California Attorney General Rob Bonta has filed an amicus brief in a case involving a dispute between a fertility practice physician and a private equity-backed management services organization over alleged violations of California’s ban on the corporate practice of medicine, according to an April 4 news release.
The case, Art Center Holdings Inc. v. WCE CA Art, stems from a 2019 transaction in which physicians at a California fertility practice sold a 51% stake to Women’s Care Enterprises, a private equity-backed MSO, in exchange for cash and deferred consideration. The MSO was to provide nonclinical administrative services in exchange for fees. A dispute arose when the physicians alleged the MSO had overstepped its authority by exerting undue control over the medical practice, including installing a chief medical officer, and retaining the contractual right to remove the physician-owner and replace him with a physician of its choosing.
A trial court previously ruled that those contractual provisions violated California’s prohibition on the corporate practice of medicine, which has been in place for nearly a century. The case is now before the California 2nd District Court of Appeal.
In his brief, Mr.Bonta argued that when an unlicensed corporation holds the power to replace a physician-owner, it effectively owns the practice. Notably, the brief supports neither party, as both sides are seeking to weaken the corporate practice of medicine prohibition.
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