With growing patient demands, advanced technology and payer restraints, healthcare providers are increasingly exploring management agreements with experienced companies to handle the daily operations of their clinical practice. However, healthcare professionals need to be aware of the potential pitfalls in doing so, especially given the deeply rooted corporate practice of medicine doctrine in many states, which provides that practitioners, not corporations, should retain control of the business decisions that affect the practice of medicine. While the corporate practice of medicine is often thought of as an antiquated doctrine, the New York and New Jersey courts recently affirmed that the doctrine is indeed alive and well.

At its core, the corporate practice doctrine prohibits non-physician-owned business entities from engaging directly in clinical practice. States adopting the doctrine, whether through statutory law, common law or otherwise, commonly state that it ensures a clinician is responsible for the control and direction of a medical practice. Many states have adopted provisions that enable healthcare professionals to enter into arm’s length arrangements for services by non-physician entities. However, the medical professionals should have an integral role in the direction of their clinical practice at all times.