The Kansas Corporate Practice of Medicine [H.B. 2119, 88th Leg., Reg. Sess. (Kan. 2019).]
Christopher L. Grause | December 2, 2020 | PDF Version (164 KB)
Summary: The Kansas Corporate Practice of Medicine Doctrine forbids a general corporation from employing a physician with few exceptions. However, in 2019, the Kansas Legislature passed H.B. 2119, which recognizes such exceptions and allows corporations to employ physicians upon certification from the Board of Healing Arts. H.B. 2119, however, has not been interpreted by the Kansas Supreme Court. This newly-enacted bill could restrict the corporate practice of medicine, rather than expand it as intended.
Preferred Citation: Christopher L. Grause, The Kansas Corporate Practice of Medicine, 60 Washburn L.J. Online 29 (2020), https://washburnlaw.edu/wljonline/grause-medicine.
I. Introduction
The Kansas Corporate Practice of Medicine Doctrine (“KCPMD”) “forbids a corporation from contracting with a physician to practice medicine that the corporation itself is not licensed to perform.”[1] The KCPMD, however, is not absolute, and Kansas law has recognized both judicial and legislative exceptions.[2] In 2019, the Kansas Legislature created another exception via House Bill 2119 (“H.B. 2119”), allowing business entities to employ or contract with physicians upon certification from the Kansas Board of Healing Arts (“BOHA”).[3] Additionally, H.B. 2119 allows certain business entities without BOHA certification to employ or contract with physicians, essentially codifying the prior-recognized exceptions.[4]
This Comment argues that the Kansas Legislature’s attempt to codify the Kansas Supreme Court’s development of the KCPMD could cause unintended consequences, and certain licensed entities may no longer be able to rely on prior cases to employ physicians. Such entities do not fit any exception listed in H.B. 2119, nor do they likely qualify as an entity eligible to apply for BOHA certification. To avoid this result, H.B. 2119 should be read consistently with the Kansas Supreme Court’s reasoning in its recent exceptions: licensed entities should be permitted to hire physicians to provide services within the scope of the entity’s license.
II. Background
A. H.B. 2119
On April 18, 2019, Governor Laura Kelly approved and signed H.B. 2119.[5] H.B. 2119 allows business entities to employ physicians upon certification from BOHA.[6] However, H.B. 2119 limits the types of business entities that are eligible to apply for BOHA certification, such as a business entity “that utilizes electronic medical records and offers medicine and surgery or chiropractic services solely for its employees and the dependents of such employees at the employer’s work site.”[7] H.B. 2119 also recognizes the Professional Corporation (“PC”) Law exception, maintaining that professional corporations are not business entities and, therefore, not subject to the BOHA certification requirement.[8] Additionally, H.B. 2119 provides that “[m]edical care facilities, as defined by K.S.A. 65-425,” are exempt from BOHA’s certification requirement. Under section 65-425, medical care facilities include hospitals, ambulatory surgical centers, and recuperation centers.[9] However, it is unclear whether H.B. 2119 provides an exhaustive list of entities permitted to employ physicians or simply acknowledges the way in which the KCPMD has evolved through Kansas Supreme Court decisions.
B. Legal Background
The KCPMD evolved from the Kansas Supreme Court’s interpretation of medical licensing statutes.[10] The court’s interpretation stemmed from the use of statutory phrases such as “personal practice,” which the Kansas Supreme Court inferred to mean that only individuals could practice medicine—not corporations.[11] Two early cases illustrate this interpretation. First, in Winslow v. Board of Dental Examiners,[12] the Kansas Supreme Court held that a corporation could not employ a licensed dentist to practice dentistry for the corporation.[13] The decision rested on the fact that “[c]orporations may not be graduated from dental colleges, they have neither learning nor skill, and they may not be examined, registered, nor licensed as dentists.”[14] Soon after, the Kansas Supreme Court extended the KCPMD to optometry in State ex rel. Beck v. Goldman Jewelry Company.[15] In Goldman Jewelry Company, the court prohibited a retail jewelry business from employing a licensed optometrist, even though the optometrist provided and owned his own equipment and could have “patients of his own.”[16] The court reasoned that the jewelry business could not employ the optometrist, because optometry licensing statutes contemplated a person—not a corporation—who was at least 21 years of age.[17]
Following these two cases, the Kansas Legislature passed the Kansas Healing Arts Act (“HAA”) and the PC Law.[18] The HAA prohibits “a person from practicing any branch of the healing arts without a license” while the PC Law permits “licensed physicians to form professional corporations to provide medical services.”[19] The Kansas Supreme Court interpreted these statutes to supplement the KCPMD and to be consistent with the prior case law because the HAA “did not define or broaden the word ‘person’ such that its meaning differed” from Winslow or Goldman Jewelry Company.[20] Thus, the court found the HAA essentially reaffirmed the Kansas Supreme Court’s KCPMD, and the PC Law provided a narrow statutory exception that had no bearing on general corporations.[21]
