Can Non-Doctors Own a Medical Practice in Texas? Texas Corporate Practice of Medicine Field Guide – Part 4 of 5

March 15, 2021

When talking about health care in Texas (particularly elective, non-invasive procedures), an almost visceral reaction is triggered by the question: can non-doctors own a medical practice in Texas?  The law is not only confusing but emotion, opinion, and rhetoric further cloud the issue.  The vision for this field guide is get to the root of the problem to help answer this question.  Taking it a step further, it examines the risk of non-doctors owning a medical practice.

This field guide is a five part series and will address the following questions:

Part One – What Is the Corporate Practice of Medicine?

Part Two – Does the Corporate Practice of Medicine Exist in Texas?

Part Three – Is the Corporate Practice of Medicine Doctrine Actually Enforced in Texas?

Part Four – Are There Exceptions to the Corporate Practice of Medicine Doctrine in Texas?

Part Five – Can a Non-Physician Hire a Texas Medical Doctor via an Independent Contractor Agreement?

Part Four – Are There Exceptions to the Corporate Practice of Medicine Doctrine in Texas?

Yes, Texas contains exceptions to the corporate practice of medicine (“CPOM”) doctrine as it provides for certain limited exceptions to the ownership rules.  This is different from developing a management service organization, with the applicable corresponding agreements referenced in Part Two of this series.  .In Texas, certain non-physicians can have ownership in a professional entity, particular hospitals and hospital districts are qualified as exceptions to the doctrine, and advanced nurse practitioners (“NPs”) have specific specialty services they may provide in their own entity.  Let’s first address the actual ownership of the medical entity.

Ownership

As previously noted, under Texas law, a business that provides medical services may be owned by the sole proprietorship of a licensed physician, a professional association, a partnership, or a professional limited liability company.   (Tex. Bus. & Comm. Code Ann. §§ 301.003, .004, .007, 012.)

Texas law also allows for the joint practice of physicians (M.D.s and D.O.s), podiatrists, and chiropractors through partnerships, professional associations, and professional limited liability companies. (Tex. Bus. Orgs. Code Ann. §§ 152.005; 301.012.)  Physicians and physician assistants are similarly allowed to have joint ownership within professional associations and professional limited liability companies, but subject to restrictions within the statute, including a limitation of 49% ownership by the physician assistant. (Tex. Bus. Orgs. Code Ann. § 301.012) Regardless, for any joint practices, Texas law reiterates the authority of each of the practitioners is limited by their respective scope of practice and no practitioner can exercise control over another’s clinical authority or treatment decisions.  (Tex. Bus. Orgs. Code Ann. § 301.012(f).) In addition to the above mentioned entities, pediatric hospitals owned by nonprofit fraternal organizations, and hospitals districts defined by statute are statutorily considered exceptions under Texas law. (22 Tex. Admin. Code § 177.17.)

Nurse Practitioners

Another exception worthy of addressing is that NPs may be able to provide services within their specific scope of practice through their own entity. At first glance, one might wonder how that is possible in light of the CPOM doctrine. Affirmed by the Texas Medical Board, there is a “carve out” exception in which a specialized NP, who has undergone the required formal education, can own their own entity, but the exception only applies when rendering services directly within the scope of their specialty. In Texas, an advanced practice registered nurse may be licensed within one of four areas: nurse anesthetist, nurse-midwife, clinical nurse specialist (“CNS”), and NP.  CNSs and NPs then also further specialize in one of eleven specialties (acute care adults, acute care adult/gerontology, acute care pediatric, adult, adult/gerontology, family, gerontological, neonatal, pediatric, psychiatric/mental health, or women’s health). Therefore, the major catch is that a NP may own and operate an entity but only if rendering services within their specific scope of practice and authorized within their particular specialty. .

Even though there are limited exceptions to the CPOM doctrine in Texas, these exceptions are just that: limited. In Part Five of this series we will address the question, “Can a Non-Physician Hire a Texas Medical Doctor via an Independent Contractor Agreement?”  If you have any questions or would like to learn more about the Corporate Practice of Medicine, email us at info@byrdadatto.com.

ByrdAdatto founding partner Brad Adatto

Bradford E. Adatto

ByrdAdatto founding partner Michael Byrd

Michael S. Byrd