It’s no secret that California has some of the strictest, most oppressive laws in the United States. In fact, it’s basically a running joke among Californians and others around the country. It’s often playfully remarked that “in California, everything causes cancer.” But all jokes aside, this has become a serious issue with California medical regulation.

While these rules and regulations are frequently put into place to protect consumers, they often put a stranglehold on small businesses. Often times, the consequences of these laws are not taken into consideration beforehand. And, all too often, regulations are written and imposed upon the populace by lobbyists with deep pockets. Shocking, I know!

So, here we are… again. The same old story….. again. Illogical regulations placed on small businesses instituted on a whim for all the wrong reasons………. again. This time, I’m referencing laws regarding the apparent “practice of medicine” without a license. Yes, I know. How could regulations ensuring doctors have to be trained and licensed be a bad thing? Well, it gets more complicated. It turns out that “practicing medicine” doesn’t necessarily mean or apply to what someone might consider actually practicing medicine.

Ludicrous California Medical Laws

You may not know it, but in California, it is technically illegal for a layman or non-doctor to own a stake in a medical facility. Not to actually practice or perform procedures, but to just maintain a financial stake. Basically, this means that a licensed doctor must be the one to own and operate the facility he or she conducts business in.

In addition, should the physician work in or with facilities owned by anyone who is not a practicing physician, they may be charged with aiding and abetting the unlicensed practice of medicine. This is even the case if the layman has absolutely nothing to do with patient consultations, procedures, surgeries, checkups, etc. In other words, simply owning a facility that tries to operate with the intention of keeping prices for patients reasonable is in violation of the law.

While these regulations are not necessarily recent, they are worth bringing to the public’s attention, as they are mostly unknown. This is due to the fact that these regulations are often wielded by competing medical establishments. They use the law to crush their competition and tie them up in the legal system. Meanwhile, they pull in an influx of new clientele and get to essentially engage in price-fixing in their chosen market. Big profits for very little effort, and all under the guise of “protecting the public.” Most of the time, it’s simply used to bully other businesses.


California Medical Practice Acts

The law states that “any person who practices, attempts to practice, or who holds himself or herself out as practicing medicine without having a valid, unrevoked, or unsuspended certificate…is guilty of a public offense.” Sounds nice on paper, but what exactly does “attempting to practice medicine” actually infer?

The Medical Practice Act code sections 2052 and 2400 against the corporate practice of medicine are intended to prevent unlicensed persons from interfering with or influencing the physician’s professional judgment. Additionally, California Code 650, commonly known as the “Physician Referral Act,” “Stark Act,” or “Anti-Kickback Statute” makes it illegal to offer or accept any commission or compensation in exchange for referring patients.

Great in theory! Nobody should be interfering with or influencing what a patient’s medical provider recommends. However, insurance companies get to do just that day in and day out. Meanwhile, nobody bats an eye. On the other hand, if a layman maintains a stake in the organization, they can both be charged with either a misdemeanor or a felony. However, agreements of this nature allow doctors to spend less of their time working on marketing, property leasing, and other administrative tasks.

You’d think splitting the workload would make perfect sense, both medically and financially. Let the medically-trained and licensed physician with years of schooling and experience focus on patient consultations, medical assistance, and surgeries. Meanwhile, allow the business-savvy manager of a medical facility to handle the aspects of running a complicated company. In other words, let each party handle and focus on what they each do best. Simply put, doctors can’t do everything on their own and they need to focus their attention on providing the best care for their patients. Seems logical right? Unfortunately, that’s not the case in California.


