Albany Medical College v. McShane

• Decision Date: 29 November 1984
• Citation: 481 N.Y.S.2d 917,104 A.D.2d 119
• Parties: , 21 Ed. Law Rep. 958 ALBANY MEDICAL COLLEGE, Appellant, v. Richard H. McSHANE, Respondent.
• Court: New York Supreme Court — Appellate Division

Page 917

481 N.Y.S.2d 917

104 A.D.2d 119, 21 Ed. Law Rep. 958

ALBANY MEDICAL COLLEGE, Appellant, v. Richard H. McSHANE, Respondent.

Supreme Court, Appellate Division Third Department.

Nov. 29, 1984.

Bond, Schoeneck & King, Albany (John A. Beach, Ronald C. Berger and Joseph P. Van De Loo, Albany, of counsel), for appellant.

O'Connell & Aronowitz, P.C., Albany (Cornelius D. Murray and Leonard R. Kershaw, Albany, of counsel), for respondent.

Cahill, Gordon & Reindel, New York City (Floyd Abrams and Andrew Dash, New York City, of counsel), for Associated Medical Schools of N.Y. and another, amici curiae.

Before MAIN, J.P., and WEISS, MIKOLL, YESAWICH and HARVEY, JJ.

WEISS, Judge.

This case raises the questions of whether a State-chartered medical school may share in the fees from patient care generated by physicians who are faculty members, and whether the medical and financial records pertaining to such patients belong to the school. We think the answer to both questions is yes and, accordingly, reverse the order and judgment of Special Term which granted defendant's motion for summary judgment dismissing the complaint.

In this lawsuit, plaintiff is suing defendant, who had been employed for six and one-half years commencing in 1977 to teach, research and run the patient-care program in its division of plastic surgery until December 30, 1983, when he disassociated himself from the school and began his own private plastic surgery practice. Plaintiff seeks to recover all books and records kept in the operation of its division of plastic surgery, including patient records, office equipment and supplies, and fees and revenues from patient care allegedly diverted by defendant. Defendant's answer, which contains an affirmative defense based upon a violation of law prohibiting fee splitting with persons or entities unlicensed to practice medicine, was accompanied by a summary judgment motion to dismiss the complaint. Special Term, in granting the motion, held that plaintiff was not licensed to practice medicine and, therefore, could have no patients, could not split fees nor maintain custody and control over patient records. This appeal by plaintiff ensued.

It is important to recognize that almost 85% of the medical schools in the United States, both public and private, utilize clinical practice plans whereby faculty physicians engage in treatment of patients with limitations on their income imposed by the school (see Kountz v. State Univ. of N.Y., 53 A.D.2d 856, 385 N.Y.S.2d 362, on remand 89 Misc.2d 483, 391 N.Y.S.2d 942, revd 61 A.D.2d 835, 402 N.Y.S.2d 426, on remand 109 Misc.2d 319, 324, 326-327, 437 N.Y.S.2d 868, affd 87 A.D.2d 605, 450 N.Y.S.2d 416). It appears that each of the 13 medical schools in this State has a faculty practice plan in place. Moreover, both the Legislature and the courts have recognized the importance of clinical programs in hospitals and medical schools as a necessary part of medical education. As far back as the year 1908, the Court of Appeals held the statutory prohibitions against the practice of medicine without lawful registration, or by any person not a registered physician, were not intended to apply and could not reasonably be held to apply to hospitals, dispensaries and similar corporate institutions, which by the express provisions of other statutes and their corporate charters were authorized to carry on the practice of medicine (People v. Woodbury Dermatological Inst., 192 N.Y. 454, 457, 85 N.E. 697). Similarly, the Legislature has recognized the need to exempt students from licensure requirements when participating in clinical programs in hospitals (Education Law, § 6526, subd. 8), and has assisted in the creation of a faculty practice plan at a State medical school (see Education Law, former §§ 385-a-385-i, repealed by L.1982, ch. 924, § 3). ^*

The issue thus distills to whether this plaintiff requires a license to practice medicine in order to conduct clinical programs and collect fees derived therefrom. Defendant's argument is that without a license, plaintiff's clinical faculty practice plan is illegal and unenforceable because it provides for fee splitting in violation of section 6509-a of the Education Law and 8 NYCRR 29.1(b)(4). Defendant and Special Term relied heavily upon United Calendar Mfg. Corp. v. Huang, 94 A.D.2d 176, 463 N.Y.S.2d 497, which held that a business corporation operating a facility for medical and dental care was guilty of illegal practice of medicine and prohibited under section 6509-a of the Education Law from splitting fees with the doctors and dentists it employed. The United Calendar case, as well as Granada Bldgs. v. City of Kingston, 58 N.Y.2d 705, 458 N.Y.S.2d 906, 444 N.E.2d 1325, and Paley v. Copake Lake Dev. Corp., 95 A.D.2d 903, 463 N.Y.S.2d 910, cited by Special Term, are inapposite in that each involved a profit-making...