CMA files brief in federal court that will shape California’s corporate bar

April 20, 2022

The California Medical Association (CMA) filed an amicus brief in the U.S. District Court for the Northern District of California in a case that will shape the boundaries of California’s prohibition on the corporate practice of medicine (known as the “corporate bar”).

The corporate bar is a broad and robust law that touches on nearly every aspect of the delivery of medical care by physicians and other licensed professionals. It springs from a fundamental public policy to protect and preserve the independence of physicians’ professional judgment in the care of their patients, free from external forces that can interfere with the physician-patient relationship.

The allegations in this case—American Academy of Emergency Medicine Physician Group (AAEMPG) v. Envision Healthcare Corp—touch on a different, burgeoning area of corporate bar enforcement. Because California law permits medical corporations to practice medicine only if physicians have a controlling ownership interest, there are massive efforts in the industry for lay entities, such as Envision, to align with the physician owners of such medical corporations. Such “friendly” medical corporation arrangements are common, and in many cases can be desirable because they enable medical corporations to access and take advantage of needed capital and market resources. However, in some instances the “friendly” alignment between a lay entity and a medical corporation can cross over into prohibited territory, wherein the lay entity gains undue influence or control over the medical corporation.

AAEMPG filed a lawsuit against Envision, alleging that it violated California laws barring corporations from practicing medicine when it took over staffing of the emergency department at Placentia-Linda Hospital in August.

The suit alleges that various policies or practices by Envision have direct and indirect effects on physicians and the way they deliver medical care. AAEMPG also alleges that Envision gains influence or control over medical corporations that deliver medical care through placement of its executives in officer and director positions on those medical corporations, or through stock holding and transfer restrictions on the physicians that own the corporations.

CMA’s amicus brief sought to provide the court with a thorough picture of how Envision’s business model threatens not just the physicians involved in the lawsuit, but, if left unchecked, could provide a roadmap for corporate entities to similarly disempower physicians in every corner of the state. The brief provided historical and systemic context to the corporate bar that is essential to the court’s understanding of the importance of this issue for the health care landscape in California. The importance of CMA’s voice on this complex issue was underscored by the court’s rare acceptance of an amicus brief at the federal district court level.

For more details, see CMA’s brief here.


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