A growing trend among my more entrepreneurial clients is national expansion. Sometimes this expansion is planned, and other times it happens by circumstance when a new hospital, office, or physician is added to the practice. Regardless, expansion across state lines creates a multitude of issues which physicians often do not realize until it is too late. Every state has its own rules for just about everything. While you do not need to hire a lawyer in every state in which you wish to expand, you do need to talk with a healthcare lawyer that can research and advise you on the advantages and restrictions of those state in which you desire to have a presence.
Some of the issues on which I advise my clients who plan to cross state lines includes the following:
1. In order to practice in another state where you will have a physical presence, your entity may need to be registered in that state. Your entity may or may not be allowed to register as a “foreign entity” in a new state depending on state law regarding medical and professional entities. As a result, you may need to form a new entity in the new state. States that do allow foreign registration may require that the owner, as well as the practicing providers, of the entity be licensed in the new state. This can take several months to achieve. Failure to register may violate state law and an entity that does not register in a state in which it does business can theoretically be barred from enforcing its rights in state court.
2. In every state the rules are different regarding fee-splitting, corporate practice of medicine, and scope of practice. Each of these legal concerns can affect your contracts and compensation methodologies.
3. Covenants not to compete are not enforced in every state and may require certain provisions in others. It’s important to be sure that your agreements with employees and contractors are revised to be legal in every state.
4. Billing requirements, such as for Medicare, can be different in certain states based on the regional carrier. It’s essential to review the requirements of the state with regard to local coverage decisions and other factors. Certain states may audit more than others or have other unfamiliar requirements to which you will need to adapt.
5. Certain professions cannot practice together in some states. If you have a practice comprised of providers with different licenses, you may need to find alternative structuring approaches to continue your expansion.
6. The definition of who constitutes an “employee” or a “contractor” may vary from state to state for tax purposes, overtime calculation, and even workers’ compensation coverage issues.
7. Although federal laws do not vary by state, as indicated in previous blogs, states may have different rules regarding medical record confidentiality, kickback and self-referral laws that can impact your business practices and compensation relationships. For example, if you are forced by state law to form a new entity to establish an office that is over state lines, referrals to that office and the sharing of ancillary equipment between your offices may implicate both Stark and the federal Anti-Kickback Statute. For this reason, it’s very important to talk to a lawyer about the implications of state health care laws on your practice expansion decisions.
8. Rules regarding advertising and promotion vary between states and professions. Find out what is permitted before any new marketing scheme is commenced.
9. Healthcare practices that operate via the Internet (without a physical presence) such as teleradiology, still need to review the laws of the states in which they will have a “presence.” For example, a state may require a radiologist to be licensed in the state where the patient is located. This means a California-based physician reading an MRI for an Illinois patient will need to be licensed in Illinois to render a primary interpretation. Additionally, healthcare facilities may require staff privileges for all physicians rendering interpretation, regardless of where they are physically located.
Expansion in any form is exciting for a medical practice. But when it comes to crossing state lines, it’s important to do your homework first.
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