Then, in St. Francis Regional Medical Center, Inc. v. Weiss,[22] the Kansas Supreme Court created an exception to the KCPMD for licensed hospitals.[23] There, the plaintiff, St. Francis Regional Medical Center, sought to enforce an employment contract with the defendant physician.[24] The physician argued that the contract was void because it was a contract for a general corporation to provide medical services, which would violate the KCPMD as laid out in Winslow and Goldman Jewelry Company.[25] Unlike the corporations in the prior cases, St. Francis Regional Medical Center was a hospital licensed by the Department of Health and Environment, and thus, it was statutorily required to provide physician services.[26] The court reasoned that the early cases relied on the public policy consideration that a general corporation practicing a licensed profession “would be injurious to the public welfare.”[27] Nevertheless, the court stated that this public policy consideration was not at issue in the present case because the hospital itself was licensed to provide the physician services, and therefore, the employment contract did not violate the KCPMD.[28]
In Central Kansas Medical Center v. Hatesohl,[29] the most recent Kansas Supreme Court case regarding the KCPMD, the employer was licensed not as a hospital, but as an ambulatory surgical center.[30] The court used similar reasoning as in St. Francis Regional Medical Center, holding that the contract was valid because the KCPMD did not prevent a licensed ambulatory surgical center from employing a physician to provide services within the scope of the ambulatory surgical center license.[31] The court stressed it would be “absurd” not to allow the licensed ambulatory surgical center to offer services within the scope of its license.[32]
III. Commentary
When interpreting statutes, courts first look at the language of the statute.[33] If the language is clear and unambiguous, courts must give effect to such language.[34] Thus, the language in H.B. 2119 clearly allows the following to employ physicians: (1) entities which obtain BOHA certification, (2) professional corporations, (3) corporations licensed under section 40-3214 of the Kansas Statutes, and (4) medical care facilities as defined under section 65-425 of the Kansas Statutes.[35] However, it is less clear whether this list is illustrative or restrictive. When the language of a statute is unclear and ambiguous, courts attempt to determine legislative intent by looking to “canons of construction, legislative history, the circumstances attending the statute’s passage, the purpose to be accomplished, and the effect the statute may have under the various constructions suggested.”[36] Additionally, courts often look to “the common law in order to understand legislative intent.”[37]
On one hand, a restrictive interpretation suggests that H.B. 2119 contains an exhaustive list of the only entities allowed to employ physicians and that all other general corporations are barred by the KCPMD. This is the most logical interpretation of the plain language of H.B. 2119. However, this interpretation fails to recognize that H.B. 2119 was the legislature’s attempt at codifying the prior common law exception laid out in St. Francis Regional Medical Center and Hatesohl. What this exception relied on, however, was that the entities in question were licensed by the State of Kansas to provide physician services, not that they fit some obscure definition of “medical care facility.”[38] Similar to the entities at issue in St. Francis Regional Medical Center and Hatesohl, hospices, psychiatric hospitals, and community mental health centers must be licensed to provide medical services.[39] Arguably, these entities would fit the exception the Kansas Supreme Court intended to develop in these cases, which is that licensed entities—not merely “medical care facilities”—should be permitted to employ physicians.
If H.B. 2119 is read in a restrictive light and exempts only medical care facilities from the BOHA certification requirement, licensed entities such as hospices, psychiatric hospitals,[40] and community mental health centers may not employ physicians unless the entities obtain BOHA certification. Such a result is likely not what the legislature intended in its attempt at codifying Kansas Supreme Court precedent. More likely, the legislature intended to codify the rationale behind the decisions: although unlicensed general corporations are barred from employing physicians, business entities licensed by the State of Kansas providing physician services must employ physicians if the entities are to serve their purpose. This interpretation better suits the KCPMD’s purpose that permitting an unlicensed corporation to practice a licensed profession “would be injurious to the public welfare” because such concern is not present with licensed entities.[41]
IV. Conclusion
H.B. 2119 is the result of the legislature’s misguided attempt at codifying and expanding the KCPMD and its evolution through the Kansas Supreme Court. H.B. 2119 incorporated the Kansas Supreme Court’s exception to the KCPMD in reference to a narrow definition of “medical care facilities.” As a result, entities such as hospices, psychiatric hospitals, and community mental health centers, all licensed by the State of Kansas, may be barred from employing physicians. However, because KCPMD cases typically arise in breach of contract cases involving covenants not to compete, the question of whether other licensed entities are exempted from the KCPMD may not be answered until a frustrated physician challenges the employment’s validity.
