Corporate Practice of Medicine

JDSupra reported on the $10 million jury verdict in a novel corporate practice of medicine (CPOM) case. The jury found in favor of a physician hospitalist group that claimed a management company repeatedly broke its promise to comply with the state’s CPOM prohibition, putting profits over patients, among other wrongdoings. The case is featured this month in Texas Medicine Magazine.

CPOM cases typically focus on terms of a contract or on practice models and are often limited to seeking declaratory judgments and not money damages. Corporations cannot control physicians’ practice of medicine. The purpose of the prohibition is to ensure licensed physicians are free to exercise independent medical judgment in the best interest of the patient without the undue influence of the corporate bottom line. See Garcia v. Tex. St. Board of Med. Exam., 384 F. Supp. 434, 438 (W.D. Tex. 1974) (internal quotations omitted) (“To practice a profession requires something more than the financial ability to hire competent persons to do the actual work. It can be done only by a qualified human being, and to qualify something more than mere knowledge or skill is essential … No corporation can qualify.”).

The management company began pressuring the physicians to practice in ways that prioritized the hospital’s financial interests over patients’ best interests. No surprise there.

The hospitalists pushed back, but the management company threatened to terminate the contract if they did not fall in line.  Strong-arm tactics.

In addition to the notable $10 million jury verdict in a venue not known for run-away verdicts, the case is a stand-out among CPOM cases because there is no private cause of action for violating the CPOM prohibition. In contrast, this CPOM case was filed as a breach of contract claim because the management company promised to comply with applicable state law, specifically the CPOM prohibition, but broke that promise.