3 Questions a Physician Should Ask before Hiring a Physical Therapist

Can a physician hire a physical therapist? This question might seem simple, but it implicates a complex array of federal and state laws.  As healthcare practices continue to consolidate and merge, it’s also a question that we’re asked frequently.  Each client and each situation are different, and this post isn’t a substitute for personalized legal advice, but these are some of the questions we ask as we guide a physician through this process. Check it out, and schedule your free consultation with one of Jackson LLP’s healthcare attorneys.

1. Is there a corporate structure that accommodates this arrangement?

Frequently, clients want to begin with the tangible step of forming a new LLC or corporation to jumpstart their new business venture. But before doing this, it’s first crucial to evaluate which corporate structures allow and accommodate the proposed activities. For example, in Illinois, physical therapists cannot form medical service corporations. However, physicians are licensed under the Medical Practice Act, and they can form such an entity.

When evaluating this issue with our clients, we begin by asking a few questions:

  • Are you currently practicing within a corporate structure (e.g., medical service corporation, professional corporation, limited liability company)? While corporate entities can help shield providers from general commercial liability — so long as the provider abides by corporate formalities — a duly licensed provider can practice without any corporate form.
  • Is the physical therapist who you want to hire currently practicing within a corporate structure? We always start by evaluating whether the providers who are proposed parties to this new relationship are currently practicing within compliant corporate entities. More often than not — especially if the corporate entity was established via an online service, a tax professional, or a non-healthcare attorney — they aren’t. Specific rules apply to healthcare businesses, so our first order of business typically involves evaluating all parties’ businesses to ensure that they comply with their practice acts and ethical requirements.
  • In what capacity do you plan to hire the physical therapist (e.g., employee, independent contractor, co-owner)? Not all of these arrangements are permitted, so we’ll walk through your business plan together and then evaluate the legal ways in which you can accomplish your goals.

While the corporate entity is often our clients’ first concern, it’s typically the detail that we’ll address last. Before getting to that point, we’ll want to ensure that the proposed arrangement is legally permissible and doesn’t land you in hot water with regulators… or in prison.

2. Is the arrangement prohibited by the Stark Law?

The Stark Law, which we typically evaluate in conjunction with the Anti-Kickback Statute, regulates the business, financial, and referral agreements into which physicians can enter.

When evaluating these issues with our clients, we’ll ask lots of questions, including:

  • What is the physical therapist’s proposed compensation arrangement? Not all compensation agreements are permitted by federal and state laws governing such arrangements.
  • Will you be entering into any profit-sharing agreements?
  • Will you and the physical therapist refer patients to the other?
  • How will the physical therapist’s services be billed?

Many terms have unique definitions for the purposes of a Stark Law analysis. For example, a “financial relationship” means something very specific under this federal law, and we will consider your proposed agreement’s intersection with federal law and federal regulations. We will also evaluate your existing and anticipated relationships with third-party payors for compliance with the Stark Law and “mini-Stark,” or the state equivalent. There are some exceptions to the Stark Law’s prohibitions, but they have sharply drawn parameters. If we suspect that an exception applies to your proposed arrangement, that will also require careful analysis.

The Anti-Kickback Statute’s penalties include weighty fines — as do Stark Law violations — but also federal prison. These are extremely tedious issues that should always be considered by an experienced healthcare attorney before entering into potentially implicated business, financial, or referral arrangements between physicians and physical therapists.

3. Does the arrangement violate any party’s practice act?

Even if an arrangement between a physician and a physical therapist is permitted by the Stark Law and Anti-Kickback Statute, it must also be allowed by the healthcare providers’ practice acts and ethical codes. These laws exist in layers, so the fact that one law permits certain behavior never guarantees that another law doesn’t prohibit the same behavior. If you imagine the federal and state laws juxtaposed in a venn diagram, you’re looking for the areas where the behaviors that they permit overlap. Conduct permitted by one but prohibited by the other is as good as prohibited for your purposes.

When evaluating these questions, we’ll ask:

  • What is each provider’s proposed practice location and hours?
  • What additional services, if any, do you propose integrating into the practice?
  • How will you store and share medical records?

These issues are extraordinarily complex and implicate your liability, your employment arrangements, your corporate governance, corporate compliance, potential defenses in the event of litigation, and so much more. If you’re trying to tackle them alone, they likely feel overwhelming (understandably so — there are entire legal conferences devoted to these topics!).  Jackson LLP’s healthcare attorneys can help your medical practice untangle them and achieve its goals. Schedule your free consultation below.

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