Joseph v. S.C. Dep't of Labor

• Decision Date: 14 September 2016
• Docket Number: Opinion No. 27666,Appellate Case No. 2014–001115
• Citation: 790 S.E.2d 763,417 S.C. 436
• Parties: Kristin Joseph, P.T., Thomas N. Joseph, M.D., and William G. McCarthy, M.D., Appellants, v. South Carolina Department of Labor, Licensing and Regulation, South Carolina Board of Physical Therapy, Respondents, and South Carolina Chapter, American Physical Therapy Association, Joseph M. McKowen, PT, Sabrina Queen Bridges, PTA, and Amalia W. Kirby, PTA, Respondents.
• Court: South Carolina Supreme Court

417 S.C. 436
790 S.E.2d 763

Kristin Joseph, P.T., Thomas N. Joseph, M.D., and William G. McCarthy, M.D., Appellants,
v.
South Carolina Department of Labor, Licensing and Regulation, South Carolina Board of Physical Therapy, Respondents,
and
South Carolina Chapter, American Physical Therapy Association, Joseph M. McKowen, PT, Sabrina Queen Bridges, PTA, and Amalia W. Kirby, PTA, Respondents.

Appellate Case No. 2014–001115
Opinion No. 27666

Supreme Court of South Carolina.

Heard February 19, 2015
Filed September 14, 2016

M. Elizabeth Crum, of McNair Law Firm, P.A., of Columbia, for Appellants.

Monteith P. Todd, of Sowell Gray Stepp & Laffitte, L.L.C., of Columbia, S. Jahue Moore and John C. Bradley, Jr., both of Moore Taylor Law Firm, of West Columbia, N. Thomas Connally, III, of Hogan Lovells US LLP, of McLean, Virginia and John R. Devlin, Jr., of Devlin & Parkinson, P.A., of Greenville, for Respondents.

ACTING JUSTICE TOAL:

417 S.C. 442

This is the latest in a longstanding disagreement regarding how the practice of physical therapy should be regulated in South Carolina. The South Carolina Board of Physical Therapy (the Board) has sided with members of the profession who desire to prevent physical therapists (PTs) from providing treatment as direct employees of physicians. The Board has long sought to require PTs to provide their services directly to patients or through a practice group of PTs. However, other licensed healthcare professionals in South Carolina, such as occupational therapists, speech pathologists, and nurse practitioners may be employed by physicians. Thus, the PTs stand alone in South Carolina. Physicians' offices may not provide PT services by employing licensed PTs, and PTs may not provide services while employed by a physician or physicians' practice group.

With this background in mind, Kristin Joseph, a PT, and two orthopedic surgeons, Doctors Thomas N. Joseph and William G. McCarthy (collectively, Appellants) appeal the circuit court's order dismissing their claims challenging a 2011 position statement from the Board, which opined that within a group practice, if a PT or physical therapist assistant (PTA) provides services to a patient—at the request of another PT or PTA employed within the same practice—the act does not constitute a “referral” under section 40–45–110(A)(1) of the South Carolina Code, as construed in Sloan v. South Carolina Board of Physical Therapy Examiners , 370 S.C. 452, 636 S.E.2d 598 (2006).

417 S.C. 443

We overrule our decision in Sloan, and reverse the circuit court's order in this case.

Facts /Procedural History

This case arises from a 2011 position statement in which the Board interpreted the fee for referral prohibition contained in section 40–45–110(A)(1) of the South Carolina Code as being inapplicable to individual PTs' or associated PT groups' employment of other PTs or PTAs. Section 40–45–110(A)(1) allows the Board to take disciplinary action against a PT who

requests, receives, participates, or engages directly or indirectly in the dividing, transferring, assigning, rebating, or refunding of fees received for professional services or profits by means of a credit or other valuable consideration including, but not limited to, wages, an unearned commission, discount, or gratuity with a person who referred a patient, or with a relative or business associate of the referring person.

S.C. Code Ann. § 40–45–110(A)(1) (2011).

The 2011 Position Statement was the Board's second position statement interpreting section 40–45–110(A)(1). The Board first issued a position statement in 2004 (2004 Position Statement), endorsing an opinion of the South Carolina Attorney General, which concluded that a PT would violate section 40–45–110(A)(1) if he or she was employed by a physician or physician groups, and accepted wages for treatment of patients referred by the employing physician or group. See S.C. Atty. Gen. Op. dated March 30, 2004 (2004 WL 736934 ). Specifically, the Attorney General's opinion addressed two questions concerning the use of the word “person” in section 40–45–110(A)(1) as it relates to physicians. See id. It opined first that physicians

790 S.E.2d 767

were persons within the meaning of the statute, and that PTs could not be employed by physicians or physician groups and receive wages to treat patients referred by the physician or group for physical therapy services. Id.

