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Tuesday, January 27, 2009


By statute and longstanding case law, Texas prohibits the corporate practice of medicine. The principle is simple. Only physicians, as opposed to corporate entities, are licensed by Texas to provide medical services. The fundamental purpose of this prohibition is to ensure physicians’ independent medical judgment. Texas’ case law has upheld this principle and continues to prohibit corporations or other lay entities from directly employing physicians.

Maintaining the physician’s independent medical judgment is critical. It ensures that a patient’s medical needs come before the hospital or governmental entity’s business needs. If the physician were to become an employee of a hospital, insurance company, or any other entity not licensed to practice medicine, the patient’s health and well-being could be compromised. Business considerations, not medical needs, could lead to poor patient care decisions.

Over time, the corporate practice of medicine doctrine has evolved. Medical schools may employ physicians, as can other physicians. Nonprofit health care corporations (commonly referred to as 501[a] corporations) sponsored by hospitals and hospital districts also may employ physicians. Under each of these avenues, however, a licensed physician or physicians are ultimately responsible for patient care. In the case of the 501(a) nonprofit corporation, even if the organizing entity is a hospital, that corporation must have a physician board of directors. Rules governing their operation are designed to ensure that physicians remain in charge of medical decisions.

Medicine’s 2009 Agenda
  • Oppose efforts to broaden the corporate practice of medicine beyond the current exceptions for medical schools, 501(a) corporations, and federally qualified health centers (FQHCs).
  • Require the Texas Medical Board to maintain current information on the sponsorship, governance, and membership of 501(a) corporations.
Medicine’s Message
  • Physicians should work for the patient not the insurance company, hospital, or anyone else who is not directly responsible for the care of the patient.
  • Physicians licensed to practice medicine in Texas have met stringent qualifications. They have earned the right to be trusted to apply their expertise to provide the appropriate medical care for their patients. Physicians should not be under the control of a lay administrator whose focus is the budget and economic health of a corporate entity.

Check out the Doctor’s Orders video to get a more complete view of TMA’s 2009 legislative agenda.

See all of TMA’s legislative issue briefs in the Governmental Affairs section of the TMA Web site.

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