South Dakota Codified Laws (West) Section 47-11 F-2, 3; 47-11 B-1.

132

South Dakota Codified Laws (West) Section 47-11 F-3.

133

Opinion of the Tennessee Attorney General, No. 07-116 (Aug. 8, 2007); see also Tennessee Administrative Code Section 0880-2-.20.

34 DLMR_628211.1


is not clear, it may also be possible for a PA to own a medical practice through a general business corporation or other lay entity. The Attorney General has stated: “It is not lawful for a . . . physician assistant to own and operate a professional corporation or professional limited liability company for the provision of medical services. However, it is lawful for a physician assistant to form and own shares in a medical professional corporation, but only in combination with licensed physicians or licensed osteopathic physicians, except radiologists, pathologists and anesthesiologists . . . and/or in combination with physician entities . . . Further, it is lawful for a physician assistant to be a member of, or holder of financial rights in, a medical professional limited liability company, but only in combination with a licensed physician or licensed osteopathic physicians, except radiologists, pathologists and anesthesiologists . . . Otherwise, in so far as our research has revealed no specific statutory prohibition against it, we anticipate that there could be certain circumstances in which a . . . physician assistant legitimately might own and operate a practice wherein medical services are provided, so long as such services are provided under the “supervision, control and responsibility of a licensed physician . . .”134 The reference to PAs owning and operating practices wherein medical services are provided suggests that a PA could be the sole owner of a non-professional entity, such as a general business corporation. There is no prohibition in Tennessee on the operation of a medical practice by a non-professional corporation, so long as the employment relation between the professional practitioners and the corporation is evidenced by a written contract with a job description and with language that does not restrict the physician from exercising independent medical judgment in diagnosing and treating patients.135 To summarize, Tennessee law appears to permit PAs to own a medical practice through an entity other than a medical professional corporation. In additional, a PA may be a coowner of a medical professional corporation or other entity, including a medical professional limited liability corporation, with a physician. Texas A medical practice in Texas may be owned by a professional association, a professional limited liability company or certain other type of entities. Texas law does not specifically address ownership of such entities by PAs, or co-ownership by PAs and physicians, nor is there any specific prohibition on such ownership or co-ownership. Texas law appears to require that physicians who practice through a professional entity do so either through a professional association or professional limited liability company. A “professional association” means an association, as distinguished from either a partnership or a corporation, that is formed for the purpose of providing the professional service rendered by a physician and certain other types of medical professionals, not specifically including PAs. “Professional limited liability company” is a limited liability company formed for the purpose of 134

Opinion of the Tennessee Attorney General, No. 07-116 (Aug. 8, 2007).

135

West’s Tennessee Code Annotated Section 63-6-204(c).

35 DLMR_628211.1


providing a professional service.136 A “professional corporation” is a corporation that is formed for the purpose of providing a professional service, other than the practice of medicine by physicians. A “professional service” means any type of service that requires, as a condition precedent to the rendering of that service, the obtaining of a license in the state.137 A professional association may provide a professional service in Texas only through owners or other persons who are professional individuals and licensed to provide the same professional service as provided by the entity.138 A person may be an owner of a professional entity only if the person is an “authorized person.” A person is an authorized person with respect to a professional association if the person is a professional individual. A person is an authorized person with respect to a professional corporation or professional limited liability company if the person is a professional individual or professional organization. Utah A medical practice in Utah may be owned by a professional corporation, a professional limited liability company or certain other types of entities, including general business corporations. Utah law limits ownership in professional corporations to certain types of listed professional persons, which does not specifically include PAs. The law is unclear regarding the ability of PAs to be owners or co-owners of limited liability companies. It appears that PAs may own general business corporations, or be co-owners with physicians in a general business corporation, and such a corporation may engage in the practice of medicine, so long as the physician is able to exercise independent judgment. A professional corporation in Utah may be organized only for the purpose of rendering one specific type of professional service and services ancillary thereto and shall not engage in any business other than rendering the professional service which it was organized to render and services ancillary thereto, subject to certain limited exceptions.139 A professional corporation may issue its stock only to persons who are duly licensed to render the same specific professional services as those for which the corporation was organized, or persons other than those meeting such requirements to the extent and in the proportions allowed by the applicable licensing act for the profession for which the corporation is organized.140 “Professional service” means the personal service rendered by a physician and certain other types of practitioners which do not include PAs. A person may not be a shareholder of a professional corporation unless that person is an individual licensed to render the same specific professional services as those for which the corporation is organized, or qualified to be a

136

Texas Business Organizations Code Annotated Section 301.001.

137

Texas Business Organizations Code Annotated Section 301.001.

138

Texas Business Organizations Code Annotated Section 301.006.

139

West’s Utah Code Annotated Section 16-11-6.

140

West’s Utah Code Annotated Section 16-11-7.

