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Meeting of the Board of Regents | January 2010

Monday, January 11, 2010 - 11:10pm

TO:

The Professional Practice Committee

FROM:

Frank Muñoz

SUBJECT:

Corporate Practice of the Professions

DATE:

December 29, 2009

STRATEGIC GOAL:

Goal 3

AUTHORIZATION(S):

 

 

Summary

 

Issue for Discussion

Presentation and discussion of the corporate practice of the professions.

 

Reason(s) for Consideration

 

              Background for your affirmation of the policy ensuring the independent practice of the licensed professions through the prohibition against unlicensed corporate practice.

 

Proposed Handling

Presentation to the Professional Practice Committee.

Background Information

Pursuant to Education Law Sections 6512 and 6513, only those persons (including business entities) that are authorized to provide professional services may do so. Accordingly, the practice of the majority of Title VIII professions is limited to individual providers and specialized businesses such as professional corporations.  This restriction upon the provision of professional services ensures that only authorized and regulated entities provide the services that reach patients and/or clients; however, it does limit the landscape of potential businesses that may wish to provide services.  This concept has historically been referred to as the doctrine of the corporate practice of the professions.


Professional business structures that may lawfully provide professional services include: an individual practitioner, professional partnership, professional corporation (PC), professional limited liability partnership (LLP), and a professional limited liability company (PLLC).  While there are varying differences in the structures of these distinct professional businesses, they are all formed with a purpose of providing professional services and all must be completely owned by licensed professionals.  Typically and historically, professional businesses provided services encompassed within a single profession. However, professional limited liability partnerships and professional limited liability companies do allow for some grouping of professions, although there are a number of restrictions in that regard as well.



              Another important aspect of the prohibition against corporate practice relates to fee splitting and profit sharing. Licensed professionals or professional firms cannot share with anyone, other than members of their own professional firm, the fees earned for providing professional services. As a result, any fees or profits earned by a professional firm may only be shared with professionals licensed in the profession that the business is authorized to provide. 

In general, the prohibition against corporate practice ensures that licensed professionals must provide professional services to the public without undue influence from other professionals or from unlicensed persons who are not subject to the professional responsibility requirements prescribed in Education Law. Licensed professionals may be guilty of professional misconduct if they engage in sharing the profits of their practices with other entities outside their own firm.  The penalties for professional misconduct range from administrative warning to revocation of license and include suspension of license and fine.

There are several noteworthy exceptions to the general rule stated above.  Health maintenance organizations and hospitals regulated under the Public Health Law have such exemptions and, thus, may hire licensees to offer professional services to the public (Section 4405 of the Public Health Law). HMOs have a similar general authorization, as do facilities authorized by the Office of Mental Hygiene.  Further, there are some professions that are expressly exempt from the corporate practice restrictions and they include pharmacy, optometry and ophthalmic dispensing, speech-language pathology and audiology, massage therapy and the clinical lab professionals. 

While corporate practice concerns have historically presented themselves in a variety of settings, a variety of current issues are becoming increasingly problematic.  Some of those issues involve the provision of services in 4410 schools and Early Intervention Programs, mental health community-based service providers, and the provision of design services by corporations that include non-licensed owners.  Currently the legislature has proposals to allow various exemptions to the corporate practice prohibition relating to each of these issues.   We seek the input and discussion of the Committee on Professional Practice as we provide guidance to the legislature as these bills move forward.