Recently, employer-sponsored on-site clinics ("corporate clinics") and convenient care clinics established in retail settings such as grocery stores ("convenience clinics") have gained momentum in the United States. Both models seek to make basic medical care more accessible and less costly. Laws regulating the delivery of health care services may pose risks that would not occur in typical business transactions. Counsel to businesses considering establishing a corporate or convenience clinic must assess the opportunities, constraints and potential liabilities posed by these laws. Inadequate attention to health law issues may result in substantial risk and/or reduced economic benefits to the enterprise.
Background
To combat rising health care costs, approximately 10% of large employers have developed corporate clinics and another 15% are expected to do so by 2008.1 Corporate clinics provide physicals, immunization shots, simple lab tests and chronic disease management; convenience for employees (and dependents, in some cases); and an emphasis on prevention and wellness. Employers expect to realize increased productivity by reducing lost work time associated with physician office visits, addressing preventive and simple health needs before they become complicated, helping employees manage chronic conditions effectively, and reducing doctors' office and emergency room utlilization.2 Corporate clinics also may enable employers to reduce expenditures by providing basic care at cost or better utilizing mid-level professionals such as advanced registered nurse practitioners ("ARNPs") and physician assistants ("PAs").
Convenience clinics are a relatively new concept but have grown exponentially since 2004. By deploying mid-level health practitioners at more convenient hours and locations that may already be part of consumers' daily itineraries, these clinics address perceived problems in health care cost and access. Currently, there are approximately 250 clinics in over 30 states.3 Convenience clinics provide limited primary care services, such as physicals, preventive services, and treatments for common conditions - allergies, colds, asthma, and headaches. More complex cases usually are referred to a local physician, emergency room or another appropriate provider.
Legal Considerations
Individual state regulation of health care services creates numerous legal considerations for a corporate or convenience clinic, including risks that can arise in three primary areas of regulation: (1) corporate practice of medicine; (2) scope of professional practice; and (3) privacy. Other laws and regulations that should be analyzed or examined in connection with clinic activity in any given state may include rules addressing fraud and abuse, anti-trust, fee-splitting, and health facility licensure. Applicable requirements may influence the nature, location, and staffing of the clinic; available services; service delivery and reimbursement; and the clinic's relationship with the host enterprise (e.g., employer, retailer).
Corporate Practice of Medicine. Ironically, the historic establishment of workplace on-site clinics through which corporations employed physicians to provide medical services to their employees helped give rise to the corporate practice of medicine doctrine.4 The American Medical Association ("AMA") lobbied and adopted ethical statements against this and other forms of "corporate practice" to prevent the loss of physician autonomy over the practice of medicine. States soon began adopting and interpreting medical professional licensing laws to prohibit corporations from practicing medicine.5 Not all states have such a doctrine, and the doctrines vary by state. In some states, these limitations apply both to physicians and other medical professionals. Where the doctrine exists, violations can result in penalties like corporate liability for malpractice, civil and criminal fines and penalties for the unlicensed practice of medicine, and suspension or revocation of licensure for the providers involved.6
An employer considering a corporate clinic must determine how it will be organized and staffed. Counsel must examine relevant state laws and regulations governing physicians' practice and licensure for potential prohibitions on the corporate practice of medicine before determining whether the clinic can be led by a physician who is employed by the employer entity or an affiliate, or contracted out to a corporation providing health care services. Some states provide exceptions to the doctrine for employer-based corporate clinics; however, these exceptions vary in the scope of services authorized at the clinic.7 In Tennessee, employers may contract with physicians to "treat" the employer's employees, retirees and dependents; however, New Jersey's exception restricts such clinics to those providing "first aid to customers or employees and/or for monitoring the health environment of employees."8 Employers must be attuned to the variations among these statutes, especially when implementing clinics across facilities located in multiple states.
In contrast to its historical resistance to corporate clinics, the AMA has recognized and accepted consumer demand for convenience clinics. Along with the American Academy of Family Physicians ("AAFP"), the AMA has established guidelines and principles for operating convenience clinics. Three industry leaders have signed contracts with AAFP, agreeing to follow the guidelines by limiting the scope of service provided, ensuring the use of clinical guidelines for quality care, providing continuity of care through a "team-based" approach, utilizing a referral system for patients who cannot be treated at the clinic, and maintaining an electronic health records system compatible with physicians' office systems.9
Scope of Professional Practice. Where state law requires an ARNP or PA to practice under the direction or supervision of a physician, a corporate clinic that provides a modest range of basic services and requires at least one physician to direct the activities of nonphysicians may find its structure and operations unaffected by scope of practice issues. This becomes more complicated where state law limits the number of individuals under the direction and supervision of a physician at any one time. Providing diagnostic imaging or other procedures requiring a higher level of supervision may further complicate matters and reduce convenience or increase costs.
