OPTIONS FOR NON-VETERINARIANS TO LEGALLY
OWN AND OPERATE A VETERINARY PRACTICE
Edward J. Guiducci, JD
Historically, state law in the United States and provincial law in Canada prevented nonveterinarian ownership of veterinary practices. The purpose of this session is to examine the
original justifications and whether or not these justifications continue to apply. We will examine
current trends in changes to state and provincial laws and veterinary practice acts in the United
States and Canada relating to non-veterinary ownership of veterinary practices. This session will
also focus on legal options for non-veterinarians to own veterinary practices and alternative
options structures that are slowly being accepted by veterinary boards across the United States
permitting non-licensed veterinarians to be owners of practice assets and operations even when
the state’s veterinary practice act has not been amended to permit non-veterinary ownership. We
will also focus on certain practical issues that go beyond the legalities for non-licensed veterinary
ownership of a veterinary practice.
WHAT IS THE RATIONAL FOR THE HISTORICAL PROHIBITION OF NONLICENSED VETERINARY OWNERSHIP?
The historical prohibition on non-licensed veterinary ownership of veterinary practices
was primarily based upon the fact that veterinary medicine is a licensed and regulated business.
As part of the regulation of the veterinary profession, as with other licensed professions,
veterinary practice acts in the United States and veterinary surgeon acts in Canadian provinces
prohibited non-veterinary ownership of veterinary practices in order to maintain the quality of
service and protect the professional’s independent judgment. The primary rational that was
utilized by the states and provinces in adopting their statutes was that the non-licensed
veterinarian owners would impact the professional judgment of the licensed veterinarians.
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WHAT ARE MODERN DAY VIEWS OF THE PROHIBITION OF NON-VETERINARY
OWNERSHIP AND ITS IMPACT UPON THE VETERINARY PROFESSION?
There remain differing views in the veterinary profession as to the appropriateness of
non-licensed veterinarians owning veterinary practices. The following are common arguments in
favor of non-veterinarians owning veterinary practices:
Arguments Supporting Non-Veterinary Ownership:
1.
Relaxing the rules will permit the introduction and development of innovative
forms of professional practices with the input of non-veterinarian owners.
2.
Relaxing the rules will permit widows/widowers and the heirs of the
veterinarians from having a hardship placed upon them with a forced “fire sale” upon the death of
the veterinarian. This is especially a hardship for spouses that manage the practice side-by-side
with their veterinarian spouse.
3.
Relaxing the rules will provide more opportunities for an exit strategy by
expanding the market to sell existing practices.
4.
Relaxing the rules will provide opportunities for key employees to become
owners and remain in the profession.
5.
Relaxing the rules could have a positive effect on competition and might afford
consumers a wider selection of services and costs.
Arguments in Opposition to Permitting Non-Veterinary Ownership:
Some of the arguments that are propounded opposing non-veterinary ownership are as
follows:
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1.
The corporate bottom-line would control over professional ethics and the
Veterinary oath. This would create an unethical influence that would damage the public.
2.
It is bad for the profession for cities and other public or quasi-public entities to
own practices and compete with private practices.
3.
If it ain’t broke, don’t fix it!!! This would prevent unforeseen problems caused
by non-veterinary owners of veterinary practices.
HAVE VETERINARY PRACTICE ACTS BEEN AMENDED TO PERMIT NONVETERINARY OWNERSHIP IN THE UNITED STATES
There has not been one uniform change in the United States to this issue. There have
been the following four basic approaches by the states:
1.
Amendment to state veterinary practice act and/or corporation act permitting
non-licensed veterinary ownership of 100% of veterinary practices;
2.
Amendment of veterinary practice act and professional corporation act to permit
up to 49% ownership of a veterinary practice by non-veterinarians;
3.
Various amendments of state statutes that are inconsistent with each other
permitting corporate ownership through certain legal entities but not others i.e., professional
corporation acts prohibit non-veterinary ownership but for-profit corporation acts permit nonveterinarian ownership.
4.
No amendment to act thereby continuing the prohibition on non-licensed
veterinary ownership of veterinary practice.
The Canadian provinces have been slow to change from the traditional prohibition on
non-veterinary ownership. However, significant changes permitting corporate operations of
veterinary practices and minority ownership of veterinary practices by non-veterinarians are
being discussed in certain provinces.
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HOW DO NON-VETERINARIANS OWN AN INTEREST IN VETERINARY
PRACTICES IN STATES THAT CONTINUE TO PROHIBIT NON-VETERINARIAN
OWNERSHIP?
Non-veterinarians are prohibited from individually owning a veterinary practice or forming
a for-profit corporation to provide veterinary medical services and directly receive the fee for
these services that reside in states that prohibit non-veterinary ownership or majority veterinary
ownership. The individual or corporation would in these states be unlawfully engaged in the
practice of veterinary medicine, while the licensed veterinarian employed by the corporation or
individual would violate the prohibition against permitting or allowing another to use his or her
license to practice medicine and would be subject to having his license canceled, revoked, or
suspended by the state’s board of veterinary medical examiners.
This would appear to prevent a non-veterinarian from obtaining ownership of a veterinary
practice in the states that have not amended their veterinary practice acts. However, there is
another option. In some states a non-veterinarian is permitted to enter into an administrative
services structure to work in conjunction with a veterinary professional services corporation that
provides veterinary medical care. The basic premise of this approach is that the administrative
services legal entity provides any and all services and staff that the veterinary professional
services corporation needs to operate the veterinary practice except for hiring veterinarians and in
some states licensed technicians. This includes providing the veterinary professional services
corporation with leased space, equipment, furniture, instruments, marketing services, accounting
services, billing services, general administrative services, training, recruiting of professional staff,
etc. The majority of the fees that are generated by the veterinary practice are received by the
veterinary professional services corporation but are then disbursed as service fees or
reimbursement except for the professional personnel expenses of the veterinary professional
services entity. This structure has satisfied many states’ concerns to protect the public because
the separate structure insures that the professional judgment of the veterinarians is not being
controlled by non-veterinarian owners.
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What is a Typical Administrative Services Structure:
A typical administrative services structure involves a for-profit corporation being formed
to purchase practice assets from a selling veterinarian to serve the role of an administrative
services entity. A separate professional veterinary corporation is formed to provide professional
veterinary services and one veterinarian will be the sole stockholder of the corporation to comply
with state law. If one of the owners of the for-profit legal entity were a veterinarian then typically
this person would be the sole shareholder of the professional legal entity. If the purchaser doesn’t
have a licensed veterinarian as part of its ownership, then a veterinarian would need to be hired
by the veterinary clinic to provide the veterinary services and to hold the share of stock while
employed.
Typically the practice assets that are sold as part of a veterinary asset sale transaction
consist of an assignment of the commercial lease on the land and buildings (or a purchase of the
land and building), all the fixtures, furniture and equipment of the practice, trade name and drug
and office supply inventory of the practice as well as the telephone numbers, e-mail addresses,
Web sites, client and patient records and goodwill. The structure will vary depending upon the
state that the practice is located in because certain states prohibit the for-profit administrative
services corporation from owning the client/patient records and goodwill. In these cases the
purchase of the client/patient records and good will assets will be assigned to the veterinary
professional services entity.
The administrative services agreement is a formalized contract that clearly identifies the
rights and responsibilities of each of the for-profit administrative services entity and the
veterinary professional services corporation. It will outline the services that will be provided and
the fees that will be paid the for-profit administrative services company.
It is unclear whether or not this option is viable in Canadian provinces.
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