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What is false incorporation in medicine?

The New York Court of Appeals has agreed to hear a case that delves into fraudulent incorporation of medical practices in the state.

What is the issue? New York has a law that prohibits the corporate practice of medicine. Insurance providers can refuse to reimburse medical facilities that are in violation of this law.

In this case, a health insurance provider refused to pay claims from a medical practice in the state, claiming the practice had violated this law. The insurance provider stated two non-physicians were running the practice. As such, the health insurance provider denied reimbursement requests for MRI services from the health care provider.   

How does the law define “fraudulent incorporation” in New York? There is not a single, simple answer. The court will consider many questions. These can include: Who had control over assets? Who shared the risk of the business? Were profits from the business somehow funneled to another, non-physician individual? The court will take these questions, along with a review of the totality of the circumstances, into consideration to determine if the practice was fraudulently incorporated.

What happens if a healthcare provider violates this law? The provider will not only need to deal with denied reimbursement requests. The group can also face penalties from the state, including fines and potential criminal prosecution. As a result, anyone facing similar allegations is wise to build a defense and act to protect their professional reputation.

What should healthcare providers learn from this case? This is likely just the first of many cases. A recent review completed through the Insurance Journal notes a “growing trend” of courts granting motions from health insurance providers to compel discovery.

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