STATE LAW ISSUESAmerican Academy of Physician Assistants

issue brief

American Academy of Physician Assistants Page 1STATE LAW ISSUES: PAs and Practice Ownership MAR 2011

Physician Assistants and Practice Ownership

Participating in the ownership of a professional corporation can be a complex endeavor for physician assistants (PAs) due to their established clinical relationships with physicians and the intersection of professional licensing, practice acts and corporation laws. Since laws vary from state to state, the ability of PAs to participate in practice ownership also varies. It is important to be aware of all the factors concerning PA ownership before making decisions about practice organization.

The PA profession was created by physicians to train highly skilled individuals to practice medicine with physician delegation and supervision. PAs embrace the concept of physician-directed teams; they count on physicians for advice, guidance and intervention for complex patient conditions. Physicians, in turn, trust PAs to provide high-quality care within their delegated scope of practice.

While physicians provide direction and oversight in clinical matters, changing economics in the health care system have led to new roles for PAs in health care practices. In addition to taking on greater administrative duties, some PAs also participate in the management

and ownership of practices. While the physician remains the clinical leader of the physician-PA team, some PAs have become owners or shareholders of health care practices.

PAs’ adoption of management and ownership roles often has occurred because of practical considerations. For example, when a physician in a rural area retires, the PA can assume ownership of that clinic when a physician in a neighboring town, who does not want additional ownership responsibilities, agrees to supervise the PA. This arrangement allows the practice to remain open, thereby ensuring local access to needed health care.

American Academy of Physician Assistants Page 2STATE LAW ISSUES: PAs and Practice Ownership MAR 2011

Alternatively, physicians seeking to recruit or retain PAs may offer them the incentive to join as partners or shareholders in professional corporations.

There are many factors that affect PA practice ownership, including states’ medical practice acts, the PA practice acts and corporate laws. Further, the business of owning a health care practice can be organized in a variety of ways based on the law and the needs of the practice’s owners.

In order to protect their personal assets from business debts, many practice owners form a corporation. A common type of organization for health care providers is the professional corporation or professional service corporation. Many states require health care professionals who incorporate to use professional corporations rather than general business corporations.

There are many factors

that affect PA practice

ownership, including

states’ medical practice

acts, the PA practice acts

and corporate laws.

Forming Professional Corporations

Forming a professional corporation requires filing articles of incorporation with a state’s Secretary of State. Typically, state laws and regulations specify that these corporations must

be organized for the sole purpose of providing a professional service; for example, a medical corporation must be made up of physicians or those providing medical care. There may be shareholders who own a percentage or an amount of stock in these corporations. Shareholders in professional corporations must be individuals licensed or otherwise legally authorized to provide the services the corporation offers.

PAs usually join with physicians or other health care professionals in the ownership of a practice; a PA owning a practice and employing a supervising physician is less common. As more medical practices change from solo physician-based to group and corporation-based practice models, there are a growing number of opportunities for PAs to join other professionals as shareholders in professional corporations.

While some state professional corporation laws include a comprehensive list of the professionals who may incorporate, other states simply indicate that a professional corporation must consist of shareholders providing the same or similar professional service. For these cases, it may be necessary to obtain clarification from state officials or legal authorities about whether physicians and PAs provide the “same service” and thus may incorporate together.

Officials in several states have developed policy on this matter and it is important to verify the current laws in each state. If state officials determine that state law prevents PAs from joining physicians as shareholders in a professional corporation, a statutory change may be required before PAs can take on this role.

American Academy of Physician Assistants Page 3STATE LAW ISSUES: PAs and Practice Ownership MAR 2011

Regardless of the extent

to which a practice vests

administrative and financial

responsibility in a PA,

the supervising physician

retains professional

authority over medical

decisions.

Employment and Supervision

Medical practice acts and PA practice acts also affect whether PAs may own a practice. Some early PA practice acts linked the role of supervising physician with a PA’s employer since, at the time, almost all PAs worked in a physician’s outpatient office. But today, many PAs work for hospitals, group practices or other business entities. Often, supervising physicians have separate business relationships with the employers of PAs, rather than serving as PAs’ direct employers themselves.

Medicare policies and most state laws now recognize that employment and supervision are separate and unrelated aspects of medical practice. This recognition frees PAs to be supervised by a physician who is not their employer. This can allow for a wider range of business relationships between corporations, physicians and PAs.

Still, PAs always must practice with the supervision of a physician. Regardless

of the extent to which a practice vests administrative and financial responsibility in a PA, the supervising physician retains professional authority over medical decisions. Both the supervising physician and PA must comply in all respects with the supervision requirements set forth in laws governing PA practice. Because some states prevent PAs from employing their supervising physicians, PA ownership of a practice that employs the supervising physician is not always possible.

The American Academy of Physician Assistants (AAPA) supports measures that allow for flexible and efficient use of PAs consistent with the provision of quality health care and opposes laws or regulations that link supervision and employment. PAs are committed to practicing with physician supervision regardless of employment arrangements. For some PAs, full or partial ownership of a professional corporation provides the best avenue for them to meet patient needs and organize the business aspects of the practice.

American Academy of Physician Assistants Page 4STATE LAW ISSUES: PAs and Practice Ownership MAR 2011

Other Issues Raised by PAs as Shareholders in Professional Corporations

Because of the complexity of the issues involved and the variety of laws across states, any PA, physician or administrator who wishes to pursue the issue of PAs as shareholders of professional corporations should consult an attorney who is familiar with the state’s corporation law and is knowledgeable about PA practice.

PAs should keep in mind that while a professional corporation shields shareholders from being liable for the negligence of an associate (such as another PA shareholder or private party), it does not protect them from personal malpractice liability. Therefore, it is imperative that PAs who are shareholders or owners of professional corporations maintain adequate malpractice coverage.

Additionally, the umbrella of a professional corporation does not exempt PAs or physicians from potential penalties a state medical board may impose should supervising physicians fail to supervise PAs according the provisions of the state’s medical and PA practice acts or the rules of their licensing authorities.

PAs also should understand how to bill for medical and surgical services they provide through a professional corporation. Payers, including private insurers and the Medicare program, may have differing rules on whether payment to a PA-owned corporation is allowed.

AAPA’s State Government Affairs and Reimbursement staff are available to answer questions on the finer points of individual state laws pertaining to professional corporation formation and reimbursement concerns. However, due to the multiple sets of laws and regulations to which professional corporations must comply, the counsel of an experienced attorney is also indispensable for PAs who wish to pursue this type of arrangement.

Further Reading

For more information about state laws and regulations that affect PA practice, visit our State Government and Licensing page at www.aapa.org/advocacy-and-practice-resources/state-government-and-licensing. For additional information about PA employment and supervision, see AAPA’s Practice Resources page at www.aapa.org/advocacy-and-practice-resources/practice-resources.

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