By Jeffrey B. Miller, Esq.& Charles I. Artz, Esq.

Published September 2001

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In recent years, however, many individuals on each side have begun to recognize the benefits that can be obtained when MDs, DOs and DCs work together, both for their patients and for their practices. By working together, physicians can add valuable expertise to their practices, resulting in improved patient care, convenience and better patient service. Moreover, physicians can share their administrative burdens and limit the necessity of outside patient referrals, lowering their costs and expanding their revenue. As a result, the concept of multidisciplinary MD/DO/DC practices has gained increased popularity.

Like most new endeavors, the decision of whether and how MDs, DOs and DCs should enter into multidisciplinary practices is ripe with legal challenges. Aspects such as appropriate corporate structure, ownership, control and management, obtaining appropriate reimbursement for services rendered and limitations on referrals rise to the top of most physicians’ concerns. These challenges, however, are not insurmountable. With careful planning, they can be satisfactorily resolved to the benefit of physicians and patients alike.

The primary issue in the licensure context relates to MDs’ and DOs’ regulatory licensure restrictions. Generally, MDs and DOs are only permitted to engage in medical entities as shareholders or as partners with individuals who are "direct access" providers. Direct access providers are other MDs or DOs, DCs, psychologists, dentists, podiatrists and optometrists. In these arrangements, the MDs and DOs must have "substantial" equitable interests in their multidisciplinary entities. While these interests must be substantial, they are not required to be dominant interests; MDs and DOs can have minority equitable interests in these entities (as little as 10 percent). However, even when in the minority, MDs and DOs must maintain absolute control over medical judgments, diagnoses and decisions relating to the treatment and care of patients within their practices. In such arrangements, neither the DCs, who have more limited medical licenses than MDs and DOs, nor the practice entities themselves, can have clinical control over the care of the practices’ patients.

Reimbursement issues also dominate any discussion of MD/DO/DC relationships. In particular, questions arise as to whether MDs and DOs can bill for services provided by DCs, and in some cases by unlicensed personnel or assistants. Through carefully complying with Medicare’s "incident to" rules, such billing can generally take place. Under the "incident to" rules, Medicare pays for services that are supervised by MDs and DOs, including physical therapy and diagnostic tests. Most private insurance plans also follow this pattern, deferring to Medicare’s rules. By billing for medical services provided by DCs or other practitioners "incident to" their services, MDs and DOs can and do bill for these services.

There are five basic requirements that must be satisfied in order for MDs and DOs to bill for other practitioners’ services "incident to" their own. First, the services that are provided must be the types of services that are commonly furnished in MDs’ or DOs’ offices, and that are generally rendered without charge, or as part of the MDs’ or DOs’ bills.

Second, the MDs or DOs must perform the initial patient services, along with regular subsequent services, with frequencies that demonstrate their active participation in and management of the patients’ courses of treatment. The key to this requirement is that the MDs or DOs must maintain and demonstrate control over the patients’ clinical care. It is absolutely essential that the MDs or DOs personally provide the initial patient exams, and that the patients’ notes clearly demonstrate the medical necessity of ongoing physical medicine procedures. The MDs or DOs must be more than just figureheads or rubber stamps for other practitioners’ care; their control of the patients’ care must readily apparent, active and regular. Moreover, in order to properly demonstrate the medical necessity of these procedures, the MDs or DOs should have knowledge, training and experience in physical medicine procedures (e.g., credentials in physiatry, sports medicine, rehabilitation, orthopedics, and diagnostic tests, etc.).

As a third "incident to" requirement, the MDs and DOs must provide direct personal supervision to the DCs or other practitioners. In legal terms, this means that the MDs and DOs must be present in the office suite (they do not need to be in the same room) and immediately available to provide assistance and direction during the time that the DCs or other practitioners are performing their services.

Fourth, the services provided by the DCs or other practitioners must be an integral, although incidental part of the MDs’ or DOs’ own professional services, provided in the course of diagnosing or treating the patients.

Finally, the DCs or other practitioners must be bona fide employees in the same corporations or partnerships as the MDs or DOs, and the MDs or DOs must have the right to direct and to control the DCs or other practitioners, not only as to the results of the patients’ care, but also as to the details and means by which those results are accomplished. These requirements can best be maintained and well-documented through the development of appropriate employment agreements for the health care providers in the practices.

The third primary concern in most MD/DO/DC joint relationships are the restrictions placed upon patient referrals by the Stark law. Under Stark, physicians (including DCs) are prohibited from referring patients for certain designated health services reimbursable by Medicare or Medicaid to any entity with which the physicians have financial relationships. This law applies to virtually every MD/DO/DC relationship, as designated health services include physical therapy services and rehabilitation. Even referrals within the same corporate entity or partnership are subject to this restriction. As a result, unless a legal exception from Stark can be satisfied, such relationships are fraught with illegality.

There is a Stark exception that applies, and that has been successfully applied to the great benefit of many MD/DO/DC practices: the in-office ancillary services exception. The requirements of Stark and of this exception are highly technical, however, and cannot be satisfactorily explained in this article. Legal advice on satisfying Stark should be obtained before entering into any MD/DO/DC arrangement. However, as a general rule, this exception can be satisfied where the designated health services are furnished (1) personally by the referring physicians, personally by physicians who are members of the same "group practice" as the referring physicians, or personally by individuals who are directly supervised by the physicians or by other physicians in the same "group practice"; and (2) in a building in which the referring physicians furnish their physician services, unrelated to the furnishing of the designated health services, or in another building that is used for the centralized provision of the group’s designated health services. Furthermore, the services must be billed by the physicians performing or supervising the services, by group practices in which such physicians are members under billing numbers assigned to those group practices, or by entities that are wholly owned by such physicians or such group practices. There are additional specific legal criteria defining this exception, including specific requirements defining "group practices."

The final major legal considerations in MD/DO/DC joint arrangements relates to the federal Anti-kickback Statute, and the somewhat parallel requirements existing in Medicare and Medicaid regulations. Additional rules also apply through state workers’ compensation and automobile insurance laws and regulations. Generally, the Anti-kickback Statute prohibits the provision or receipt of anything of value in exchange for referrals. This is a criminal statute that requires the government to prove, beyond a reasonable doubt, that at least one purpose of the remuneration provided was to induce referrals. As with the Stark law above, the requirements of the Statute are highly technical and cannot be satisfactorily explained in this article. However, similar to Stark, the Statute contains specific exceptions (and for the Statute, safe harbors) designed to specifically define legal arrangements. Satisfaction of one of these exceptions or safe harbors provides practices with assurances of legality. Under the Statute, practitioners who are bona fide employees of their practices, as defined by the Internal Revenue Service, satisfy such an exception. Legal advice on satisfying the Statute and other noted laws and regulations should be obtained before entering into any MD/DO/DC arrangement.

In recent years, many physicians have begun to recognize the potential benefits that can be obtained when MDs, DOs and DCs work together, both for their patients and for their practices. Like most new endeavors, however, the decision of whether and how MDs, DOs and DCs should enter into multidisciplinary practices is ripe with legal aspects that must be carefully considered. Several MD/DC multidisciplinary practices have been investigated, resulting in some convictions and guilty pleas, where the compliance measures discussed in the article have not been followed. With careful planning, however, relevant issues can be satisfactorily resolved to the benefit of all involved.

Jeffrey B. Miller, Esq., is an Associate Corporate Counsel with Mercy Health System of Southeastern Pennsylvania. His office is located in Conshohocken, Pennsylvania. Charles I. Artz. Esq., is the founder of the law firm Charles I. Artz & Associates, located in Harrisburg, Pennsylvania.