Top Four Legal Issues to Consider When Opening an Urgent Care Center

Each year in the United States, more than 150 million patient visits are made to urgent care centers for the treatment of acute illness and injury. This number is expected to rise as more Americans gain health coverage through the Affordable Care Act in the next few years. Other factors contributing to the growing prominence of urgent care facilities include the lack of primary care physicians, emergency room delays and treatment costs. According to The Urgent Care Association of America, approximately 600 new urgent care centers came online in 2011, with the total number of urgent care facilities growing to 9,200 – an increase of 1,200 in just the past three years.

When planning to open an urgent care center, in addition to general business considerations, many of which are no different than other retail businesses – location, management, hours of operation n – several unique issues related to healthcare regulation and reimbursement should be taken into account, including corporate practice of medicine laws, state licensure matters, EMTALA requirements and reimbursement strategy.

Corporate Practice of Medicine

Some states prohibit the corporate practice of medicine. This doctrine, intended to protect the integrity of the medical profession by keeping it separate from the interest of corporations, prohibits employment of physicians by corporations. For example, in New York it is a felony for an unlicensed person to practice medicine, and corporations may not hold licenses to practice medicine. In practical terms, that means that an urgent care center in New York owned by a corporate entity may not employ physicians at the facility. Alternatively, Florida has no ban on the corporate practice of medicine. In Florida, a corporation, limited liability company or partnership may own an urgent care center and employ physicians to staff the facility.

When determining the structure of ownership for an urgent care center, whether the state prohibits the corporate practice of medicine must be considered. In many cases, a physician entrepreneur is the one who plans to open a center, making a potential prohibition on corporate practice irrelevant; however, if the owner will be any kind of corporate entity, whether the state has a prohibition can become an issue. Despite this potential hurdle, there are many legal ways for non-physicians to own and operate an urgent care center in a state that does not allow corporate practice, such as the formation of a medical holding company or the formation of a “friendly PC” model.

In the “friendly PC” model, a physician or physicians form a professional corporation (PC) under the state’s corporation laws. The PC provides the physicians to staff the center, and the non-phys ician-owned company desiring to open an urgent care center contracts with the PC to provide management services, including paying the physicians, handling billing and collection for services and employing non-physician personnel. The PC receives a management fee to provide these services.

State Licensure

Healthcare facilities are licensed differently from state to state. Currently, Arizona is the only state that specifically requires the licensure of urgent care centers. Florida licenses healthcare clinics, and urgent care centers may fall under the definition of healthcare clinics in that state. As urgent care centers become more prevalent, more states are likely to enact licensure requirements (and fees), so one of the first diligence steps should be to check with the Department of Health or analogous agency in the state to determine if the center must be licensed. In addition to a state license for the center, it will need a CLIA certificate or CLIA Certificate of Waiver if it offers certain clinical laboratory testing; an X-ray permit or registration if it performs on-site X-ray services; or other licenses depending on the state and what services are offered. The state’s Department of Health or similar agency can usually provide information on these types of licenses and permits.

EMTALA

Because urgent care centers often provide what some consider emergency care, whether an urgent care center must comply with the requirements of EMTALA (the Emergency Medical Treatment and Labor Act) is a frequently asked question. Generally speaking, the answer is no. Under EMTALA, hospitals with dedicated emergency departments must provide certain services to patients who present at the emergency room, regardless of the patient’s ability to pay. The hospital must provide a medical screening examinat ion to determine whether an emergency medical condition exists and then must treat the patient or stabilize the patient so he or she may be transferred.

If an urgent care center is not owned in whole or in part by a hospital, it is not subject to EMTALA and, as a general rule; there is no obligation to treat patients who arrive at the center. It is a good idea for the center to have a policy on how to handle patients who are not able to pay for services, but the center is not required to treat such patients under EMTALA. If a facility is a department of a hospital on the hospital campus, then the center must comply with EMTALA obligations. For urgent care centers owned by hospitals or in joint ventures with hospitals, EMTALA requirements must be carefully researched to ensure compliance with the regulations.

Reimbursement Considerations

The final critical path issue in opening an urgent care center is contracting and credentialing wit h payors for reimbursement. To be economically viable, most centers will likely want to accept reimbursement by insurance companies. The first step is to determine the payors from which the center will accept payment. Getting on a payor’s approved list can be an extended process, so this process should be started as soon as possible. Contracting with insurance companies is required so that a plan’s beneficiaries can visit the center and their insurance company will pay for the visit. Be aware that different payors, and possibly different plans with the same payors, will reimburse different amounts for urgent care services. Practitioners whose services will be billed by the center must be credentialed with the insurance company. The contracting and credentialing process are specific to each payor, but all will take considerable time. It is a good idea to contact the insurance company’s contracting department as soon as there is a reasonable intention to open an urge nt care center.

Contracting with governmental payors – Medicare, Medicaid, and TRICARE for military benefits – can also have a long lead time. Payment from governmental payors will typically cover services retroactive to a requested date, but it can become a cash flow issue if applications aren’t approved until after the center opens. Governmental payor rates are typically lower than private insurers, but depending on the centers target population, it may be necessary to accept them.

As with opening any business, especially one in the healthcare services arena, there are many issues to consider, but addressing the four critical path items discussed above are essential steps in opening and operating a successful urgent care center.

Matthew Burnstein is a partner and the chairman of the Board at Waller Lansden Dortch & Davis. His legal practice focuses on the acquisition, divestiture, syndication and finance of healthcare businesses ranging from public companies to startups. His extensive experience includes transactions involving hospitals, outpatient facilities, behavioral healthcare facilities and physician joint ventures. Robert Harris is a partner at Waller Lansden Dortch & Davis, where he advises healthcare companies, private equity firms, banks and healthcare specialty lenders in strategic acquisitions, investments and complex commercial finance transactions. In the past five years, he has helped arrange more than $3 billion in financings for healthcare companies. www.wallerlaw.com.

 

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