Introduction
EmCare, a publicly traded company on the New York Stock Exchange, was the nation’s largest physician management company, hiring almost 16,000 clinicians to staff over 4,600 hospitals and healthcare facilities, including Overland Park Regional Medical Center.
When physicians at Overland Park grew concerned with dangerously low staffing levels in the emergency room, they organized under their director, Dr. Raymond Brovont, to communicate their concerns to management.
Dr. Brovont held a meeting articulating the doctors’ concerns with the staffing policy, which required a single doctor to work in the emergency room while on call for emergencies in other units of the 343-bed hospital.
An EmCare executive responded by circulating an email with links to EmCare’s stock and financial information, stating: “[S]taffing decisions are financially motivated. . . . Profits are in everyone’s best interest.”
Dr. Brovont was subsequently fired and reprimanded by the EmCare executive, who told him: “[Y]ou cash the check every month to be a corporate representative, and there is a responsibility as the corporate representative to support the corporation’s objectives.”
The EmCare episode highlights the danger of corporate influence in healthcare: Decisionmaking prioritizes profit over the concerns and expertise of licensed professionals.
In theory, however, a corporation like EmCare should have been prohibited from staffing physicians in the first place. In Kansas, where Overland Park is located, “[a] general corporation is prohibited from providing medical services or acting through licensed practitioners.”
To provide medical services in Kansas, a corporation must be specially registered, and only licensed physicians and other qualified persons can hold equity interests in it.
These rules combine to prevent for-profit, publicly traded corporations like EmCare from controlling healthcare services.
Every state has its own regulations and court decisions prohibiting corporations from practicing medicine or employing physicians, which collectively form the corporate practice of medicine doctrine (CPOM).
The public policy underlying CPOM is rooted in the dual fears that, first, “a corporation’s obligation to its shareholders may not align with a physician’s obligation to [their] patients,” and, second, that corporate management may interfere with a physician’s medical judgment.
Over the last three decades, corporate investors have found ways to bypass CPOM by forming corporate structures through which they can control healthcare groups indirectly.
For example, EmCare created separate subsidiary corporations in each state in which it employed physicians and then made physicians the owners of those subsidiaries.
Under this structure, the subsidiaries could facially comply with CPOM while the parent company retained control.
This model of corporate ownership has grown increasingly popular, opening the floodgates to corporatization in healthcare, especially through large, publicly traded companies and private equity firms. For instance, in July 2022, Amazon announced a deal to purchase One Medical, a primary care organization.
A year later, CVS closed on its acquisitions of Oak Street and Signify Health, a primary care provider and a home healthcare company.
Today, four of the Fortune 10 companies have acquired physician groups.
One report showed that in 2021, a single private equity firm owned more than 30% of specialty medical practices in over a quarter of local markets.
This trend is especially concerning as more studies indicate that corporate ownership of healthcare groups correlates with problems such as understaffing and poor patient outcomes.
One study found that rates of hospital-acquired complications, like infections and falls, increased by an average of 25% at hospitals that were purchased by private equity firms.
In a survey of a thousand physicians across the country, more than half stated that changes to corporate ownership resulted in reduced quality of patient care, due to “an erosion in clinical autonomy and a greater focus on financial incentives.”
CPOM was designed to prevent these problems and protect patients by giving their physicians, rather than profit-motivated laymen, agency to make appropriate clinical decisions.
But in the 1970s, CPOM became increasingly underenforced as corporate entities began to take control of the healthcare sector.
Today, corporate actors dominate the healthcare market, and many states choose not to enforce CPOM without expressly rejecting it.
Fortunately, CPOM laws still exist, despite the preponderance of corporate arrangements that blatantly violate their spirit. Penalties for CPOM violations vary by state but generally involve fines, revocation of licenses, and even criminal penalties.
There is an area of active litigation challenging the legality of corporate control of healthcare groups;
however, in some states, private citizens lack a cause of action to enforce CPOM.
Furthermore, it is not typical for courts to award monetary damages to plaintiffs in CPOM cases.
These limitations exacerbate the underenforcement of CPOM.
This Note proposes that false claim liability should attach to corporations that bill government health plans while violating CPOM. The Centers for Medicare and Medicaid Services (CMS) coordinates government health plans, and its conditions for participation include compliance with “all applicable Federal, State, and local laws and regulations related to the health and safety of patients,”
which presumably include CPOM laws. Therefore, to participate in CMS programs, a healthcare practice must comply with CPOM regulations.
Under the “implied false certification” doctrine, submitting a reimbursement claim to a government program without complying with the underlying preconditions to payment constitutes a false claim.
Under this theory, a corporation that bills a government health plan while violating CPOM would be submitting false claims and therefore subject to hefty fines. Because most healthcare groups rely on government reimbursement,
this approach would implicate virtually any healthcare group in violation of CPOM.
Furthermore, through its qui tam/whistleblower provisions, the False Claims Act enables private citizens with evidence of fraud to file suit on behalf of the government.
These provisions provide private citizens a cause of action to enforce CPOM in states where they would otherwise lack standing to sue.
States also have their own false claims and insurance fraud acts that CPOM plaintiffs can invoke.
Based on their legislative and judicial constructions, these laws may be more permissive to certain CPOM complaints than the Federal False Claims Act.
Attaching false claim liability to CPOM violations would incentivize plaintiffs to enforce CPOM through litigation and encourage whistleblowers to expose corporate arrangements that give laymen undue influence over physicians.