A case pending before the Illinois Supreme Court could add a new twist to the clash over corporate practice of medicine.
Although a ruling is not expected until later this summer at the earliest, healthcare attorneys are quite familiar with the case of Richard Berlin, M.D., and also the case of John Holden, M.D., which raises similar issues.
In each case, Illinois appellate courts have declared physician employment contracts with not-for-profit hospitals unenforceable because of rules against corporate practice of medicine. Even though Illinois is not among the five states that have specific laws barring control of doctors by an organization not owned by physicians, the courts ruled in the doctors' favor.
Hospitals and physician practice management companies enter contracts with the idea of keeping physicians--and their patients. So while the Berlin and Holden decisions have no legal impact outside Illinois, they could inspire other physicians to use corporate-practice-of-medicine arguments to get out of contracts with hospitals and PPMs, healthcare attorneys say.
"Every state could have this doctrine come full force into effect," says Patricia Jacobsen, a healthcare attorney with Wickers, Herzer & Panza in Lorain, Ohio. "This is a bear hibernating in the den, waiting to come out."
In an article Jacobsen wrote for the journal Health Law Handbook in 1993, she speculated that the fight against corporate practice of medicine was being revived. Four years later, some big healthcare players are wondering if Jacobsen was right.
In March, Jacobsen, as a board member of the National Health Law Association, helped lead a seminar on corporate practice of medicine that drew representatives from, among others, Columbia/HCA Healthcare Corp., the American Hospital Association, Anthem Blue Cross and Blue Shield, the American Society of Internal Medicine and hospital group Catholic Healthcare West.
"What has happened recently with the advent of managed care, integrated delivery systems and the incredible changes in the healthcare environment is that the corporate practice doctrine is looking attractive again to those who want to protect the independence and integrity of physicians, or their wallets," Jacobsen says.
Berlin's case, against Sarah Bush Lincoln Health System of Mattoon, Ill., is awaiting a ruling from the Illinois Supreme Court, which heard arguments on the case in January. Sarah Bush spokeswoman Kathy Roland says a ruling could come as soon as July
Sarah Bush sued Berlin, a general surgeon, in 1994 after he left the hospital to work for Carle Clinic, a multispecialty group practice in nearby Urbana, Ill.
The hospital says Berlin violated the noncompete clause in his contract by taking the job at Carle.
Using the corporate-practice-of-medicine argument, Berlin's attorney, Cameron Dobbins of Champaign, Ill., obtained rulings in his client's favor from a county court and an appellate court.
On April 18, 1996, six days after the appellate court ruled for Berlin, Rockford, Ill., attorney Richard Haldeman filed a motion for summary judgment in favor of his client, Holden, in a Winnebago County court. A few months earlier, Holden, a reproductive endocrinologist, had sued Rockford Memorial Hospital after the hospital tried to hold him to a noncompete clause.
The Winnebago County judge ruled in Holden's favor, and an appellate court upheld the judgment on March 27, 1997. No argument is scheduled before the state Supreme Court.
Dobbins' and Haldeman's arguments went like this: Under Illinois law, anyone who practices medicine must receive a license. Corporations can't meet the qualifications for licensing, which include certain standards of education and personal traits such as honesty and loyalty.
Illinois, like many states, has carved out exceptions for physician groups to give them corporate tax breaks. However, in the Berlin and Holden cases, the appellate courts said Illinois had never made an explicit exception for hospitals.
Dobbins and Haldeman said they each have received calls from physicians interested in filing cases similar to Berlin's and Holden's. Haldeman says 10 Rockford doctors have retained him since the Holden appellate court ruling.
Other attorneys are watching these cases as well. James Cervenak, director of Washington law firm Jackson & Campbell, says the growing nationalization of hospital and PPM networks makes state court decisions about the corporate practice of medicine resonate louder.
"You have to do whatever is necessary to apply to the state standards," says Cervenak, who has represented hospitals and physicians in contract disputes.
"The philosophy of . . . how (hospitals and PPMs) deliver their services is a big issue."
Corporate-practice-of-medicine laws have their roots in the 19th century when they were established as a reaction to abuses by company-owned doctors against employees (their patients) in such industries as rail, mining and lumber.
State attorneys general over the past 10 years have unwound such laws, issuing opinions that make exceptions for anyone from not-for-profit groups to any healthcare business with a medical director, depending on the state. Federal law allows HMOs to own physicians.
California, Colorado, Iowa, Ohio and Texas are the only states that have specific bans on corporate practice of medicine. They aren't always enforced: Jacobsen says Ohio hasn't fought a corporate-practice-of-medicine case since 1962.
However, in most states physicians and their attorneys can read between the lines to find corporate-practice-of-medicine bans. By law, the final say over patient care usually rests with physicians, not hospitals or PPMs.
"As PPMs get more popular and managed care takes more of a hold, one doesn't have to be a rocket scientist to figure out there's a corporate influence on medicine," says Julia Krebbs-Markrich, who leads the healthcare law group for the Fairfax, Va., law firm Hazel & Thomas. "That's why the Illinois cases are getting so much attention."
Illinois Hospital Association General Counsel Mark Deaton says if hospitals continue to be barred from owning physicians, they could find ways to "lawyer around" the problem by setting up physician-led trusts to own practices. But that option "is costly and cumbersome," he says.
Deaton says his group is trying to work with the Illinois State Medical Society to craft legislation that would overrule the Berlin and Holden decisions and allow hospitals to employ physicians. Most hospitals, he says, continue to own physicians and probably won't consider making any changes until the Illinois Supreme Court rules on Berlin's case.
"It is a concern that a hospital can go through that time, energy and money and then the doctor can pick up at will and move on," Deaton says.