Resources & Information

In this installment of Lessons from the Disciplinary Committee, we discuss the all-too-common issue of licensees entering into inappropriate business arrangements or employment situations. North Carolina has specific laws that dictate who may lawfully own medical practices. Be informed and avoid getting involved in partnerships that may get you into trouble.

Case study: When a side hustle actually is a hustle

MD is an internal medicine physician with about 20 years of clinical experience working in a mid-sized general internal medicine practice. After receiving an inquiry through LinkedIn, MD decides to supplement his income by serving as the medical director for a new med spa that is opening in the area. The spa will be staffed by aestheticians and advanced practice providers, including NPs and PAs who will provide a range of medical treatments such as hormone replacement therapy, GLP-1 weight loss regimens, laser facial peels and injectables such as Botox and dermal fillers.

After a tour of the med spa, during which MD meets several of the APPs who work there, MD signs an agreement to serve as the spa’s medical director, for which he will be paid $2,000 a month. The owner of the med spa, an entrepreneur with no medical training, sends MD on his way with assurances that she will be in touch if any issues that require his input arise. MD is advised that his role does not require him to work hours at the med spa or be on site for any procedures or consultations with clients.

Four months pass without any contact between MD and the med spa, except for a monthly direct deposit of $2,000 in MD’s bank account. During the fifth month of his tenure as medical director, MD receives a notice from the medical board that a complaint has been submitted against him by a client of the med spa who suffered blistering facial burns after a laser facial. The laser facial was performed by a PA, who is also under investigation related to the incident. The medical board notes that MD is listed as the PA’s primary supervising physician.

In his response to the complaint, MD indicates that he does not know the PA and never agreed to supervise her but acknowledges that he is the med spa’s medical director. MD further states he was unaware that any clients had experienced complications, noting that no one from the med spa had contacted him. The medical board invites MD for an interview to learn more. During the interview, MD explains his arrangement with the med spa, including the owner’s assurance that MD would only be contacted if needed. He states that, since he had not heard from anyone, he assumed everything was going well. MD reports that, since receiving the complaint, he has been in contact with the med spa’s owner, who told MD that he is listed as the primary supervising physician for all four of the med spa’s APPs, including the PA who performed the laser facial. MD is adamant that supervising APPs was never discussed and is not mentioned in his employment agreement with the med spa. When asked by a medical board member what service he provides to the med spa to earn his $2,000 fee, MDs struggles to come up with an answer, finally responding, “I’m not really sure.”

Discussion

NCMB regularly investigates situations where licensees are involved in business arrangements that, like the one described in the case study, are unlawful in North Carolina. As a general rule, the North Carolina Professional Corporations Act (Chapter 55B of the NC General Statutes) requires corporations that provide certain professional services to be owned entirely by licensees of that profession. In the context of medical practice, that means any business that provides medical services in North Carolina must be owned by a licensee of the North Carolina Medical Board – either a physician or a PA.

NCMB frequently sees cases that involve licensees employed by either a physician who is licensed in a state other than North Carolina, or as in the case study, individuals who are not physicians. Often the licensee is hired as medical director of the medical practice, which is owned by a non-licensed individual. When a NC-licensed physician or PA accepts such a role, he or she may be aiding and abetting the unlicensed practice of medicine in North Carolina, which could result in regulatory action. NC law allows licensees to partner with specific types of medical professionals to provide certain medical services. Possible partnerships are noted in NCGS § 55B-14 (c).

NCMB’s position statement entitled, “Corporate Practice of Medicine” outlines expectations for practice ownership in North Carolina and discusses situations that are exempt from the requirements set out in the NC Professional Corporations Act. Exemptions include hospitals and health systems, as well as health maintenance organizations, based on the idea that these entities are intended for the public welfare and regulated by the government, thus mitigating the tension between profit-making and good medical care. The position statement also exempts public health clinics and charitable nonprofits on similar grounds.

Examples of unlawful practice arrangements

In many instances, the licensee hired as “medical director” is minimally involved in the day-to-day operation of the practice and has little or no say in how medical services are provided. In the case study, for example, the physician medical director had no active role in the med spa. NCMB has also seen arrangements where the NC-licensed physician or PA is involved in the practice, perhaps even on a full-time basis, but has little autonomy to determine how care is provided; Instead, treatment protocols are dictated by the non-licensed owners. Both situations are inappropriate and unlawful in North Carolina.

Another way that non-licensed individuals attempt to skirt North Carolina’s corporate practice of medicine laws is through straw ownership. A straw ownership arrangement is one in which a licensed physician is made the sole shareholder of a practice controlled and operated by an individual who is not licensed by NCMB. The NC physician is made shareholder of the corporation on paper to disguise the fact that control and decision-making authority in the practice is held by a non-licensee. In many instances, the physician straw owner signs a management agreement that results in the bulk of the practice’s revenue going to the non-licensee.

A secondary issue in the case study involves supervision of APPs. Current NC law requires all PAs and NPs to be supervised by a NC-licensed physician who fulfills this responsibility in accordance with applicable rules and policies. Although the physician in the case study did not consent to supervising APPs, the APPs nonetheless designated the physician as their primary supervising physician. Technically, the physician would be linked to each APP and could be held accountable for failing to provide appropriate supervision.

Avoiding sketchy business arrangements

NCMB urges licensees to exercise caution when considering business opportunities and employment situations.

• Be wary of opportunities that seem too good to be true – they often are. If a position you are considering has no meaningful responsibilities or duties ask yourself what service you are being compensated for. A hard look at the terms may reveal that what you are actually doing is agreeing to rent the use of your NC professional license to a non-licensed entity.

• If you are offered the chance to be the owner or sole shareholder of a medical practice or business without investing money, property or anything else of value, it should raise red flags. Why would someone give away a medical practice? Such an offer may be an attempt to use you for your NC professional license.

• If you have questions about the legitimacy of a business opportunity or offer of employment, you may contact NCMB and ask to speak to a Board attorney. NCMB cannot give legal advice but our Legal Department may be able to help identify opportunities that seem suspect or unlawful.

• Carefully review the terms of any contract or agreement before committing. NCMB does not review contracts or offer legal advice. It may be prudent to hire an attorney who is familiar with the NC Professional Corporations Act to advise you.

The ability to practice medicine in North Carolina is a privilege, not a right. Clinicians licensed by NCMB should vigilantly protect their professional licenses from those who would inappropriately use their license for financial gain.