Can an Arkansas for-profit corporation employ or contract with physicians, bill third parties as the medical provider, or hire advanced practice nurses, without being registered as a medical corporation with the Arkansas State Medical Board?

Plain-English summary

State Senator Cecile Bledsoe asked the AG a sequence of related questions designed to map the edges of Arkansas's restrictions on the corporate practice of medicine. The pattern in each question was the same: a regular for-profit corporation (not registered as a medical corporation) wants to bill third-party payers and patients as the provider of medical services, using physicians or advanced practice nurses it either employs or contracts with.

The Arkansas Medical Corporation Act, A.C.A. § 4-29-301 et seq., authorizes corporations to engage in the "study, diagnosis, and treatment of human ailments and injuries" only if (a) they are organized under the Arkansas Business Corporation Act and (b) they obtain a certificate of registration from the Arkansas State Medical Board. Section 4-29-309(a) makes registration a prerequisite to opening, operating, or maintaining a medical establishment. Section 4-29-307 requires that all owners, officers, and directors of a registered Arkansas medical corporation be licensed physicians. Section 4-29-313 (added by Acts 2013, No. 135) lets out-of-state medical corporations register in Arkansas if all owners, officers, and directors are licensed in the state of incorporation and the corporation otherwise complies with the Medical Corporation Act.

AG Leslie Rutledge applied that framework to all six questions and answered "no" to every one of them.

The key move in her analysis is the treatment of "billing as the provider." Each posited scenario contemplated the unregistered corporation receiving payment as the provider of the medical service rendered. The AG concluded that the act of being paid (or seeking to be paid) as the provider of medical services is what triggers the Medical Corporation Act. Whether the corporation employs the physician, contracts with the physician as an independent contractor, hires a physician for research, or uses advanced practice nurses supervised by physicians, the moment the corporation seeks payment as the medical provider it is "opening, operating, and maintaining an establishment" for medical purposes under § 4-29-305.

The AG carved out one safe harbor: ancillary services like billing and collection performed for a separately registered Arkansas medical corporation do not trigger the Medical Corporation Act. The Arkansas State Medical Board's attorney had written that the Board "does not regulate businesses that perform billing and collection services for licensed Arkansas physicians" and that medical practices may contract for those services with anyone they choose. But the questions in this opinion presupposed the corporation would be the named provider, not merely a billing service.

Question 6 added the wrinkle of a foreign corporation "qualified to conduct business in Arkansas." The AG read that to mean a foreign corporation that had registered with the Arkansas Secretary of State to do business in the state, but had not registered with the Arkansas State Medical Board as a medical corporation. The same conclusion applied: an unregistered foreign corporation cannot bill as the medical provider in Arkansas, whether or not it is otherwise qualified to do business in the state. A foreign corporation can do business as an Arkansas medical corporation only by clearing both the Secretary of State's foreign-corporation registration and the Medical Board's medical-corporation registration under § 4-29-313.

Currency note

This opinion was issued in 2015. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

The Arkansas Medical Corporation Act, Acts 1961, No. 179, codified at A.C.A. § 4-29-301 et seq., is Arkansas's expression of the "corporate practice of medicine" doctrine. The doctrine, in its strongest form, forbids non-physician investors from owning equity in entities that provide medical services, on the theory that lay owners' profit motives could distort the physician-patient relationship. Different states implement the doctrine with different degrees of strictness; Arkansas's framework allows physician-owned corporations but channels them through a registered "medical corporation" structure overseen by the Arkansas State Medical Board.

Three sections are operative:

A.C.A. § 4-29-305 authorizes one or more physicians (licensed under the Arkansas Medical Practices Act, § 17-95-201 et seq.) to associate to form a corporation under the Arkansas Business Corporation Act of 1987 (A.C.A. § 4-27-101 et seq.) to own, operate, and maintain an establishment for the "study, diagnosis, and treatment of human ailments and injuries" and to promote "medical, surgical, and scientific research and knowledge." Medical or surgical treatment may be given by employees of the corporation "only if they are licensed pursuant to the Arkansas Medical Practices Act."

A.C.A. § 4-29-307 restricts ownership: only persons licensed under the Arkansas Medical Practices Act may be owners, officers, and directors of a registered medical corporation.

A.C.A. § 4-29-309(a) requires registration: "[n]o corporation shall open, operate, or maintain an establishment for any of the purposes set forth in § 4-29-305 without a certification of registration from the Arkansas State Medical Board."

A.C.A. § 4-29-313 (added by Acts 2013, No. 135) opens the door to foreign medical corporations. Before 2013, out-of-state medical corporations could not be registered with the Arkansas State Medical Board at all. The 2013 amendment lets them register if all owners, officers, and directors are licensed to practice medicine in their state of incorporation and the foreign corporation otherwise complies with the Medical Corporation Act.

