C orporate ounsel T h e M e t r o...

Corporate Counsel
The Metropolitan
Volume 15, No. 3
© 2007 The Metropolitan Corporate Counsel, Inc.
March 2007
Convenient Health Care:
Legal Considerations For A New
Consumer-Driven Model
Anthony R. Miles,
Kaylynn S. Yoon
and Ruth E. Granfors
Recently, employer-sponsored on-site
clinics (“corporate clinics”) and convenient
care clinics established in retail settings such
as grocery stores (“convenience clinics”)
have gained momentum in the United States.
Both models seek to make basic medical care
more accessible and less costly. Laws regulating the delivery of health care services
may pose risks that would not occur in typical business transactions. Counsel to businesses considering establishing a corporate or
convenience clinic must assess the opportunities, constraints and potential liabilities posed
by these laws. Inadequate attention to health
law issues may result in substantial risk
and/or reduced economic benefits to the
To combat rising health care costs,
approximately 10% of large employers have
developed corporate clinics and another 15%
are expected to do so by 2008.1 Corporate
clinics provide physicals, immunization
shots, simple lab tests and chronic disease
management; convenience for employees
(and dependents, in some cases); and an
emphasis on prevention and wellness.
Anthony R. Miles is a Partner in the health
care law practice of Kirkpatrick & Lockhart
Preston Gates Ellis LLP, residing in the Seattle office. Ruth E. Granfors is a Partner in
the practice in the Harrisburg office. Kaylynn
S. Yoon is an Associate in the Newark office.
Anthony R.
Kaylynn S.
Employers expect to realize increased productivity by reducing lost work time associated with physician office visits, addressing
preventive and simple health needs before
they become complicated, helping employees
manage chronic conditions effectively, and
reducing doctors’ office and emergency room
utlilization.2 Corporate clinics also may
enable employers to reduce expenditures by
providing basic care at cost or better utilizing
mid-level professionals such as advanced
registered nurse practitioners (“ARNPs”) and
physician assistants (“PAs”).
Convenience clinics are a relatively new
concept but have grown exponentially since
2004. By deploying mid-level health practitioners at more convenient hours and locations that may already be part of consumers’
daily itineraries, these clinics address perceived problems in health care cost and
access. Currently, there are approximately
250 clinics in over 30 states.3 Convenience
clinics provide limited primary care services,
such as physicals, preventive services, and
treatments for common conditions – allergies, colds, asthma, and headaches. More
complex cases usually are referred to a local
physician, emergency room or another appropriate provider.
Legal Considerations
Individual state regulation of health care
services creates numerous legal considera-
tions for a corporate or
convenience clinic,
including risks that can
arise in three primary
areas of regulation: (1)
corporate practice of
medicine; (2) scope of
professional practice;
and (3) privacy. Other
laws and regulations
Ruth E.
that should be analyzed
or examined in connection with clinic activity in any given state may
include rules addressing fraud and abuse,
anti-trust, fee-splitting, and health facility
licensure. Applicable requirements may influence the nature, location, and staffing of the
clinic; available services; service delivery and
reimbursement; and the clinic’s relationship
with the host enterprise (e.g., employer,
Corporate Practice of Medicine. Ironically, the historic establishment of workplace
on-site clinics through which corporations
employed physicians to provide medical services to their employees helped give rise to
the corporate practice of medicine doctrine.4
The American Medical Association (“AMA”)
lobbied and adopted ethical statements
against this and other forms of “corporate
practice” to prevent the loss of physician
autonomy over the practice of medicine.
States soon began adopting and interpreting
medical professional licensing laws to prohibit corporations from practicing medicine.5
Not all states have such a doctrine, and the
doctrines vary by state. In some states, these
limitations apply both to physicians and other
medical professionals. Where the doctrine
exists, violations can result in penalties like
corporate liability for malpractice, civil and
criminal fines and penalties for the unlicensed
practice of medicine, and suspension or revocation of licensure for the providers
Please email the authors at tony.miles@klgates.com, kaylynn.yoon@klgates.com
or ruth.granfors@klgates.com with questions about this article.
Volume 15, No. 3
© 2007 The Metropolitan Corporate Counsel, Inc.
An employer considering a corporate
clinic must determine how it will be organized and staffed. Counsel must examine relevant state laws and regulations governing
physicians’ practice and licensure for potential prohibitions on the corporate practice of
medicine before determining whether the
clinic can be led by a physician who is
employed by the employer entity or an affiliate, or contracted out to a corporation providing health care services. Some states provide
exceptions to the doctrine for employerbased corporate clinics; however, these
exceptions vary in the scope of services
authorized at the clinic.7 In Tennessee,
employers may contract with physicians to
“treat” the employer’s employees, retirees
and dependents; however, New Jersey’s
exception restricts such clinics to those providing “first aid to customers or employees
and/or for monitoring the health environment
of employees.”8 Employers must be attuned
to the variations among these statutes, especially when implementing clinics across
facilities located in multiple states.
In contrast to its historical resistance to
corporate clinics, the AMA has recognized
and accepted consumer demand for convenience clinics. Along with the American
Academy of Family Physicians (“AAFP”),
the AMA has established guidelines and principles for operating convenience clinics.
Three industry leaders have signed contracts
with AAFP, agreeing to follow the guidelines
by limiting the scope of service provided,
ensuring the use of clinical guidelines for
quality care, providing continuity of care
through a “team-based” approach, utilizing a
referral system for patients who cannot be
treated at the clinic, and maintaining an electronic health records system compatible with
physicians’ office systems.9
Scope of Professional Practice. Where
state law requires an ARNP or PA to practice
under the direction or supervision of a physician, a corporate clinic that provides a modest range of basic services and requires at
least one physician to direct the activities of
nonphysicians may find its structure and
operations unaffected by scope of practice
issues. This becomes more complicated
where state law limits the number of individuals under the direction and supervision of a
physician at any one time. Providing diagnostic imaging or other procedures requiring
a higher level of supervision may further
complicate matters and reduce convenience
or increase costs.
