Employment of Physical Therapists by Medical Corporations

When AB 1000 went into effect in January 2014, it was actually the combination of two bills: (1) AB 1000 for direct consumer access to physical therapy, and (2) AB 1003, sponsored by the California Medical Association, to permit professional medical corporations to employ physical therapists.
Since 2010, the California Physical Therapy Board had taken the position that a physical therapist could not be legally employed by a medical corporations. This was because medical corporations are professional corporations. And professional corporations typically employ professionals of the same ilk – i.e. dentists employing dentists, doctors employing doctors, etc. These professional corporations may employ individuals from a different profession, but the majority of the owners and/or employees of the professional corporation must be from the primary profession. For example, a medical corporation may employ other health care professionals (such as nurses), but the medical corporation must be majority-owned by physicians.
As to what types of professionals could be employed within a particular professional corporation, the statute governing it had been murky. Corporations Code, section 13401.5 had specified particular types of professionals that could own, direct, and manage within each professional corporation type. Prior to passing AB 1000, physical therapists were not listed therein and the Physical Therapy Board interpreted that as meaning that ownership, directors, management, AND employment were barred.
The legislation added physical therapy corporations to the Moscone-Knox Professional Corporations Act, thereby permitting licensed physicians, surgeons, doctors of podiatric medicine, acupuncturists, naturopathic doctors, occupational therapists, speech-language therapists, audiologists, nurses, psychologists and physician assistants to be shareholders, officers, directors, or employees of a professional physical therapy corporation. Furthermore, it permitted physical therapists to be shareholders, officers, directors, or employees of medical corporations, podiatric medical corporations, and naturopathic doctor corporations.
Before passage of the law, however, there was a concern that it would lead to abuse by allowing physicians to refer patients for physical therapy within their own practice rather than to an independent physical therapist. Therefore, the new law requires the referring practitioner to provide notice to the patient, orally and in writing, in at least 14-point type, and signed by the patient of the following:

  1. That the patient may seek physical therapy treatment services from a physical therapy provider of his or her choice who may not necessarily be employed by the medical corporation; and
  2. If the patient chooses to be treated by an employed physical therapist, any financial interest the referring practitioner has in the corporation.