AB 1000 and Corporate Practice in California: More than Meets the Eye—or Less?

by Buchalter

Buchalter Nemer Points & Authorities, Spring 2014

On the way to authorizing direct access to physical therapy, the California legislature may have broadly loosened the restrictions on numerous business arrangements imposed by California’s corporate practice ban. AB 1000, which went into effect on January 1, 2014, provides that patients no longer need a medical diagnosis and a referral to a physical therapist, but may directly self-refer for physical therapy treatments of up to 45 days or 12 visits (whichever comes first). AB 1000 states explicitly that it does not expand the scope of physical therapy practice and that payers are not required to provide coverage for direct access physical therapy services. Nonetheless, the bill represents the achievement of a long-held ambition of the physical therapy profession: licensed physical therapists may now market and provide services directly to the public, like other licensed professionals.

At the same time, the legislature gave physicians something they had been wanting for some time: the right to employ physical therapists in their practices. Medical groups had routinely provided physical therapy services in their offices through employed physical therapists until the California Physical Therapy Board announced in 2010 that such employment violated the corporate practice ban and constituted unprofessional conduct for a physical therapist, which conduct could lead to licensure action. Medical groups were understandably dismayed by this about face on the part of the Physical Therapy Board; having an employed physical therapist in the office was convenient, enhanced patient compliance and expanded the rehabilitation services the practice could offer. Further, the ability to bill for physical therapy services represented income to the practice. In order to restore the status quo ante 2010, AB 1000 added licensed physical therapists to the list of licensed professionals who could be officers, directors, minority shareholders and professional employees of medical corporations and podiatry corporations. It also added 10 categories of licensees who could be shareholders, officers, directors and professional employees of physical therapy corporations, including physicians and surgeons, podiatrists, acupuncturists, naturopathic doctors, registered nurses and psychologists.

AB 1000 went much further, however, by adding the following language to Corporations Code Section §13401.5, the primary section governing professional corporations in California: “This section does not limit employment by a professional corporation designated in this section of only those licensed professionals listed under each subdivision. Any person duly licensed under Division 2 (commencing with Section 500) of the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act may be employed to render professional services by a professional corporation designated in this section.” 

Until this amendment, §13401.5 had carefully listed out, for each specific type of professional corporation, all of the other licensed persons who could be officers, directors, minority shareholders and professional employees of a particular type of professional corporation. If a license category was not listed, a person holding that license could not provide professional services through that type of professional corporation. For example, dentists were not listed under medical corporations although physicians and surgeons were listed under dental corporations. That meant, until January 1, 2014, that a medical group could not employ a dentist even though a dental corporation could employ a physician. Further, no dentist could own shares in a medical corporation or serve on its board, even though a physician could own up to 49% of the stock of a dental corporation and be a member of its board of directors.

As a result of the language added to §13401.5 any of the listed professional corporations may now employ any licensed person and offer their services. In theory, as a result of AB 1000, a properly constituted audiology corporation, owned by licensed audiologists and speech-language pathologists as authorized by §13401.5(e), could open a clinic and offer medical services through employed physicians. This would represent a significant change in corporate practice as it relates to inter-license practice in California.

Licensees should be cautious in implementing this new authority, however. A number of previously existing statutes applicable to individual licensed professions appear to be in direct conflict with the current version of §13401.5. For example, Business and Professions Code §3109, applicable to optometrists, prohibits employment of optometrists except by optometric corporations or ophthalmologists (but not other medical specialties), in direct conflict with §13401.5. It is not clear which section would prevail if a medical corporation (other than one practicing ophthalmology) employed an optometrist, even though optometrists are listed among the authorized persons who may be officers, directors, minority owners or professional employees of a medical corporation.  Even more uncertain is the result if an optometrist were employed by a license category that does not explicitly list optometrists as permitted professional employees, such as a physician assistant corporation. Only time will tell how these conflicts will be resolved or whether AB 1000 represents a significant erosion of corporate practice in California.

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.

© Buchalter | Attorney Advertising

Written by:


Buchalter on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.