36 DLMR_628211.1


shareholder under the applicable licensing act or the profession for which the corporation is organized.141 Notwithstanding the foregoing, the Professional Corporation Act does not preclude incorporation by professional persons under the revised Business Corporation Act, where such persons would be permitted to organize a corporation and perform professional services in the absence of the Professional Corporations Act.142 A physician licensed under Utah law may engage in practice only as an individual licensee, but as an individual licensee he may be either an individual acting as a sole proprietor, an employee of another person, a partner in a lawfully organized partnership, a lawfully formed professional corporation, a lawfully organized limited liability company, a lawfully organized business corporation or any other form of organization recognized by the state which is not prohibited by a rule of the Medical Board.143 This suggests that an entity co-owned by a PA, other than a professional corporation or limited liability company, may employ physicians as well as PAs and other licentiates. Note, however, that “unlawful conduct” is defined to include substantially interfering with the licensee’s lawful and competent practice of medicine by any person or entity that manages, owns, operates or conducts a business having a direct or indirect financial interest in the licensee’s professional practice, or anyone other than another physician licensed under the Medical Practice Act, who is engaged in direct clinical care or consultation with a licensee.144 Utah law provides for limited liability companies organized to render professional services, and calls such entities “professional services companies.” A professional services company may render only one specific type of professional services, and services ancillary to them. “Professional services” is defined in the same way as in the Professional Corporation Act.145 A professional services company organized to render professional services may include members, managers and employees authorized to provide similar services; may include members who are not licensed or registered by the state to render those professional services to the extent allowed by the applicable licensing act relating to those professional services; and may render professional services through its members, managers and employees.146 But another Utah code provision states that except upon the death or incapacity of a member, a member of the professional services company may sell or transfer the member’s interest in the company only to

141

West’s Utah Code Annotated Section 16-11-8.

142

West’s Utah Code Annotated Section 16-11-15.

143

West’s Utah Code Annotated Section 58-67-802.

144

West’s Utah Code Annotated Section 58-67-501(1)(c).

145

West’s Utah Code Annotated Section 48-2(c)-1507; 48-2(c)-1502.

146

West’s Utah Code Annotated Section 48-2(c)-1508.

37 DLMR_628211.1


an individual who is licensed or registered in the state to render the same type of professional services as those for which the company was organized.147 Vermont A medical practice in Vermont may be owned by a professional corporation, professional limited liability company and certain other types of entities. Vermont law does not specifically address ownership of such entities by PAs, or co-ownership by PAs and physicians, nor is there any specific prohibition on such ownership or co-ownership. A professional corporation may be formed for the purpose of rendering professional services (including services ancillary to them) solely within a single profession. In addition, a professional corporation may be formed for the purpose of rendering professional services within two or more professions, to the extent the combination of professional services is authorized by the licensing law of Vermont applicable to each profession in the combination.148 “Professional service” means a service that may be lawfully rendered only by a person licensed or otherwise authorized by a licensing authority to render the service.149 Except for accounting corporations, a professional corporation may issue shares only to individuals who are authorized by law to render a professional service described in the corporation’s articles of incorporation, an employee stock ownership plan if a majority of the voting trustees of the plan are professionals licensed to furnish the pertinent professional services, or general partnerships in which all the partners are qualified persons with respect to the professional corporation, and in which at least one partner is authorized by Vermont law to render a professional service described in the corporation’s articles of incorporation. A professional limited liability company may engage in rendering professional services only to the extent that, and subject to the conditions and limitations under which, a professional corporation may engage in rendering professional services under the Professional Corporation Law. Further, the members of a professional limited liability company shall be treated in the same manner as shareholders of a professional corporation and managers shall be treated in the same manner as directors of a professional corporation. PAs are not permitted to share ownership in a medical practice formed as a business corporation. 150 Virginia A medical practice in Virginia may be owned by a professional corporation, a professional limited liability company or certain other types of entities. Virginia law appears to 147

West’s Utah Code Annotated Section 48-2(c)-1510.

148

Vermont Statutes Annotated, Title 11, Section 821.

149

Vermont Statutes Annotated, Title 11, Section 817.