The same kind of analysis applies to convenience clinics, compounded by one of the AMA/AAFP guidelines that requires the clinics to ensure proper supervision and to limit the scope of care provided by nonphysicians. Given the limited scope of services provided at convenience clinics, as compared with the care provided at emergency rooms and in most physicians' offices, ARNPs and PAs likely will not operate outside their scope of practice. Nonetheless, establishing a convenience clinic within the law requires understanding these rules in the relevant states. For example, a nonphysician's ability to prescribe medications may be broad in one state, limited in another, and prohibited in a third. Counsel for convenience clinics cannot assume that a model that works in one state will work in another state. Rather, counsel should verify and comply with state licensure laws and professional board regulations, and establish adequate policies and procedures to ensure compliance. Retailers contracting with such clinics should inquire into the convenience clinic's arrangement with any management companies, as well as into how the clinic will be organized and staffed. This information will help counsel determine the representations, warranties and other assurances the host enterprise needs to receive, along with the appropriate levels of insurance for the scope of services to be provided.
HIPAA/Privacy Issues. Employers and retailers also must consider how medical information obtained through a corporate clinic or convenience clinic is used and disclosed under the Health Insurance Portability and Accountability Act ("HIPAA"), state medical records rules, and other privacy laws. HIPAA covers three types of entities: (1) a health plan, (2) a healthcare clearinghouse, and (3) a health care provider who transmits health information for certain covered electronic transactions. A corporate clinic could be considered part of the employer-sponsored health plan, which is expressly covered under the definition of "health plan." A corporate or convenience clinic that transmits information electronically in connection with any covered transaction ( e.g., claims submission) would be a covered health care provider. Employers will need to take steps to comply with HIPAA's requirements, including adopting appropriate policies and procedures and designating the clinic as a covered function within the employer's "hybrid entity" (a designation that allows employers to separate the on-site clinic's covered functions and obligations from the rest of the corporation's non-covered functions).10
Likewise, a convenience clinic that is a covered health care provider must adopt appropriate policies, procedures and safeguards, and can only use and disclose protected health information ("PHI") in accordance with the requirements of HIPAA. Further, convenience care clinics that are subject to HIPAA may be asked to share customer/patient information with the pharmacies or other retailers in which they are located. Any individually identifying information ( e.g., names, addresses or phone numbers), even if stripped of any medical information, may not be disclosed except as permissible under the HIPAA privacy rules.
HIPAA allows states to enact laws that enhance patients' privacy or rights of access to their information. Whether these laws take the form of medical records requirements, security breach response rules, or other restrictions, violations can result in malpractice liability, civil or criminal fines, and substantial ongoing expenses ( e.g., credit monitoring services) to mitigate the effects of security breaches. Managing these risks for entities participating in corporate or convenience clinics requires knowledge of applicable requirements, as well as a thoughtful combination of technology, policies and procedures, insurance, and appropriate contract provisions.
Conclusion
Corporate clinics and convenience clinics promise increased efficiency, accessibility and cost-effective care delivery for basic health care services. Businesses seeking to take advantage of these alternative delivery models must understand the legal risks and compliance obligations that arise from the highly regulated nature of health care services. As these clinics mature and integrate into the health care industry, the legal and regulatory issues that need to be addressed may become more complex. Maximizing the benefits these clinics offer will require effective management of the associated legal risks by counsel through careful attention to regulated areas at the commencement of the venture and beyond.1See Milt Freudenheim, Company Clinics Cut Health Costs, N.Y. Times (January 14, 2007), at 1.
2 Id.
3Convenient Care Association, Convenient Care Association: Advancing the Future of Convenience Clinics, available at www.convenientcareassociation.org/aboutcca.htm (last visited February 8, 2007).
4Adam M. Freiman, The Abandonment of the Antiquated Corporate Practice of Medicine Doctrine: Injecting a Dose of Efficiency into the Modern Health Care Environment, 47 Emory L.J. 697, 701 (Spring 1998).
5 Id. at 702-03.
6See, e.g., Mass. Gen. Laws, ch. 112 6 (2003); N.C. Gen. Stat. 90-18(a) (West 2005) (unlicensed practice), 90-21.11 (malpractice liability); Tex. Occ. Code Ann. 165.151, 165.159 (Vernon 2004) (unlicensed practice).
7See Adam M. Freiman, The Abandonment of the Antiquated Corporate Practice of Medicine Doctrine: Injecting a Dose of Efficiency into the Modern Health Care Environment, 47 Emory L.J. 697, 707-08 (Spring 1998).
8See Tenn. Code Ann. 63-6-204(c) (2006). N.J. Admin. Code 13:35-6.16(f)(4)(ii) (2005).
9See Sheri Porter, American Academy of Family Physicians, Retail Health Clinics Sign Academy Agreement: "Big Three" Support AAFP's List of Desired Attributes (February 1, 2007), ava ilable at www.aafp.org/online/en/home/publications/news/news-now/professional-issues/20070201retailhealth.html (last visited 2/8/07); see American Academy of Family Physicians, Desired Attributes of Retail Health Clinics, June Executive Committee 2006 (June 2006), available at www.aafp.org/online/en/home/policy/policies/r/retailhealthclinics.html (last visited 2/8/07).
10See 42 U.S.C. 300gg-91(c)(1)(G) (2002).
Published March 1, 2007.
