Opinion No.

The Honorable Vic Snyder State Senator 324 South Valmar Little Rock, AR 72205

Dear Senator Snyder:

This is in response to your request for an opinion on whether it is legal for a non-physician-owned corporation to employ licensed physicians for profit. Specifically, you indicate that it has been your understanding that a commercial enterprise is prohibited from selling the services of an employee licensed professional such as a physician, dentist, or lawyer, and that with the exception of HMOs, the corporate practice of medicine is considered illegal under common law by some authorities.

It is my opinion that the answer to your question is "no," it is not legal for a non-physician-owned corporation to employ licensed physicians for profit. There are three types of authorized corporate entities under Arkansas law which may provide medical services. They are medical corporations, each of the shareholders and directors of which must be licensed physicians, hospital and medical service corporations, and health maintenance organizations or "HMOs." Unless the entity to which you refer falls into one of these categories and complies with the statutory requirements for existence thereunder, it is my opinion that the answer to your question is "no."

As you have noted, at common law, the corporate practice of medicine was generally prohibited. The reason for this rule was stated in Marik v. Friedman, 236 Cal. Rptr. 751,191 Cal. App. 3d 1136 (1987), as being that "layman, who are not bound by the ethical standards governing the profession, might seek to enhance the corporation's ``commercial advantage' rather than conform to professional strictures." Id. at 753. In 1961, however, the Arkansas legislature authorized the corporate practice of medicine. See Act 179 of 1961. The act, as amended, is now codified at A.C.A. §§ 4-29-301 to -311 (1987). This act, however, requires owners, officers, directors, and shareholders to be persons licensed by the Arkansas Medical Practices Act. See A.C.A. §§ 4-29-304 and -306.

Another type of corporate entity eligible to provide medical ervices is authorized at A.C.A. §§ 23-75-101 to -122 (1987), which governs "hospital service corporations," "medical service corporations," and "hospital and medical service corporations." This subchapter, however, contemplates the nonprofit provision of medical services, and the contracting with, rather than the employment of, physicians. "Health Maintenance Organizations" or "HMOs" in corporate form are also authorized at A.C.A. §§23-76-101 to -131 (1987) and (Cum. Supp. 1993). Such organizations do not appear to be implicated in your request, however.

It is therefore my opinion that a non-physician owned corporation is not currently authorized to employ physicians for profit in Arkansas.

The foregoing opinion, which I hereby approve, was prepared by Deputy Attorney General Elana C. Wills.

Sincerely,

WINSTON BRYANT Attorney General

WB:ECW/cyh