COLUMBIA PHYSICAL THERAPY v. BFOA

• Decision Date: 18 March 2010
• Docket Number: No. 81734-1.,81734-1.
• Court: Washington Supreme Court
• Parties: COLUMBIA PHYSICAL THERAPY, INC., P.S., Petitioner, v. BENTON FRANKLIN ORTHOPEDIC ASSOCIATES, P.L.L.C.; Benton Franklin Physical Therapy, Inc.; Thomas R. Burgdorff; Christopher A. Kontogianis; Arthur E. Thiel; David W. Fischer; Heather L. Phipps; Rodney Kump; Jay West; and Does 1 through 9, Respondents.

228 P.3d 1260

168 Wash.2d 421

COLUMBIA PHYSICAL THERAPY, INC., P.S., Petitioner, v. BENTON FRANKLIN ORTHOPEDIC ASSOCIATES, P.L.L.C.; Benton Franklin Physical Therapy, Inc.; Thomas R. Burgdorff; Christopher A. Kontogianis; Arthur E. Thiel; David W. Fischer; Heather L. Phipps; Rodney Kump; Jay West; and Does 1 through 9, Respondents.

No. 81734-1.

Supreme Court of Washington, En Banc.

Argued November 17, 2009.

Decided March 18, 2010.

COPYRIGHT MATERIAL OMITTED

Darrin E. Bailey, Danford Duncan Grant, Stafford Frey Cooper, P.C., Seattle, WA, Charles Kenneth Wiggins, Wiggins & Masters, P.L.L.C., Bainbridge Island, WA, for Petitioner.

Michael H. Church, Matthew Thomas Ries, Stamper Rubens, P.S., Spokane, WA, Howard R. Rubin, Katten Muchin Rosenman, Kenneth J. Pfaehler, Christopher L. Harlow, Sonnenschein, Nath & Rosenthal, L.L.P., Washington, DC, for Respondents.

Jay Allan Goldstein, Carmen R. Rowe Hoogkamer, Jay A. Goldstein Law Office, P.L.L.C., Olympia, WA, for amicus curiae Physical Therapy Association of Washington, Inc.

Kristiana Farris O'Brien, Scott Easter, Montgomery Purdue Blankinship & Austin, Seattle, WA, for amici curiae The Washington Academy of Eye Physicians and Surgeons, The American Medical Association, The American Society of Anesthesiologists, The Benton-Franklin County Medical Society, The Clark County Medical Society, The Northwest Academy of Otolaryngology, The Pierce County Medical Society, The Spokane County Medical Society, The Thurston-Mason County Medical Society, The Walla Walla Valley Medical Society, The Washington Academy of Family Physicians, The Washington Osteopathic Medical Association, The Washington Society of Physical Medicine & Rehabilitation, The Washington State Medical Association, The Washington State Medical Group Management Association, The Washington State Psychiatric Association, The Washington State Society of Anesthesiologists, The Yakima County Medical Society, Washington State Chiropractic Association and Whatcom County Medical Society

Emily Studebaker, Garvey Schubert Barer, P.S., Seattle, WA, for amicus curiae Washington Ambulatory Surgery Center Association.

Leonard J. Feldman, Jason T. Morgan, Stoel Rives LLP, Seattle, WA, for amici curiae American Association of Orthopaedic Surgeons, American College of Surgeons, American Medical Society for Sports Medicine, American Urological Association.

Howard Mark Goodfriend, Edwards, Sieh, Smith & Goodfriend, P.S., Seattle, WA, John J. Bennett, Alexandria, VA, for amicus curiae American Physical Therapy Association.

OWENS, J.

¶ 1 Columbia Physical Therapy, Inc. (Columbia), a professional service corporation owned by a group of physical therapists, brought this action against Benton Franklin Orthopedic Associates (BFOA), a professional limited liability company owned by physicians and employing physical therapists. Columbia asserts that BFOA and its doctors and physical therapists are violating (1) the corporate practice of medicine doctrine, (2) The Professional Service Corporation Act (PSCA), chapter 18.100 RCW, (3) the antirebate statute, chapter 19.68 RCW, and (4) the Consumer Protection Act (CPA), chapter 19.86 RCW. The statutory law has developed and evolved around the existing common law and carefully balances the competing interests at stake in the delivery of health care services. For the reasons discussed below, BFOA is entitled to summary judgment on Columbia's claims under the corporate practice of medicine doctrine, the PSCA, and the antirebate statute. We also affirm the trial court's denial of BFOA's summary judgment motion with respect to Columbia's CPA claim.

Facts

¶ 2 BFOA is a professional limited liability company owned by five members, all of whom are licensed to practice medicine in the state of Washington.¹ In 2003, three of these physicians served as the officers and exclusive shareholders of the newly incorporated Benton Franklin Physical Therapy, Inc. (BFPT). In 2004, BFPT ceased to operate as an independent corporation and began to operate as part of BFOA but continued to do business under the name Benton Franklin Physical Therapy.

