By: Mathew J. Levy, Esq. & Stacey Lipitz Marder, Esq.
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Overview:

For many chiropractors, there are several benefits associated with working with physicians and other licensed healthcare professionals from both a clinical and financial perspective.  However, prior to entering into these business structures, chiropractors must evaluate the legal implications as there are several federal and New York State rules and regulations which govern how these relationships can be structured.  As such, we have outlined three (3) different models involving financial arrangements between chiropractors and other licensed healthcare professionals including physicians, bearing in mind that each of these models are susceptible to numerous variations in detail.

Management Company Model:

Although a chiropractor is not permitted to have a joint venture with a physician, a chiropractor can provide office space to physicians or other healthcare providers, as well as other non professional services including but not limited to billing services, and the provision of non professional personnel through a management company.  The specific terms of this arrangement would be outlined pursuant to a facilities use and administrative services agreement. 

In the event that a chiropractor goes forward with the management company model, it is imperative that the compensation for the services provided (including the space) be fair market value, be fixed in advance and not take into account, directly or indirectly, the volume or value of referrals or other business generated between the parties.  Furthermore, the services provided, including space, must be legitimate.  For instance, a physician should only rent space of a size and for a time that is reasonably necessary to carry out the physician’s business purpose for the rented space.  It is especially important that the management company model be structured in such a way since otherwise the Office of the Inspector General (the “OIG”) of the Department of Health may perceive such relationships to be disguised kickbacks to induce referrals which is in violation of the Federal Anti-Kickback Statute.

PLLC Model:

As per New York State law, a chiropractor is permitted to have a joint venture with licensed healthcare professionals including for instance physical therapists and occupational therapists[1]. In the event that a chiropractor goes forward with this model, the chiropractor would have to form a professional limited liability company (“PLLC”) with the other licensed healthcare professional.  By forming a professional entity with a physical therapist for example, the chiropractor would be able to offer chiropractic services and physical therapy through the PLLC.  It is important to note that with respect to this model, the owners of the PLLC must be professionals who are licensed in the specialties provided to patients of the PLLC. Therefore, a PLLC that is owned by chiropractor and a physical therapist can only provide chiropractic and physical therapy services to its patients. 

In the event that a chiropractor does go forward with this arrangement, it is imperative that there be an operating agreement in place which governs the relationship between the owners including percentage of ownership interest, withdrawal/buy-outs and compensation. 

Employer / Employee Model:

Although New York State prohibits a physician from being employed by a chiropractor, a physician can hire a chiropractor as a direct employee. Prior to entering into an employment relationship with a physician, chiropractors need to take into account several factors.  As an employee, the chiropractor would lose autonomy with respect to his/her practice as he/she would be working directly for the physician.  However, this may be a benefit for many chiropractors who rather focus on helping patients as opposed to dealing with the operation of a practice.  Furthermore, chiropractors have to carefully evaluate certain terms of the employment relationship including for instance termination, and a restrictive covenant prohibiting the chiropractor from rendering services upon termination within a set geographic location within a certain amount of time. In order for chiropractors to protect themselves with respect to termination, it is advisable to consider having a guaranteed severance.  In the event a chiropractor pursues this model, it is imperative to negotiate an employment contract that is mutually beneficial.

With respect to compensation in the Employer / Employee Model, the chiropractor’s compensation has to be structured so as to comply with the bona fide employee Safe Harbor regulations under the Anti-Kickback Statute, as well as the New York law permitting “fee-splitting” with employees.  As such, permissible forms of compensation include the chiropractor receiving a percentage of the collections received by the practice for services personally rendered by the chiropractor or a set salary with a potential bonus. 

Furthermore, if the chiropractor is an out of network provider, this also may present an issue if the physician’s practice is in network. 

Conclusion:

Having a financial relationship with a licensed healthcare professional can be very beneficial for many chiropractors; however, there are many issues that need to be evaluated both from a business and legal standpoint.  To that end, it is in the best interest of the chiropractor to retain a team of professionals specializing in health care – attorneys and accountants– to ensure that the arrangement is appropriate and in the best interest of the chiropractor.  Although an arrangement may be appropriate for some chiropractors, it may not be as beneficial for others. 

About the Authors:

Mathew J. Levy is a Partner of the firm and co-chairs the Firms corporate transaction and healthcare regulatory practice. Mr. Levy has particular experience in advising health care clients with respect to contract issues, business transactions, practice formation, regulatory compliance, mergers & acquisitions, professional discipline, healthcare fraud & billing fraud, insurance carrier audits including prepay and post payment review, litigation & arbitration, and asset protection-estate planning. You can reach Mathew Levy at 516-926-3320 or email: mlevy@weisszarett.com.

Stacey Lipitz Marder is an associate at Weiss Zarett Brofman Sonnenklar & Levy, PC., with experience representing healthcare providers in connection with transactional and regulatory matters including the formation and structure of business entities, negotiating and drafting contracts and commercial real estate leases, stock and asset acquisitions and general corporate counseling.  Ms. Marder also has experience advising healthcare clients on a wide range of regulatory issues including Stark, the Anti-Kickback Statute, fraud and abuse regulations, HIPAA, reimbursement and licensing matters.


[1] A chiropractor is not permitted to form an entity with physicians, dentists, veterinarians, licensed clinical social workers, mental health counselors, psychoanalysts, creative arts therapists, or marriage and family therapists.