Don’t Mess with Texas – Selling a Medical Practice to Non-Physicians Is Not as Easy as 1, 2, 3

June 22, 2016

On June 16, 2016 the Minneapolis Star Tribune published an article about a Minnesota medical anesthesia practice selling to a Florida entity.  The article reports that many doctors are selling their practices to national companies because of new healthcare laws, payor mix, and overall struggles in running a private practice.

Physicians that are entertaining the idea of selling their practices to hedge funds, or hedge funds that are entertaining the idea of acquiring medical practices in Texas, must be mindful that the state of Texas has heavy restrictions on ownership and management of medical practices, commonly referred to as the corporate practice of medicine.  This rule basically prohibits non-licensed physicians from owning a medical practice or employing physicians. The concept is that Texas wants to prohibit a non-physician from making and controlling professional medical judgement.  Any documentation that does not reflect this premise most likely will be violating the corporate practice of medicine doctrine.  Violation of this rule can raise a host of issues including the physician losing their license to practice medicine, and for the hedge fund, it may find itself in possession of unenforceable agreements.  Texas does have certain exemptions allowing non-physicians to employ physicians; however, such exemptions are limited and a non-physician must meet every element of the exemption.

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As a result, transactions that might work in Minnesota or Florida will not always comply with Texas rules.   Any physician that is in the process of selling, or hedge fund in the process of buying a Texas medical practice should be mindful of the corporate practice of medicine.

For further details on the Texas corporate practice of medicine please schedule a consult at info@byrdadatto.com.

ByrdAdatto founding partner Brad Adatto

Bradford E. Adatto

Brad decided to become a lawyer during sixth-grade Career Day, when he promised to represent his best friend, a future doctor. A few decades later, he started his own law firm that focused on representing health care and corporate clients.