Op. Att'y Gen. 2012-118 (the immediate predecessor's opinion) reached the same conclusions in a similar pattern of questions. The Arkansas State Medical Board's attorney had previously confirmed in writing that billing-and-collection-only services do not require registration.

Common questions

What is the corporate practice of medicine doctrine?

It is a state-by-state body of law that restricts who can own and operate entities providing medical services. Most strict-doctrine states require physician ownership of any business that practices medicine, on the policy ground that non-physician owners' profit incentives could interfere with the physician's independent medical judgment. Arkansas follows that doctrine through the Medical Corporation Act, with a registered-corporation channel and physician-only ownership requirements.

Can a hospital or clinic operate as an ordinary for-profit corporation in Arkansas?

Not for the purpose of being paid as the medical provider. To bill third-party payers and patients as the medical provider, the entity must be registered with the Arkansas State Medical Board as a medical corporation, and its owners, officers, and directors must be licensed under the Arkansas Medical Practices Act. Many hospitals in Arkansas operate as nonprofit corporations or governmental entities, which have their own statutory frameworks; this opinion is about the corporate-practice rules for ordinary for-profit corporations.

What about hiring a physician as an independent contractor?

The AG concluded the same answer applies. The Medical Corporation Act is triggered by the corporation's act of billing as the provider, not by the employment classification of the physician doing the actual work. Whether the physician is an employee, an independent contractor, or a member of a separate professional services corporation does not matter to the analysis. The corporation that bills as the provider must be registered.

What about a corporation that just does billing and collection?

That is the safe harbor the opinion explicitly preserves. The Arkansas State Medical Board does not regulate businesses that perform billing and collection services for licensed Arkansas physicians. Medical practices are free to contract with any vendor (domestic or foreign) for billing services, as long as the registered medical corporation, not the billing vendor, is the named provider for billing purposes.

Does this apply to advanced practice nurses?

Yes. Question 5 specifically asked about advanced practice nurses supervised by physicians, with the corporation billing as the provider of the nurses' services. The AG's answer was the same: the corporation needs to be a registered medical corporation. The relevant trigger is the corporation's role as provider for billing purposes, not the credentials of the personnel doing the work.

What about clinical research conducted by a physician as principal investigator?

Question 3 asked specifically about a corporation hiring a physician as a principal investigator on human research, billing other parties as the entity performing the research. The AG put that in the same bucket. The Medical Corporation Act covers entities operating for the "study, diagnosis, and treatment of human ailments and injuries," and research that is conducted under a physician's medical license falls within "study."

Can a foreign corporation enter Arkansas to provide medical services?

Yes, but only by registering twice: once with the Arkansas Secretary of State as a foreign corporation qualified to do business, and again with the Arkansas State Medical Board as a foreign medical corporation under A.C.A. § 4-29-313. Bare qualification with the Secretary of State alone is not enough. The 2013 amendment made foreign medical corporations possible at all; before then, out-of-state medical corporations could not practice medicine in Arkansas.

What is the consequence if a corporation bills as a provider without registering?

The opinion does not address enforcement. Practically, billing without proper registration could trigger refusal of claims by third-party payers, possible recoupment actions, complaints to the Arkansas State Medical Board, and theoretical exposure under unlicensed-practice statutes. Anyone considering an arrangement like the ones described in this opinion should consult Arkansas counsel before signing the corporate paperwork.

Citations

Statutes: A.C.A. § 4-29-301 et seq. (Arkansas Medical Corporation Act); A.C.A. § 4-29-302 (definitions, post-2013); A.C.A. § 4-29-305 (purposes for which a medical corporation may operate); A.C.A. § 4-29-307 (ownership restricted to licensed physicians); A.C.A. § 4-29-309(a) (registration requirement); A.C.A. § 4-29-313 (foreign medical corporations); A.C.A. § 4-27-101 et seq. (Arkansas Business Corporation Act of 1987); A.C.A. § 17-95-201 et seq. (Arkansas Medical Practices Act).

Legislation: Acts 1961, No. 179 (original Medical Corporation Act); Acts 2013, No. 135 (foreign medical corporations).

Prior AG opinions: 2012-118 (predecessor opinion on similar questions, citing Arkansas State Medical Board attorney's letter on billing-and-collection safe harbor).

