Attorney General Bonta Files Amicus Brief in Defense of California’s Ban on Corporate Practice of Medicine

OAKLAND - California Attorney General Rob Bonta today announced filing an amicus brief in Art Center Holdings, Inc., et al. v. WCE CA Art, et al., a case before the California Second District Court of Appeal involving a dispute between a physician who owned a medical practice and a private equity-backed management services organization (MSO). In California, only licensed medical professionals can practice medicine. For nearly a century, California has prohibited corporations and non-physicians from engaging - either directly or indirectly - in the practice of medicine. This ensures that medical judgment remains independent and focused on patient care. While medical professionals may contract with MSOs to assist with administrative, back-office support, MSOs are vendors and cannot own or operate medical practices, nor can they exert undue influence over licensed medical professionals. Increasingly, however, private equity-backed MSOs have expanded into healthcare, chasing profits at the expense of patient care. In the amicus brief, Attorney General Bonta argues that the trial court correctly held that contractual provisions giving the MSO excessive control over the medical practice - including the power to replace the physician-owner of the medical practice - violate California's ban on the corporate practice of medicine.

"State law is clear: medical decisions must be made by licensed physicians, not unduly influenced by corporate interests," said Attorney General Bonta. "As private equity investment in healthcare grows, we must reaffirm our commitment to California's prohibition on the corporate practice of medicine and ensure patients remain our top priority."

In the amicus brief, which supports neither party since both parties seek to weaken the prohibition on the corporate practice of medicine, Attorney General Bonta argues that:

• Important public policy reasons underlie California's ban on the corporate practice of medicine. Among other things, it protects patients from commercial exploitation, prevents profit-driven corporations from interfering in the doctor-patient relationship, and ensures that doctors' loyalties remain with patients. Medical professionals should be the ones making decisions that affect patient lives as they are trained and licensed to make decisions in patients' best interests.
• When an agreement gives an unlicensed corporation the right to replace the physician-owner of a medical practice with a different physician of its choice, the corporation effectively owns the practice. Likewise, when the practice's ostensible physician owner cannot replace the unlicensed MSO without fear of losing ownership over their practice, the MSO has undue control over that practice.

In filing this amicus brief, Attorney General Bonta wrote only to support the trial court's holding regarding the corporate practice of medicine.