Vanderbilt Law Review

First Page



Corporations, in the form of small, doctor-owned, proprietary hospitals and community or charity nonprofit hospitals, have pervaded the provision of health care services for many years. Recently, however, private, for-profit corporations increasingly have entered the health care field. One industry expert predicts that by the mid-1990s, ten national firms will provide fifty percent of the nation's medical care. Nationwide hospital chains, nonexistent twenty years ago, now own or manage twelve percent of the nation's hospitals. The proliferation of health maintenance organizations, freestanding emergency centers,' and other proprietary health care delivery systems exemplify the increased commercialization of medicine. Indeed, many young physicians now shun private practice to work as employees for corporate health care entities. Despite the increased level of corporate involvement in health care, many states officially subscribe to a legal doctrine that prohibits a corporate entity from providing medical services. This doctrine, generally known as the corporate practice of medicine prohibition, originated within the medical profession at the turn of the century as an ethical restriction on physicians' economic relations. The leaders of the profession feared that if physicians were permitted to work for corporations, corporations ultimately would control physicians' level of income, their methods of treatment and diagnosis, and their relationships with patients." ...

This Note examines the development of the corporate practice prohibition and addresses its efficacy in the modern health care industry. Part II describes the American medical profession's struggle to establish itself and the threat that corporate involvement in medicine posed to the early profession. Part III traces the history of the profession's ethical restraints on corporate practice and explains the ways in which courts have applied the doctrine. Part IV presents recent applications of the corporate practice prohibition. Finally, Part V demonstrates that the doctrine has be-come obsolete in light of the court-ordered abolition of ethical restraints on physicians and the impact of modern health care delivery alternatives.