WA Supreme Court: BFOA Safe Under Corporate Practice of Medicine Doctrine
Columbia Physical Therapy, Inc., P.S. v. Benton Franklin Orthopedic Assocs. Its a little difficult learning a new text editor, so you'll have to bear with me.
Yes, the Prof has gone mac.
This isn't the first time I've gone mac of course, but its the first time I've outgrown MacJournal, the blogging program I first used to connect to Typepad when I created the blog.
One other small announcement. You may have noticed we are no longer blogging how each vote came down. It is more of a pain than the benefit conveyed. You will now simply see the authors of the various opinions and, if relevant, how the votes came down.
That being said, let's get on with the case...its a boring one and I haven't had my coffee yet:
So BFOA is essentially five guys, all docs. Three of the five were the officers of BFPT, a physical therapy place that, not so shockingly, gets a LOT of referrals from BFOA. In fact, a third of BFOA's patients are referred to BFPT, and was well over 2/3 of BFPT's patients.
Columbia is mad about that, because they're not getting referrals and they felt patients weren't being told about physical therapy options other than BFPT. There's some evidence that BFOA patients were told that the docs would ONLY give a referral to BFPT.
So the questions before the court: Is this a violation of the corporate practice of medicine doctrine? Does this violate the Professional Service Corporation Act? Does this violate the antirebate statute? Does this violate the CPA?
The court tackled the Practice of Medicine Doctrine and the PSCA in one fell swoop. Essentially, because the doctors could have employed physical therapists under the PSCA, then there's no craziness in allowing the docs to do the same with the PTs in a different entity.
BFOA argued RCW 18.100.150(1) authorized its employment of physical therapists:
An individual or group of individuals duly licensed . . . to render the same professional services within this state may organize and become a shareholder or shareholders of a professional corporation for pecuniary profit under the provisions of Title 23B RCW for the purpose of rendering professional service.
Columbia argued that a prohibition on engaging in business other than the professional services for which the PS was incorporate operated to stop BFOA from employing PTs. The court held that Physical Therapy falls under the larger umbrella of practicing medicine.
Physical therapy is one aspect of the practice of medicine. The practice of medicine is defined by RCW 18.71.011(1) as "[o]ffer[ing] or undertak[ing] to diagnose, cure, advise or prescribe for any human disease, ailment, injury, infirmity, deformity, pain or other condition, physical or mental, real or imaginary, by any means or instrumentality." This broad definition readily encompasses all the acts constituting the statutory definition of the practice of physical therapy. RCW 18.74.010(8). The physical therapy licensing statute simply permits nonphysicians to engage in a limited practice of medicine without liability for the unauthorized practice of medicine. Cf. RCW 18.71.030(4) (providing that the prohibition on the unauthorized practice of medicine does not prohibit the practice of any healing art for which the practitioner is licensed). The upshot is that physical therapy is part of the practice of medicine and, by extension, part of "the same professional service . . . for which" BFOA's members are licensed. RCW 18.100.010. The practice of medicine is the purpose for which BFOA was incorporated and, even when employing physical therapists, BFOA does not engage in any business other than the practice of medicine. As such, BFOA's employment of physical therapists does not violate RCW 18.100.080 but is instead authorized by RCW 18.100.050(1), which allows the creation of a professional service corporation for the purpose of rendering the same professional service for which its organizers are duly licensed.
As far as the antirebate statute, "the statute exempts from its coverage profits earned by an employee of a firm and flowing to the firm's owners, provided the owners practice in the firm, RCW 19.68.040." Of particular note is the difference between this and Day v. Inland Empire Optical, Inc., 76 Wn.2d 407, 456 P.2d 1011 (1969). In Day, the docs reaping the profits weren't employed by the entity receiving the referrals. Here, the docs receiving the profits did actually practice at BFPT.
Finally, as to the CPA, there are facts that may provide for an unfair and deceptive trade practice (telling the patients that they can ONLY get a referral to BFPT, or not informing patients of alternate PT options). One claim survives.