California hospitals prohibited from hiring doctors

hospitals will control doctors

California won't let hospitals hire doctors for fear they will turn them into puppets.

It is a little known fact that California is one of a handful of states that prohibits the direct employment of doctors by hospitals. While large urban areas can attract and support physician owned medical groups, rural areas of California have found it difficult to recruit and retain doctors to serve their populations. California allows physician employees at teaching hospitals, some community clinics, narcotic treatment programs, and certain non-profit organizations.

Corporations can be people, but not doctors

“In California, the practice of medicine is governed by the Medical Practice Act. Specifically, Business and Professions Code (B&P) Section 2052 states that practicing medicine without a valid license is unlawful. Medical licenses are issued only to individuals, not to businesses.” – Medical Board of California “SB 376: Direct Employment of Physicians Report to the Legislature” September 10, 2008. Technical wording prohibits corporations from employing doctors and potentially directing care.

Hospitals are devoid of compassion

The primary reason cited by physician lobbying groups against allowing hospitals to directly hire doctors is the need to prevent corporate interference with the practice of medicine. Particular issues revolve around corporations setting rules regarding diagnostic tests, referrals, patient treatments, the number of hours the physician must work or the number of patients that must be seen.

One of the primary opponents to hospital employed doctors is the California Medical Association. On their website under CMA Top Issues, “CMA fiercely defends California’s bar on the corporate practice of medicine, which prevents corporate interests from unduly influencing physicians’ professional judgments in the name of profit and to the detriment of patients. Hospitals and other corporate interests do not have the same ethical and moral obligation to the patient as a physician does; therefore, it is essential to maintain the firewall between medical decisions and the corporate bottom line.”

Rural communities need ways to attract Doctors

SB 376 established a pilot program that allowed rural community hospitals to hire doctors on staff.  Doctors were able to gain a level of security when hired by hospitals that they couldn’t necessarily achieve in private practice. This physician employment program ended in 2011. Subsequent legislation, AB 1360 (Swanson) Physicians and surgeons: employment, would authorize a health care district and a clinic owned or operated by a health care district to employ physicians and surgeons if the health care district’s service area includes a Medically Underserved Area (MUA) or a Medically Underserved Population (MUP). Similar in nature to the SB 376, this bill has not been acted upon.

A new level of health provider branding

The marketing of hospitals and physician groups often times blur the lines. Kaiser Permanente, for example, is the combination of Kaiser Foundation Health Plan and The Permanente Medical Group which is the doctor group. They collaborate with the Kaiser Foundation of Hospitals to create a unique federally recognized Health Maintenance Organization.

While not a HMO, Mercy Medical Group is a physician group that works with Dignity Health, formerly Catholic Healthcare West. Similarly, Sutter Health, a physician group, collaborates with the Sutter Hospital system. In these two instances the physician groups and hospitals contract with private insurance companies to cover the services for most of their patients.

The Hospital – Doctor “Firewall” may be crumbling

Even though there is a prohibition of hospitals directly hiring doctors, we have witnessed a progression of closer affiliation between doctors, hospitals and insurance companies. With the advent of Accountable Care Organizations under the ACA, healthcare reform, we will see even more collaboration between the three sectors that make our health care system function.


The Medical Board of California> Corporate Practice of Medicine