Verify the Relationship Between the Physician and the Employer is Legal

April 15, 2014

medicalIn reviewing contracts and employment agreements for physicians and health professionals, sometimes it’s necessary to look beyond the written language of the contract and determine if the very relationship between the physician and employer is legal.

More than 10 years ago, the Florida Legislature enacted the “Health Care Clinic Act.”  The primary purpose behind this legislation was to require non-physician owners of health care entities to have the clinic licensed through the Agency for Health Care Administration (AHCA). There are some exemptions enumerated within the Act.

The Health Care Clinic Act requires that a non-physician owned clinic have a completely separate license issued by AHCA. This applies if any portion of the business is owned by a non-physician. So for example, if 99% of the clinic is owned by physicians and 1% is owned by a non-physician, the clinic must obtain a health care clinic license from AHCA. In order to obtain a health care clinic license from AHCA, several requirements must be met.

First, the health care clinic must have a medical director to oversee the operation of that clinic.  It is the medical director’s responsibility to ensure that all medical professionals are properly licensed and certified, to ensure record keeping compliance, to report noncompliance, and to personally review clinic billings for illegality or fraud. These requirements also include providing proof of financial ability to operate or the posting of a bond, background screenings, including screening of the director and chief financial officer, and disclosures of certain additional information.

Be aware there are several health professions for which ownership or control by anyone outside of that profession is prohibited by law. This means that a health care clinic license may not be obtained for them. These professions are dentistry, optometry and chiropractic medicine. A business entity that is not owned, managed and controlled 100% by members of those professions may not operate such a practice.

Watch for Clinic Ownership Changes.

Even if the organization and ownership of the clinic or practice were at one time legal, if ownership has changed, it may no longer be legal.  A trust or estate owned or controlled by a non-physician also may not legally operate such a medical business without a health care clinic license.  If a physician with a legally established medical clinic sells the clinic to a non-physician, it is illegal to continue the operation of the clinic without a health care clinic license.

Consequences.

Recently, we have encountered a number of physicians who have entered into contractual relationships with non-physicians without verifying that the practice was appropriately licensed as a health care clinic.  If improper, these relationships can have severe consequences for both the clinic and the physician.  Some of these include:

1.         The operation of a clinic without a license is a third-degree felony, with each day of continued operation being a separate offense;

2.         If an individual has an interest in more than one clinic and fails to obtain a license for any of the clinics, AHCA may revoke the license for all of the clinics;

3.         Administrative fines of up to $5,000 per day; and

4.         Potential recoupment of all claims and charges made to Medicare, Medicaid, and other third-party payors, including insurance companies, private payers and patients.

The key to avoiding these penalties is simple.  When reviewing a contractual relationship between a physician and a non-physician, make sure that you request a copy of the clinic’s health care clinic license or the reason for its exemption from this requirement.  Information on a clinic’s or practice’s license can be verified online through the AHCA.