 The Way it Works

The decisions described below are examples of some of the types of behaviors and subtle controls that the corporate practice doctrine is intended to prevent. From the Medical Board’s perspective, the following health care decisions should be made by a physician licensed in the State of California and would constitute the unlicensed practice of medicine if performed by an unlicensed person:

  • Determining what diagnostic tests are appropriate
  • Determining the need for referrals with another physician/specialist
  • Overall care of the patient, including treatment options
  • Selection, hiring/firing (as it relates to clinical competency or proficiency) of physicians, allied health staff and medical assistants
  • Setting the parameters under which the physician will enter into contractual relationships with third-party payers

For the most part, this makes sense. However, this is where it gets complicated, as a marketer or management agency can easily be accused of “practicing medicine” just by running the operations of the business. In other words, the types of decisions and activities described above cannot be delegated to an unlicensed person, including, for example, management service organizations. Essentially, while a physician may consult with unlicensed persons in making the business decisions, the physician must retain the ultimate responsibility for those decisions.

Having a financial interest following types of medical practices and operating structures also are technically prohibited:

  • Layman non-physicians owning or operating a business that offers patient evaluation, diagnosis, care and/or treatment
  • Management service organizations arranging for, advertising, or providing medical services rather than only providing administrative staff and services for a physician’s medical practice
  • Non-physicians exercising controls over a physician’s medical practice, even where physicians own and operate the business
California businessman

The Hypocrisy

Other states don’t have laws as restrictive and oppressive as California. It has become one of if the most business-unfriendly states in the country. This makes it difficult for smaller operations to stay in business or function at all without jumping through hoop after hoop. Ultimately, this creates inequalities and difficulties for medical professionals and entrepreneurs alike.

In other states, the practice of allowing each party to focus on what they do best is accepted and often encouraged. However, California’s detrimental policy which is meant to protect patients and ensure doctors maintain control over their practices are frequently doing just the opposite.

The Absurdity Continues

Right now in California, it is illegal for non-doctors to do something as simple as drawing on someone’s head with a mascara pencil. However, the removal of sutures is perfectly completely acceptable. Go figure! Medical technicians can’t give someone a simple injection, but diabetics are able to inject themselves daily without issue. The layman may consult with a potential patient, however giving medical advice of any kind is a completely different issue. Where is the line drawn? What exactly does that mean and what is the “safe zone” to work within? That’s a tough call and often open to interpretation. In the end, everyone is left walking on eggshells.

The hypocrisy of these laws is seen in an even greater light when you consider that random teenagers with no medical training are allowed to pierce someone’s ears at a mall kiosk. Even more absurd, tattoo artists are allowed to puncture a client’s skin and inject foreign bodies into it… all with no medical training. Why does California allow these type of actions, yet take issue with talking with someone or drawing on their head? It seems a bit ridiculous, to say the least.

The Fallout

While all of these laws were put in place to protect doctors and patients, the extract opposite is often the case. And the resulting repercussions are that businesses are forced to close, jobs are lost, doctors are forced to waste valuable time, and patient care suffers. There’s a reason so many large California-based tech and online companies have been relocating to the neighboring state of Nevada. Simply put, operating is easier and more profitable there.

In California, any layman attempting to get into or those with financial interests in medical practices must hire and retain medical/business attorneys. They are forced to structure complex corporate legal structures between the doctor(s) and their business entity in order to guard themselves and the doctors they work with against frivolous lawsuits and criminal prosecution. Unfortunately, these regulations have lead to a witch hunt. Non-existent problems are created in order to harass legitimate businessmen and investors who are enriching the medical industry and make practices more practical for all parties involved.

The End Result

As with most things in California, regulation has, at best, turned operating into a difficult and inconvenient process. At worst, it forces well-meaning people and organizations to shut down or leave the state in order to avoid further government oppression. Ultimately, the state has its focus placed in the wrong area. Where they should be focusing on ensuring that unlicensed citizens performing medical procedures, they have decided to go after the businesses that help keep doctors operating profitable practices and keeping costs low for their patients.

When doctors choose to put the business aspects of their practice into the hands of those with experience in the field, they are precisely exercising the types of control that the state claims they are giving up. They are choosing to focus solely on patient care and leaving other aspects of running a business in the hands of those who do so best. To take away that power is the antithesis of what these laws were set up to do in the first place. Until California legislators and the powers that be realize this, the industry and its patients will continue to suffer.

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