¶ 3 BFOA currently employs three physical therapists at BFPT who work in a separate facility from the physicians. In 2006, BFOA referred approximately 33 percent of its patients to physical therapists at BFPT. This constituted around 86 percent of BFPT's clients. When referring patients to physical therapy, BFOA claims to advise patients, both verbally and in writing, of their ownership interest in BFPT and to provide patients with a list of other physical therapy providers. Columbia has produced some evidence that, when a patient told his BFOA physician that he wanted a referral to a physical therapist at Columbia, the physician said he could not provide a referral anywhere other than BFPT. Columbia also produced evidence that another patient asked a BFOA physician where to go with his physical therapy referral and the physician pointed to BFPT.

¶ 4 Columbia sued BFOA and its physician-members and physical therapists. Columbia's lawsuit consisted of four claims: (1) violation of the corporate practice of medicine doctrine, (2) violation of the PSCA, (3) violation of the antirebate statute, and (4) violation of the CPA. Columbia and BFOA both moved for summary judgment on each of the claims, except for the CPA claim, on which only BFOA moved for summary judgment. The trial court granted BFOA's motion for summary judgment on the PSCA claim and denied BFOA's motions for summary judgment on the CPA and antirebate statute claims. The trial court denied Columbia's motion for summary judgment with respect to the PSCA and the antirebate statute claims. The court declined to grant or deny either party's summary judgment motion on the application of the corporate practice of medicine claim. Pursuant to stipulation by the parties, the trial court certified the issues to the Court of Appeals, which denied review. The parties then filed a joint motion for review with this court, which we granted as to four issues. Columbia Physical Therapy, Inc. v. Benton Franklin Orthopedic Assocs., 164 Wash.2d 1008, 196 P.3d 130 (2008).

ISSUES

1. Does BFOA violate the corporate practice of medicine doctrine?

2. Does BFOA violate the PSCA?

3. Do BFOA's employees violate the antirebate statute?

4. Did BFOA violate the CPA?

STANDARD OF REVIEW

¶ 5 We review summary judgment orders and the meaning of statutes de novo. Wright v. Jeckle, 158 Wash.2d 375, 379, 144 P.3d 301 (2006) (meaning of statutes); Hisle v. Todd Pac. Shipyards Corp., 151 Wash.2d 853, 860, 93 P.3d 108 (2004) (summary judgment orders). Summary judgment is appropriate if "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." CR 56(c). All facts and reasonable inferences therefrom must be viewed in the light most favorable to the nonmoving party. Hisle, 151 Wash.2d at 860-61, 93 P.3d 108.

ANALYSIS

I. The Corporate Practice of Medicine Doctrine and the PSCA

¶ 6 Columbia asserts that BFOA has violated both the corporate practice of medicine doctrine and the PSCA. Though these are independent causes of action, they are closely related and we therefore combine our analysis of the two claims. Because we find that the PSCA authorizes BFOA's employment of physical therapists, there is no violation of either the PSCA or the corporate practice of medicine doctrine. As a result, Columbia's claims under the corporate practice of medicine doctrine and the PSCA both fail as a matter of law and BFOA is entitled to summary judgment.

¶ 7 The corporate practice of medicine doctrine provides that, absent legislative authorization, a business entity may not employ medical professionals to practice their licensed professions. This doctrine is derived of much broader principles "addressed by both the statutory and common law of Washington." Morelli v. Ehsan, 110 Wash.2d 555, 558, 756 P.2d 129 (1988). In the abstract, these broader principles are relatively straightforward. The practice of certain professions requires a license. See, e.g., RCW 18.71.021 (medicine); RCW 18.74.150 (physical therapy). A person or entity practices a profession by either directly engaging in statutorily defined conduct or by employing a licensed individual to engage in such conduct. See Morelli, 110 Wash.2d at 561, 756 P.2d 129; State ex rel. Standard Optical Co. v. Superior Court, 17 Wash.2d 323, 328-33, 135 P.2d 839 (1943). The legislature may, of course, authorize exceptions to this general scheme. This interpretation of the corporate practice of medicine doctrine is supported by legislative acquiescence, RCW 18.100.030(1) (stating that prior to the passage of the PSCA certain professional services could not be performed by corporations), and earlier precedent of this court, Deaton v. Lawson, 40 Wash. 486, 489-90, 82 P. 879 (1905); State ex rel. Lundin v. Merchs. Protective Corp., 105 Wash. 12, 17-18, 177 P. 694 (1919).

¶ 8 Two cases are instructive in understanding the application of the corporate practice of medicine doctrine: Standard Optical, which addresses a corporation employing an optometrist, and Morelli, which addresses a partnership employing a physician. In Standard Optical, a corporation employed a licensed optometrist, who engaged in the practice of optometry in the course of business. 17 Wash.2d at 325-26, 135 P.2d 839. The practice of optometry was limited by statute to licensed persons. Id. at 327, 135 P.2d 839. Though noting that the corporation exercised no control over the optometrist's professional judgment, this court nonetheless held that the corporation impermissibly engaged in the practice of optometry by employing the optometrist. Id. at 326, 328-33, 135 P.2d 839. As justification for its holding, this court cited a decision by the South Carolina Supreme Court, which argued that the commercialization of professions would destroy professional standards and...