The same kind of analysis applies to convenience clinics, compounded by one of the
AMA/AAFP guidelines that requires the clinics to ensure proper supervision and to limit
the scope of care provided by nonphysicians.
Given the limited scope of services provided
at convenience clinics, as compared with the
care provided at emergency rooms and in
most physicians’ offices, ARNPs and PAs
likely will not operate outside their scope of
practice. Nonetheless, establishing a convenience clinic within the law requires understanding these rules in the relevant states. For
example, a nonphysician’s ability to prescribe
medications may be broad in one state, limited in another, and prohibited in a third.
Counsel for convenience clinics cannot
assume that a model that works in one state
will work in another state. Rather, counsel
should verify and comply with state licensure
laws and professional board regulations, and
establish adequate policies and procedures to
ensure compliance. Retailers contracting
with such clinics should inquire into the convenience clinic’s arrangement with any management companies, as well as into how the
clinic will be organized and staffed. This
information will help counsel determine the
representations, warranties and other assurances the host enterprise needs to receive,
along with the appropriate levels of insurance
for the scope of services to be provided.
HIPAA/Privacy Issues. Employers and
retailers also must consider how medical
information obtained through a corporate
clinic or convenience clinic is used and disclosed under the Health Insurance Portability
and Accountability Act (“HIPAA”), state
medical records rules, and other privacy
laws. HIPAA covers three types of entities:
(1) a health plan, (2) a healthcare clearinghouse, and (3) a health care provider who
transmits health information for certain covered electronic transactions. A corporate
clinic could be considered part of the
employer-sponsored health plan, which is
expressly covered under the definition of
“health plan.” A corporate or convenience
clinic that transmits information electronically in connection with any covered transaction (e.g., claims submission) would be a
covered health care provider. Employers will
need to take steps to comply with HIPAA’s
requirements, including adopting appropriate
policies and procedures and designating the
clinic as a covered function within the
employer’s “hybrid entity” (a designation
that allows employers to separate the on-site
clinic’s covered functions and obligations
from the rest of the corporation’s non-covered functions).10
Likewise, a convenience clinic that is a
covered health care provider must adopt
appropriate policies, procedures and safeguards, and can only use and disclose protected health information (“PHI”) in
accordance with the requirements of HIPAA.
Further, convenience care clinics that are subject to HIPAA may be asked to share customer/patient information with the
pharmacies or other retailers in which they
are located. Any individually identifying
information (e.g., names, addresses or phone
March 2007
numbers), even if stripped of any medical
information, may not be disclosed except as
permissible under the HIPAA privacy rules.
HIPAA allows states to enact laws that
enhance patients’ privacy or rights of access
to their information. Whether these laws take
the form of medical records requirements,
security breach response rules, or other
restrictions, violations can result in malpractice liability, civil or criminal fines, and substantial ongoing expenses (e.g., credit
monitoring services) to mitigate the effects of
security breaches. Managing these risks for
entities participating in corporate or convenience clinics requires knowledge of applicable requirements, as well as a thoughtful
combination of technology, policies and procedures, insurance, and appropriate contract
Corporate clinics and convenience clinics
promise increased efficiency, accessibility
and cost-effective care delivery for basic
health care services. Businesses seeking to
take advantage of these alternative delivery
models must understand the legal risks and
compliance obligations that arise from the
highly regulated nature of health care services. As these clinics mature and integrate
into the health care industry, the legal and
regulatory issues that need to be addressed
may become more complex. Maximizing the
benefits these clinics offer will require effective management of the associated legal risks
by counsel through careful attention to regulated areas at the commencement of the venture and beyond.
See Milt Freudenheim, Company Clinics Cut Health
Costs, N.Y. Times (January 14, 2007), at 1.
Convenient Care Association, Convenient Care Association: Advancing the Future of Convenience Clinics,
www.convenientcareassociation.org/aboutcca.htm (last
visited February 8, 2007).
Adam M. Freiman, The Abandonment of the Antiquated Corporate Practice of Medicine Doctrine: Injecting a Dose of Efficiency into the Modern Health Care
Environment, 47 Emory L.J. 697, 701 (Spring 1998).
Id. at 702-03.
See, e.g., Mass. Gen. Laws, ch. 112 § 6 (2003); N.C.
Gen. Stat. §§ 90-18(a) (West 2005) (unlicensed practice), 90-21.11 (malpractice liability); Tex. Occ. Code
Ann. §§ 165.151, 165.159 (Vernon 2004) (unlicensed
See Adam M. Freiman, The Abandonment of the Antiquated Corporate Practice of Medicine Doctrine: Injecting a Dose of Efficiency into the Modern Health Care
Environment, 47 Emory L.J. 697, 707-08 (Spring 1998).
See Tenn. Code Ann. § 63-6-204(c) (2006). N.J.
Admin. Code § 13:35-6.16(f)(4)(ii) (2005).
See Sheri Porter, American Academy of Family Physicians, Retail Health Clinics Sign Academy Agreement:
“Big Three” Support AAFP’s List of Desired Attributes
(February 1, 2007), available at www.aafp.org/online/
en/home/publications/news/news-now/professionalissues/20070201retailhealth.html (last visited 2/8/07);
see American Academy of Family Physicians, Desired
Attributes of Retail Health Clinics, June Executive Committee 2006 (June 2006), available at www.aafp.org/
(last visited 2/8/07).
See 42 U.S.C. § 300gg-91(c)(1)(G) (2002).