2005 Legislative Compendium: Corporate Practice of Medicine


Certifying Hospital Districts to Employ Physicians  |  Physician Employment by Maverick County Hospital District  |  Corporate Practice of Medicine Close Call  |  On the Horizon 

Few issues are as sacrosanct to Texas physicians as the prohibition on the corporate practice of medicine. Texas is one of only a handful of states that still prohibits anyone except a physician from employing another physician. This session, several bills were filed to allow some types of hospitals, such as hospital districts or rural facilities, to employ physicians. Some of the problematic bills were "local bills" - bills affecting only a certain county or region - that were filed simply to recodify existing statute. In the 1950s and 1960s, enabling legislation for a number of hospital districts contained language allowing physician employment. Some of the statutes were so old that they were only available by paper research and thus not widely known.

However, a number of other bills were filed specifically to allow hospitals to employ physicians. Many rural hospitals and some lawmakers argued that employing physicians would make it easier to attract and retain physician in underserved areas, especially since the hospital could offer physicians a guaranteed salary and benefits. While TMA strongly supports efforts to expand physician services in rural communities, TMA argued that hospitals had other mechanisms to recruit physicians. Allowing hospitals to employ doctors ultimately could do more harm than good by undermining physicians' independent medical judgment.

Two bills did pass, HB 1924 and SB 1027, which TMA opposed. SB 1027 is a local bill restricted to Maverick County, but establishes a dangerous precedent.

Certifying Hospital Districts to Employ Physicians

HB 1924 by Rep. Norma Chavez (D-El Paso) and Sen. Eliot Shapleigh (D-El Paso) requires the Texas State Board of Medical Examiners to certify a hospital district to contract with or employ physicians for a component of the hospital that was a federally qualified health center (FQHC). The language does not refer to the ability of the hospital to employ a physician, only an FQHC run by the facility. Representative Chavez filed the bill on behalf of the El Paso County Hospital District, with support by some local physicians. Its intent was to reduce the liability of physicians by employing them in an FQHC, where employees have limited liability exposure. TMA opposed the bill early in the session fearing repercussions to the corporate practice of medicine prohibition. However, many El Paso physicians supported the bill. As a compromise, in the Senate, language was added bracketing the bill to El Paso by specifying that the language applies to a health organization in a community of at least 650,000 located in a county along the U.S.- Mexico border. The statute expires Sept. 1, 2007.

Physician Employment by Maverick County Hospital District

SB 1027 by Sen. Frank Madla (D-San Antonio) and Rep. Tracy King (D-Batesville) allows the board of the Maverick County Hospital District to employ physicians, dentists, or other health care providers as the board considers necessary for the efficient operation of the district. The bill states that the statute does not authorize the board to supervise or control the practice of medicine or permit the unauthorized practice of medicine.

Corporate Practice of Medicine Close Call

Rural Physician Employment
SB 1240 by Senator Madla and HB 3102 by Rep. Jim McReynolds (D-Lufkin) were two bills staunchly opposed by TMA that would have allowed the employment of physicians by critical access hospitals, sole community hospitals not located in a metropolitan service area (MSA), and hospitals located in counties with fewer than 50,000 people.

The motivation for the development of these bills was to increase a rural area's ability to recruit and retain physicians. However, incentives are already available to assist hospital districts such as non-profit health corporation, retirement plans, loan forgiveness programs, and other similar benefits.

On the Horizon

Issues surrounding the ban on the corporate practice of medicine are likely to reemerge next session. TMA is contemplating an internal task force to examine the issue further, including whether an exemption for small rural hospitals is defensible.

Corporate Practice of Medicine TMA Staff Contacts:  

  • Yvonne Barton, Legislative Affairs, (512) 370-1359
  • Rocky Wilcox, JD, Office of the General Counsel, (512) 370-1335
  • C.J. Francisco, JD, Office of the General Counsel, (512) 370-1339
  • Lee Spangler, JD, Office of the General Counsel, (512) 370-1337


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Last Updated On

April 02, 2012

Originally Published On

March 23, 2010