1. Cent. Kan. Med. Ctr. v. Hatesohl, 425 P.3d 1253, 1260 (Kan. 2018). [Return to Text]
2. See id. at 1261–62. [Return to Text]
3. H.B. 2119, 88th Leg., Reg. Sess. (Kan. 2019). BOHA’s mission is to “[s]afeguard the public through licensure, education and discipline of those who practice the healing arts in Kansas.” Kan. Bd. of Healing Arts, http://www.ksbha.org/main.shtml [https://perma.cc/8PG6-VLW6] (last visited Aug. 4, 2020). [Return to Text]
4. See Kan. H.B. 2119. [Return to Text]
5. Governor Signs Bill Increasing Funding of Child Welfare Services in Kansas, Kan. Off. of the Governor (April 18, 2019), https://governor.kansas.gov/governor-signs-bill-increasing-funding-of-child-welfare-services-in-kansas/ [https://perma.cc/UJ4J-HLAD]. In addition to amending the KCPMD, Kansas House Bill 2119 (“H.B. 2119”) “[a]mends the Pharmacy Act of the State of Kansas to require certain prescription orders be transmitted electronically and to permit a licensed pharmacist to administer a drug by injection in certain situations.” Id. [Return to Text]
6. Kan. H.B. 2119. H.B. 2119 defines “physician” as “a person licensed by the state board of healing arts to practice medicine and surgery.” Id. [Return to Text]
7. Id. H.B. 2119 defines “business entity” as
an employer located in Kansas that utilizes electronic medical records and offers medicine and surgery or chiropractic services solely for its employees and the dependents of such employees at the employer’s work site; an organization that is licensed to sell accident and sickness insurance in the state that is also a mutual or non-profit health carrier that utilizes electronic medical records, or a wholly owned subsidiary of such organization that provides medical services solely for the organization’s enrollees and dependents of such enrollees; or an information technology company that designs, utilizes and provides electronic medical records for businesses and worksite medical clinics for employers located in Kansas and offers medicine and surgery or chiropractic services solely to its employees and the dependents of such employees at the employer’s work sites in Kansas.
Id. [Return to Text]
8. Id. [Return to Text]
9. Kan. Stat. Ann. § 65-425(h) (West, Westlaw through 2019 Reg. Sess.). [Return to Text]
10. Cent. Kan. Med. Ctr. v. Hatesohl, 425 P.3d 1253, 1260–61 (Kan. 2018). [Return to Text]
11. Id. [Return to Text]
12. Winslow v. Kan. State Bd. of Dental Exam’rs, 223 P. 308 (Kan. 1924). [Return to Text]
13. Id. at 309. [Return to Text]
14. Id. [Return to Text]
15. State ex rel. Beck v. Goldman Jewelry Co., 51 P.2d 995, 1001 (Kan. 1935). [Return to Text]
16. Id. [Return to Text]
17. Id. at 997. [Return to Text]
18. Kansas Healing Arts Act, Kan. Stat. Ann. §§ 65-2801 to 65-28,132, 65-6836; Professional Corporation Law of Kansas, Kan. Stat. Ann. §§ 17-2706 to 17-2720. [Return to Text]
19. Cent. Kan. Med. Ctr. v. Hatesohl, 425 P.3d 1253, 1261 (Kan. 2018). [Return to Text]
20. Id. [Return to Text]
21. See id. [Return to Text]
22. St. Francis Reg’l Med. Ctr., Inc. v. Weiss, 869 P.2d 606 (Kan. 1994). [Return to Text]
23. Id. at 618. [Return to Text]
24. Id. at 608. [Return to Text]
25. Id. at 609. [Return to Text]
26. Id. at 618. [Return to Text]
27. Id. [Return to Text]
28. Id. [Return to Text]
29. Cent. Kan. Med. Ctr. v. Hatesohl, 425 P.3d 1253 (Kan. 2018). [Return to Text]
30. Id. at 1255. [Return to Text]
31. Id. at 1265. [Return to Text]
32. Id. at 1264. [Return to Text]
33. State v. Arnett, 413 P.3d 787, 791 (Kan. 2018). [Return to Text]
34. Id. “[T]he best and only safe rule for ascertaining the intention of the makers of any written law is to abide by the language they have used.” Gannon v. State, 319 P.3d 1196, 1224 (Kan. 2014). [Return to Text]
35. H.B. 2119, 88th Leg., Reg. Sess. (Kan. 2019). Section 40-3214 of the Kansas Statutes deals with Health Maintenance Organizations and Medicare Provider Organizations. Kan. Stat. Ann § 40-3214 (West, Westlaw through 2019 Reg. Sess.). [Return to Text]
36. State v. Quested, 352 P.3d 553, 557–58 (Kan. 2015). [Return to Text]
37. Id. (quoting Paul E. Wilson, New Bottles for Old Wine: Criminal Law Revision in Kansas, 16 Kan. L. Rev. 585, 585 (1968) (internal quotation marks omitted)). [Return to Text]
38. See St. Francis Reg’l Med. Ctr. v. Weiss, 869 P.2d 606, 618 (Kan. 1994). [Return to Text]
39. See generally About KDHE, Kan. Dep’t. Health & Env’t, http://www.kdheks.gov/mission.html [https://perma.cc/UXZ4-D58K] (last visited Aug. 4, 2020). [Return to Text]
40. Psychiatric hospitals do not fit the definition of “hospital” under section 65-425 of the Kansas Statutes. Kan. Stat. Ann. § 65-425 (West, Westlaw through 2019 Reg. Sess.). [Return to Text]
41. St. Francis Reg’l Med. Ctr., 869 P.2d at 618 (Kan. 1994); see also Early Detection Ctr., Inc. v. Wilson, 811 P.2d 860 (Kan. 1991). [Return to Text]
