Health Care Regulation

The Washington State Attorney General has answered a question of which types of health care professionals can “flock together” to form a multidisciplinary professional limited liability company. The answer – every profession noted in the state statute other than physical and occupational therapists who must flock amongst themselves.

The question of who can own a healthcare clinic arises when advising health professionals about business entity formation. Since Washington bans the “corporate practice of medicine,” companies cannot employ professionals to provide health care services outside the scope of practice of the company owners. However, Washington permits the formation of multidisciplinary professional service corporations and professional limited liability companies.

Thus, if a chiropractor wants to provide care with an acupuncturist sharing revenue in the same clinic, they must both be owners of the clinic with each supervising the activities related to their professional license. A legal question arises from the way the state Legislature added physical and occupational therapists to these business formation statutes as evidenced by a dispute between physicians and physical therapists.

In 2010, the Washington Supreme Court decided a case in which physical therapists argued that physicians who employed physical therapists violated state law prohibiting the corporate practice of medicine because physical therapists are listed in a separate subsection of the professional service corporation statute from physicians. Thus, the therapists argued that physicians and physical therapist practices had to remain completely separate.

The court ruled against the physical and occupational therapists. The court found that physicians with their broad scope of practice may employ a broad range of other healthcare professionals including physical therapists. Therefore, the professional service corporation owned by physicians was not practicing outside the scope of practice of the owners. The Washington Supreme Court went on to state:

“Importantly, physicians are listed in subsection (a) but not subsection (b); physical therapists are not listed in subsection (a) but are listed in subsection (b). The legislation creating these lists of licensed professionals who “may own stock in and render their professional services through a single professional service corporation” was first enacted in 1996 and had the effect of broadening the professions that could come together and    form a single professional service corporation. This, in turn, broadened the professional services that a single professional service corporation could provide. That is, these lists do not, as [the physical therapist] suggests, limit the services that a single professional service corporation may provide but rather broaden those services.”

The question that naturally flowed from the case was this, “if as the court noted, the statute broadened the list of professions who can form a professional service corporation, does that mean that a physical therapist can own a clinic with the professionals listed in subsection (a) of the statute such as physicians?” Naturally, lawyers said yes and said no.

In 2018, Washington State Representative Joe Schmick requested an Attorney General opinion asking:

“Does RCW 18.100.050 (5)(b) prohibit physical and occupational therapists from having an ownership interest in a health care practice with health care professionals listed in RCW 18.100.050(5)(a)?”

Two years later, the Attorney General’s office has finally answered the question. They said:

“Yes. Physical and occupational therapists are prohibited from having an ownership interest in a health care practice with health care professionals listed in RCW 18.100.050(5)(a). Physical and occupational therapists may only own stock in and render their services through a professional service corporation within their respective fields. See RCW 18.100.050(5)(b).”

The Attorney General explained the Supreme Court’s opinion regarding the broadening of professions permitted to join together.

“This was simply an acknowledgement of the [legislative history of the law] — that before the legislature adopted these lists, only members of a single profession could own a business together. But the legislature has not added occupational therapists and physical therapists to the list of professions in RCW 18.100.050(5)(a) that can come together to form a professional service corporation. [The Court] also held that a physician-owned limited liability company may employ physical therapists in part because the practice of physical therapy is one aspect of the practice of medicine. But nothing in the Court’s opinion suggests that a physical or occupational therapist can thereby own an interest in a business of one of the professions listed in RCW 18.100.050(5)(a).”

The Attorney General’s view is that physicians can employ physical therapists but cannot share an ownership interest with them because the Supreme Court was addressing physician scope of practice not ownership. My own view is that the Attorney General’s position is best captured in their last statement quoting the Supreme Court’s decision.

“But ‘the legislature remains free to adopt another course should it see fit to do so.’ ”

Whether you agree or disagree, if physical therapists want to become owners in a multidisciplinary healthcare practice, I’d ask the Legislature to delete the (b) from the section and have just one list of professions. Unless of course the profession possesses a unique need to be alone.