Texas Rural Hospitals Given Authority to Directly Employ Physicians

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While Texas remains one of only five states that continues to enforce a prohibition on the corporate practice of medicine, on Thursday, May 12, 2011, Governor Rick Perry signed a bill into law that now permits critical access hospitals, sole community hospitals, and hospitals in counties with a population of 50,000 or less to directly employ physicians.

The prohibition of the corporate practice of medicine in Texas hasbeen in place since the early 20th century and generally prohibits physicians from being employed by hospitals or other non-physician owned businesses. Throughout the years, however, certain exceptions have been carved out that permit the employment of physicians by certain entities. These exceptions include medical centers connected to state universities or state hospitals and non-profit health organizations certified by the Texas Medical Board. Additionally, the legislature has allowed approximately 12 individual hospital districts to change their enabling legislation to employ physicians. Effective immediately, these exceptions now also include critical access hospitals, sole community hospitals, and rural hospitals.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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