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

Opinion No. 2014-118
March 10, 2015
STATE OF ARKANSAS
THE ATTORNEY GENERAL
LESLIE RUTLEDGE
The Honorable Cecile Bledsoe
State Senator
Post Office Box 2457
Rogers, Arkansas 72757-2457
Dear Senator Bledsoe:

This is in response to your request for my opinion on the following questions:

In the State of Arkansas, can a for-profit corporation that has not
been registered with the Arkansas State Medical Board as a medical
corporation:

Question 1: Employ a physician so that the corporation may bill as
the provider of services to third party payers and patients?
Question 2: Contract with a physician and use the physician's
license to obtain Health Department approval to operate and
subsequently bill third party payers and patients as the provider of
medical services pursuant to that physician's license?
Question 3: Hire a physician as an employee to perform professional
services as a principal investigator in human research so that the
corporation may contract with others as the entity being paid to
perform human research?
Question 4: Hire a physician as an independent contractor and the
corporation bills third party payers and patients as the provider of
professional services rendered by the physician contractor?
Question 5: Hire advanced practice nurses, who are supervised by
physicians, and bill third party payers and patients as the provider of
professional services rendered by the advanced practice nurses?
Question 6: Would the answers to questions 1-5 above change if the
for-profit corporation is a foreign corporation that is qualified to
conduct business in Arkansas?

RESPONSE
For the reasons explained below, it is my opinion that the corporate arrangements
set out above would not be permitted in the State of Arkansas without the
corporations being registered as Arkansas medical corporations. Accordingly, the
answer to each of these questions is "no," in my opinion.

DISCUSSION
As a threshold matter, I note that the crux of the inquiry in this instance seems to
be not whether any of the above transactions or corporate arrangements can occur
in the State of Arkansas, but rather whether any can occur in the State without the
for-profit business being registered as a medical corporation by the Arkansas State
Medical Board. It is with this understanding that I address the above questions.

The applicable law governing these questions is the Medical Corporation Act.
That act states in part that "[n]o corporation shall open, operate, or maintain an
establishment for any of the purposes set forth in § 4-29-305 without a
certification of registration from the Arkansas State Medical Board." Thus, the
issue to be resolved is whether the corporation in each of the posited scenarios is
opening, operating, or maintaining an establishment for any of the purposes in § 4-
29-305.

Each scenario contemplates that the corporation itself would bill and seek to be
paid as the provider of the medical services. In my opinion, the act of being paid
or seeking to be paid as the provider of the medical services will trigger the
application of the provisions of the Medical Corporation Act.

My immediate predecessor observed in an official opinion that a corporation
"seeking to engage in 'the study, diagnosis, and treatment of human ailments and
injuries . . .' within the State of Arkansas must be organized pursuant to the
Arkansas Business Corporation Act of 1987, must engage in such activities
through licensed Arkansas physicians and must be registered with the Board." A
court would most likely conclude that a corporation wishing to be paid as the
provider of medical services would be seeking to "open, operate, and maintain an
establishment" for the purposes set out in § 4-29-305. It necessarily follows that
the corporation in that instance would have to be registered as a medical
corporation with the Arkansas State Medical Board pursuant to § 4-29-309.

Mere ancillary services, such as the handling of billings and collections for a
registered Arkansas medical corporation, do not fall under the Medical
Corporation Act or the Medical Practices Act. However, the questions set out
above presuppose that the corporations will not simply be handling billing or
collections for Arkansas licensed physicians but will be billing patients or third-
party payors as the provider of the services.

Prior to 2013, out-of-state medical corporations could not be registered with the
Arkansas State Medical Board at all for the purpose of practicing medicine in the
State of Arkansas. The General Assembly enacted a measure that would allow
medical corporations organized in another state to be registered with the Arkansas
State Medical Board, so long as all of the owners, officers, and directors of such
foreign medical corporations are licensed to practice medicine in the state where
they are incorporated, and so long as the foreign medical corporations comply
with all other aspects of the Medical Corporation Act.

Question 6 refers to a for-profit foreign corporation that is "qualified to conduct
business in Arkansas." I interpret this as referring to a foreign medical corporation
that would otherwise be eligible under the Medical Corporation Act to apply for
and obtain a certificate of registration from the Arkansas State Medical Board but
has not done so. In my opinion, the law applies to foreign corporations in the
same way as it does to domestic ones. If the foreign medical corporation does not
have a certificate of registration from the Arkansas State Medical Board, a
reviewing court would most likely conclude that the foreign corporation may not
"own, operate, and maintain an establishment for the study, diagnosis, and
treatment of human ailments and injuries, whether physical or mental, and to
promote medical, surgical, and scientific research and knowledge" in the State of
Arkansas pursuant to the Medical Corporation Act.

Assistant Attorney General Ray Pierce prepared this opinion, which I hereby
approve.

Sincerely,

Attorney General
LR/RP:cyh