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The accelerating formation of independent practice associations (IPAs), sometimes established independently by physicians and sometimes established in conjunction with healthcare organizations, reflects one response to the changing healthcare industry.
The formation of IPAs raises a number of legal issues, however, and failing to address and resolve these issues can jeopardize an IPA's success. Issues that should be addressed include licensure and choice of entity, illegal renumeration, self-referral, health maintenance organization (HMO) insurance regulations, the use of utilization review agents, securities law, benefit plans, liability, and antitrust.
Licensure and choice of entity. Several states, such as Texas and California, have a corporate practice of medicine doctrine that proscribes an entity having nonphysician owners from rendering medical care and prohibits the employment of physicians by nonphysicians for the purpose of providing medical care to the public for a fee. The nature and enforcement of this doctrine varies by state. The corporate practice of medicine doctrines in Texas and California highlight the importance of determining who will be members of the entity and in what capacity they obtain membership.
True IPAs (ie, entities--particularly managed care entities--established to offer medical services to the public, services that are being provided by practitioners who also maintain their private practices) are entities authorized to practice medicine under state law. Qualifying entities typically are a partnership, a limited liability partnership, a professional limited liability company, a professional association, a foundation, a nonprofit corporation, or a trust.
Illegal remuneration. Federal and state laws prohibit the payment of compensation by or to any person for healthcare referrals. Any arrangement to cross-refer within an organization must be analyzed in connection with broadly written Federal and state prohibitions to determine if any exception exists or a safe harbor applies.
Self-referral. The "Stark I" law prohibits physicians from referring Medicaid or Medicare patients to clinical laboratories with which physicians have financial relationships, subject to exemption. As of January 1, 1995, the "Stark II" law prohibits physicians from referring Medicare or Medicaid patients receiving "designated health services" to clinical laboratories, with which the physicians have financial relationships again, subject to exemption.(a) If an IPA is formed with the involvement of healthcare organizations or providers of other designated healthcare services, (perhaps in conjunction with the formation of a physician-hospital organization,...