Subsequent to the 2004 Position Statement, Dr. Allen Sloan, along with other physicians, PTs, and other medical professional associations, brought an action in circuit court seeking a declaratory judgment that a physician may lawfully employ a PT and refer patients to that PT. Sloan , 370 S.C. at 466, 636 S.E.2d at 605.

417 S.C. 444

Ultimately, the circuit court dismissed the plaintiffs' causes of actions. Id. On appeal, this Court affirmed the circuit court's ruling in a 3–2 decision. Id. at 485–86, 636 S.E.2d at 616.

The majority held that the circuit court correctly interpreted section 40–45–110(A)(1) as prohibiting in-practice referrals from a physician to a PT. Id. at 473, 636 S.E.2d at 609. The majority further found that the Board's formal endorsement of the Attorney General's opinion did not constitute improper rulemaking in violation of the Administrative Procedures Act (APA) because it was “nothing more than a policy or guidance statement which does not have the force or effect of law in any individual case.” Id. at 474, 636 S.E.2d at 610.

The majority rejected appellants' constitutional challenges to section 40–45–110(A)(1). Id. at 476–86, 636 S.E.2d at 611–16. The majority held that section 40–45–110(A)(1) did not violate the equal protection rights of PTs who wish to be employed by physicians who refer patients to them, because the Legislature had “a rational basis for defining the pertinent classification in this instance as the class of physical therapists [which was to avoid] overuse of physical therapy services and actual and potential conflicts of interest stemming from a physician's financial interest in the provision of therapy services.” Id. at 481–82, 636 S.E.2d at 613–14. The majority further held that “[t]he statute prohibiting employment relationships between physicians and physical therapists bears a reasonable relationship to a legitimate interest of government, and the Legislature has not engaged in an arbitrary or wrongful act in enacting the statute.” Id. at 484, 636 S.E.2d at 615. Finally, the majority found no procedural due process violation, as: (1) the hearing at issue was a regularly scheduled meeting during which the appellants' representatives were present to offer comments regarding their respective positions; (2) the Board voted in open session to adopt the Attorney General's opinion; and (3) the Board began enforcing the statute following a ninety-day grace period. Id. at 485, 636 S.E.2d at 615.

The dissent, however, would have held that the plain language of section 40–45–110(A)(1) does not prohibit all employee-employer relationships between a physician and PT. Id. at 486, 636 S.E.2d at 616 (Toal, C.J., dissenting). Although the

417 S.C. 445

dissent agreed that there had been no violation of the appellants' procedural due process rights, in the dissent's view, the majority's interpretation of the statute would result in a violation of the plaintiffs' rights to equal protection and due process. Id. (Toal, C.J., dissenting). Finally, the dissent would have found that the Board failed to comply with the APA in adopting the Attorney General's opinion, thereby promulgating an invalid regulation. Id. (Toal, C.J., dissenting).¹

On May 3, 2011, Robert Carpenter, a practicing PT, wrote a letter to the Board requesting that it issue a position statement addressing whether section 40–45–110(A)(1) prohibits: (1) a physical therapist from working for pay for another PT, PTA, or group of PTs when the PT or PTA refers a patient to another PT or PTA for physical therapy services; and (2) a PT or PTA from working for pay for a professional corporation owned by one or more licensed PTs when a PT owner or employee of the corporation refers a patient to the PT for physical therapy services.

790 S.E.2d 768

On June 2, 2011, Marilyn Swygert, the Chairman of the Board responded with a letter entitled: “Application of S.C. Code Ann. Sec. 40–45–110(A)(1) to Intra–Professional Interactions .” In the letter, Swygert stated that in her view, the answer to both of Carpenter's questions was “no.” During a regularly scheduled meeting on August 17, 2011, the Board voted to adopt the position stated in Swygert's letter. The Board subsequently posted a position statement (2011 Position Statement) on its website. The 2011 Position Statement provided, in pertinent part:

In a group practice, a [PT] or [PTA] providing services to a patient of that practice should not fall within this definition of a “referral.” The [PT] or [PTA] seeing a patient at the request of another [PT] in the same group does not constitute a “referral,” but is rather a [PT] or [PTA] providing

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