In Potential Landmark Corporate Practice of Medicine Case, TMA Backs Physician Autonomy
By Phil West

In a case before the Texas Supreme Court that could impact the statewide prohibition on the corporate practice of medicine, the Texas Medical Association filed its second amicus brief advocating against any lay entities, including contracted staffing companies, from directing physician decision-making.

The case involves Hospital Internists of Texas, Hospital Internists of Austin (HIA), and Texas APN, which won an initial $10.2 million trial-court judgment against staffing companies Quantum Plus and Lonestar Hospital Medical Associates, as reported in Texas Medicine’s 2023 coverage. The jury found that the staffing companies violated Texas’ prohibition against the corporate practice of medicine, which the trial court defined as prohibiting corporations from controlling or directing physicians’ medical decisions.

Quantum contracted with St. David’s HealthCare in 2014 to manage emergency medicine and hospitalist staffing at five St. David’s hospitals in the Austin metro area, then subcontracted with HIA to supply the hospitalists, according to TMA’s December 2024 amicus brief filed at the intermediate appellate court level.

The state’s caselaw prohibiting the corporate practice of medicine dates back to 1956. Per TMA’s white paper, the doctrine exists to ensure “physicians are able to exercise professional medical judgment relating to a patient’s health care needs without financial or other outside pressures.” 

According to TMA’s latest amicus brief, the physician groups allege that the staffing companies: 

• Told hospitalists they needed to run emergency codes against the hospitalists’ judgment that they were not qualified to do so in order “to save the expense of paying a second emergency physician”;
• Required physicians to accept all patient transfers even if a needed specialist had not been confirmed to be available; 
• Ignored physician objections to the hospital billing-department pressure to add diagnoses to a patient’s medical records that the physician had either not made or disagreed with;
• Pressured physicians to discharge patients before the physician felt they were medically ready; and 
• Directed physicians to adopt a rounding structure that physicians considered dangerous, replacing the patient-based rounding the physicians preferred.  

The staffing companies argue that the relationship with the physician groups lacked the level of control needed to be considered akin to an employer and employee, and therefore the companies could not have engaged in the corporate practice of medicine.

TMA’s amicus brief argued that the corporate practice of medicine doctrine is not limited to employer-employee relationships. TMA wrote “the test for whether the corporate practice of medicine doctrine has been violated has never been the five-factor ‘right of control’ test that is used to determine employee rather than independent contractor status; instead, courts have often looked at whether the effect of the relationship is to allow non-physicians to violate the [corporate practice of medicine] provisions of the Medical Practice Act (e.g., directing or controlling medical care).”  

TMA cautions that, should the Texas Supreme Court side with the staffing companies in the appeal, the corporate practice of medicine prohibitions that protect Texas physicians’ ability to exercise independent medical judgment could be weakened.

“To limit the [corporate practice of medicine] doctrine to employer-employee relationships would not only be inconsistent with the law, it would also permit the placement of corporate profit motives over the best interests of patients,” TMA wrote. “Texans expect and deserve to have their best interests and physician independent medical judgment put first.”

As is often the case for appellate decisions, the timeline for the court’s determination remains uncertain. TMA is monitoring the case closely.