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Selling a Medical Practice to Non-Physicians: It’s Not So Easy in Texas

Selling a Medical Practice to Non-Physicians: It’s Not So Easy in Texas
Hendershot, Cannon & Hisey, P.C.

In recent years, there’s been a fair amount of coverage about medical practices being sold to out-of-state entities. One Minneapolis Star Tribune article, for example, shared the story of a local anesthesia practice being sold to a Florida company, and discussed the growing trend of national firms and investor-owned companies buying up physician practices across the country.

As the article notes, firms looking to purchase medical practices often purport that by selling, physicians can focus more on providing medical care, spend less time dealing with the financial and tiresome aspects of running a health care business, and position their practice for growth and prosperity.

While that may sound attractive, physicians entertaining the idea of selling a practice to a publicly-traded company, as well as any business or hedge fund looking to acquire a medical practice in the Lone Star state, needs to know it may not be so easy in Texas. While such arrangements may be possible in states like Florida or Minnesota, restrictive Texas laws mean they may not always work here.

The Prohibition Against the Corporate Practice of Medicine

Physicians and medical practices are governed by a complex patchwork of state and federal regulations. Among these is Texas’ own state law against the corporate practice of medicine. In short, this regulation essentially prohibits any non-licensed physician from (1) owning a medical practice, or (2) employing physicians.

The idea behind the law is to prevent medical practices from being run by individuals and entities who don’t possess a medical background or license, and who may potentially compromise, control, or influence professional medical judgment, ethics, and patient care. It’s a law intended to ensure patients have access to sound and ethically driven care, and not care motivated by profits or other factors.

For anyone with potential interests in a medical practice, the corporate practice of medicine doctrine should always be considered so as to prevent violations and exposure to severe penalties. This includes not only fines or loss of one’s medical license, but also unenforceable agreements and medical contracts. Though there are statutory exceptions which allow some non-physician individuals or entities to own a Texas medical practice, those exemptions are limited to very specific situations where every requirement can be met – such as a non-profit that’s certified by the Texas Medical Board (for physician employment), or certain hospital districts, rural hospitals, and Texas counties that provide medical care to incarcerated inmates.

How Proven Health Care Attorneys Can Help

As a firm that’s earned national recognition in health and medical law, and a proven record in matters of business law and business litigation, our team at Hendershot, Cannon & Hisey, P.C. knows Texas’ corporate practice of medicine prohibition can have far-reaching implications.

In addition to selling and purchasing a medical practice, common examples of situations where the doctrine may be of consideration include:

Hendershot, Cannon & Hisey, P.C.: Serving Houston & Beyond

With an extensive understanding of Texas health care laws and federal laws against fraud and abuse, our attorneys provide the insight clients need to fully and accurately evaluate any transaction and agreement involving a Texas-based medical practice. From navigating the challenges of ensuring regulatory compliance, creating compliance plans, and structuring sound agreements to resolving disputes, allegations of health care violations, and licensure defense, our firm offers comprehensive representation to physicians and professionals across the spectrum.

Hendershot, Cannon & Hisey, P.C. serves clients across Houston and the state of Texas, and is available to personally discuss your unique situation, options, and what we can do to help. To request an initial consultation with a Houston health care lawyer from our team, contact us today.

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