150

Vermont Statutes Annotated, Title 11, Sections 806, 3012

38 DLMR_628211.1


permit PAs to be owners of their own professional corporations and to co-own a professional corporation or other entity with a physician. A “professional corporation” means a corporation that is organized for the sole and specific purpose of rendering professional service (other than certain specified non-health care services), and that has as its shareholders or members only individuals or professional business entities that are duly licensed or otherwise legally authorized to render the same professional service. In addition, a professional corporation may be organized for the sole and specific purpose of rendering the professional services of one or more practitioners of the healing arts, including PAs.151 “Professional services” means any type of personal service to the public that requires as a condition of precedent to the rendering of that service or the use of a that professional title, the obtaining of a license, certification or other legal authorization and shall be limited to the personal services rendered by certain specified practitioners, including PAs. 152 An individual or groups of individuals duly licensed or otherwise legally authorized to render the same professional service may organize a professional corporation for the sole and specific purpose of rendering the same specific professional service. For purposes of the Professional Corporation chapter, “practitioners of the healing arts,” including PAs, physicians, nurse practitioners, optometrists, physical therapists assistants, and certain other types of health care practitioners, are deemed to be rendering the same professional service. Washington A medical practice in Washington may be owned by a professional service corporation, a professional limited liability company or certain other types of entities. PAs may own professional service corporations or co-own them with physicians. Washington law provides that “an individual or group of individuals duly licensed or otherwise legally authorized to render the same professional services . . . may organize and become a shareholder or shareholders of a professional corporation.”153 It further provides that, notwithstanding any other provision of law, health care professionals who are licensed or certified pursuant to certain specified chapters (including PAs) may own stock in and render their professional services through one professional service corporation, and are to be considered as rendering the same professional services.154 Similar statutes exist for professional limited liability companies.155

151

West’s Annotated Code of Virginia Section 13.1-1103.

152

West’s Annotated Code of Virginia Section 13.1-1102.

153

Revised Code of Washington Annotated (West) Section 25.15.045.

154

Revised Code of Washington Annotated (West) Section 18.100.090.

155

Revised Code of Washington Annotated (West) Section 25.15.045.

39 DLMR_628211.1


West Virginia A medical practice in West Virginia can be owned by a professional corporation, professional limited liability company, or certain other types of entities. West Virginia law does not appear to provide for the ownership or co-ownership of such entities by PAs. West Virginia law provides for the formation of medical corporations owned by one or more physicians duly licensed to practice medicine. It does not provide for the formation of professional corporations by PAs or joint ownership of a medical corporation by a PA and a physician.156 A professional limited liability company is a limited liability company organized for the purpose of rendering a professional service. A “professional service” means the services rendered by certain specified professions, which do not include PAs.157 One or more persons duly licensed or otherwise legally authorized to render the same or compatible professional services or to otherwise practice together within the state and become members of a professional limited liability company for the purpose of rendering the same or compatible professional services. Any one or more persons who, under applicable law or ethical rules or principals, can collectively practice the same or compatible professions, can perform, own and operate, as members, a professional limited liability company.158 Wisconsin A medical practice in Wisconsin may be owned by a service corporation, a limited liability company or certain other types of entities. PAs may be owners of a service corporation or co-own a service corporation with physicians. It appears they may also own or co-own a limited liability company. One or more natural persons licensed, certified, or registered pursuant to Wisconsin law, if all have the same license, certificate, or registration, or if all are health care professionals, may organize and own shares in a service corporation.159 “Health care professional” means an individual who is licensed, registered or certified by any of certain specified boards, and includes PAs. A limited liability company may be organized in Wisconsin for any lawful purpose. A limited liability company engaging in a business that is subject to other provisions of Wisconsin law may organize as a limited liability company only if not prohibited by, and subject to all limitations of, the other chapter.160

156

West’s Annotated Code of West Virginia Section 30-3-15.

157

West’s Annotated Code of West Virginia Section 31B-13-1301.

158

West’s Annotated Code of West Virginia Section 31B-13-1302.

159

West’s Wisconsin Statutes Annotated Section 180.1903.

160

West’s Wisconsin Statutes Annotated Section 183.0102.

40 DLMR_628211.1


Wyoming A medical practice in Wyoming may be owned by a professional corporation, a professional limited liability company or certain other types of entities. Wyoming law does not specifically address ownership of such entities by PAs, or co-ownership by PAs and physicians, nor is there any specific prohibition on such ownership or co-ownership. A professional practice corporation whose capital stock is owned exclusively by a person or persons licensed to practice a profession by the state of Wyoming may, by and through the person or persons of such licensed stockholder or stockholders, or licensed employees, practice and offer professional services in such profession.161 The articles of incorporation of a professional practice corporation shall contain language stating that all of its shareholders are licensed in the profession for which the corporation is formed. A business corporation organized under the Wyoming Business Corporation Act, whose capital stock is owned exclusively by a person or persons licensed to practice a profession by the state, may, by and through such person or persons of such licensed stockholder or stockholders, or licensed employees, practice and offer professional services in such profession.162 A limited liability company may be organized for any lawful purpose. Nothing in the limited liability law shall be interpreted as precluding an individual whose occupation requires licensure from forming a limited liability company if the applicable licensing statutes and regulations do not prohibit it. No limited liability company may offer professional services except by and through its licensed members or licensed employees.163

161

Wyoming Statutes Annotated Section 17-3-101.

162

Wyoming Statutes Annotated Section 17-3-101.

163

Wyoming Statutes Annotated Section 17-15-103.

41 DLMR_628211.1


AAPA Summary of Physician Assistant Ownership by State