On March 25, 2014, in State Farm Mutual Automobile Insurance Company v. Mobile Diagnostic Imaging, Inc., the U.S. District Court for the District of Minnesota held that a corporation not owned or controlled by physicians does not violate Minnesota’s corporate practice of medicine doctrine by employing technologists to perform magnetic resonance imaging (“MRI”) scans and having independent contractor physicians interpret the scans. In State Farm, the court indicated that lay entities may carry out certain technical aspects of medical diagnostic imaging services without violating Minnesota’s corporate practice of medicine doctrine.
The State Farm case arose when State Farm insurance company informed Mobile Diagnostic Imaging, Inc. (“MDI”), a Minnesota business corporation, that it would not honor bills MDI submitted for performing MRI scans. State Farm sought a declaratory judgment that it has no obligation to pay outstanding bills to MDI because MDI’s services violate the corporate practice of medicine doctrine.
The Corporate Practice of Medicine Doctrine
The corporate practice of medicine doctrine forbids corporations from the practice of health care professions. As the court in State Farm noted, the doctrine prohibits lay corporations from employing licensed health care professionals to perform medical services. The doctrine stems from a corporation’s inability to meet state professional licensure requirements and other public policy concerns such as protecting physicians’ independent medical judgment.
The Corporate Practice of Medicine Doctrine’s Application to MRI Scans
A. The Technical and Professional Components of MRI Scans are Separable.
The corporate practice of medicine doctrine does not automatically cover every form of health care or therapy. In this case, State Farm argued that the doctrine prohibits MDI from providing MRI services because the MRI process requires licensed professional involvement at all stages. MDI, in contrast, argued that MRIs involve two separate steps: (1) the physical recording of a scan; and (2) the interpretation of the scan. MDI claimed it does not violate the corporate practice of medicine doctrine by performing the technical component of taking the scan, which requires limited training, and contracting with physicians to carry out the professional component of interpreting the scans. Both parties agreed that interpreting MRI scans constitutes practicing medicine, meaning that MDI violates the corporate practice of medicine doctrine if the technical and professional components are not divisible.
The Minnesota Supreme Court has not directly addressed whether MRI services are separable into technical and professional components. In considering this unresolved state law question, the federal district court predicted that the Minnesota Supreme Court would hold the technical and professional components are divisible. The court noted that no Minnesota precedent suggests the components of the MRI process are inseparable, and Minnesota statutes concerning diagnostic-imaging facilities seem to contemplate lay ownership. The court concluded that Minnesota law suggests that some parts of MRI services need not be performed or controlled by a physician. Further, the court noted that MDI’s use of global billing (billing for taking and interpreting MRI scans together) does not demonstrate inseparability of the technical and professional components of the MRI process. In reaching this conclusion, the court pointed to the widespread use of global billing in the industry.
B. Performing the Technical Component Does Not Violate the Corporate Practice of Medicine Doctrine.
After finding the technical and professional components of MRI scans are separable, the court decided that MDI does not violate the corporate practice of medicine doctrine by performing only the technical component. The court noted that part of the justification underlying the corporate practice of medicine doctrine is that professionals must fulfill significant educational and training requirements, are part of a licensed profession, and exercise independent professional judgment. MDI technologists, however, do not have to satisfy state training or licensure requirements and have less substantial educational requirements than professions that fall within the corporate practice of medicine doctrine. The court analogized MDI technologists’ education, training, and accreditation requirements to those of physical therapists who Minnesota courts have excluded from the reach of the doctrine. Finally, the court noted that MDI technologists do not exercise any independent professional judgment. Accordingly, the court held that MDI does not violate the corporate practice of medicine doctrine by performing the technical component of MRI scans.
C. Contracting with Physicians to Interpret Scans Does Not Violate the Corporate Practice of Medicine Doctrine.
Next, the court held that MDI does not indirectly practice medicine through its arrangement with independent contractor physicians to interpret MRI scans. As the court noted, the practice of medicine includes diagnosis or analysis of a condition. An unlicensed person could violate the corporate practice of medicine doctrine by communicating a physician’s findings or advice to a patient for diagnostic or treatment purposes. MDI, however, did not directly transmit any scans or findings to patients and instead relayed scans and physician’s reports to referring medical providers. The court concluded that MDI’s relationship with independent contractors to interpret MRI scans with no direct communication by MDI to patients does not violate the corporate practice of medicine doctrine.
State Farm Mutual Automobile Insurance Company v. Mobile Diagnostic Imaging, Inc. examines the reach of Minnesota’s corporate practice of medicine doctrine as applied to MRI services. The case suggests that Minnesota law allows lay entities to perform technical aspects of diagnostic imaging processes, and that courts will look to the education, training, and accreditation requirements for performing a service when determining whether a violation of the corporate practice of medicine doctrine occurs. Finally, the case indicates that lay entities may contract with physicians to perform professional services if the entity does not communicate findings directly to patients.
Summer Associate Sarah Claypool provided significant assistance in the creation of this article.