A rural Illinois hospital is hailing its recent court victory as insurance that hospitals across the state will be able to attract physicians to medically underserved areas by offering them employment contracts.
In a closely watched case, the Illinois Supreme Court ruled late last month that hospitals can directly employ physicians to provide medical services.
The decision reverses a lower-court ruling that 174-bed Sarah Bush Lincoln Health System, Mattoon, Ill., violated the state's prohibition against the corporate practice of medicine when it hired Richard Berlin Jr., M.D., to practice medicine.
The state's highest court ruled that a licensed hospital is an exception to the corporate practice of medicine doctrine. It also sent the case back to the circuit court to decide the merits of Berlin's employment agreement.
The corporate practice of medicine doctrine arose out of court cases in the 1930s that said corporations can't employ doctors because state law says only individuals can be licensed to practice medicine.
The case started when Berlin resigned from Sarah Bush in 1994 and went to practice at a nearby clinic. The hospital said he had broken the noncompete clause in his employment contract. Berlin said the contract terms were unenforceable because in Illinois hospitals can't employ doctors.
"This is really going to help us recruit physicians," said Gene Leblond, chief executive officer at Sarah Bush.
Michael Duffy, the Chicago attorney who represented Sarah Bush, said the court's decision affirms what is already a widespread practice.
"It should be a relief to many hospitals that have employed physicians because if it had gone the other way it would have been necessary to restructure many of these agreements," said Duffy, a partner with Gardner, Carton & Douglas.
According to information provided by Sarah Bush, more than 7,000 physicians are employed by Illinois hospitals.
In a statement, the Chicago-based Illinois State Medical Society said it was "disappointed" with the court's decision.