The Office of General Counsel issued the following informal opinion on March 11, 2002, representing the position of the New York State Insurance Department.
Re: No-fault fees; Independent Contractor/Professional Corp.
May a physician, who is an independent contractor associated with a medical professional corporation ("PC"), sign a claim form which is submitted by the PC to a No-Fault insurer for benefits while such physician is representing himself or herself as the attending physician of the injured person being treated, in order for the PC to receive reimbursement for health services rendered under the No-Fault system in New York?
No. If the physician has contracted with the PC as an independent contractor, and is not an employee or shareholder of the PC, such physician may not represent himself or herself as an employee of the PC eligible to bill for health services rendered on behalf of the PC, under the New York Comprehensive Motor Vehicle Insurance Reparations Act ("No Fault" law), N. Y. Ins. Law Art. 51 (McKinney 2000), in accordance with N.Y. Comp. R. & Regs. tit. 11, § 65.15(j) (2001) (Regulation 68).
Attorney A represents a New York governmental entity involved in determining whether a physician has committed professional misconduct concerning billings under No-Fault. An internist, who had contracted with a PC as an independent contractor, ordered physical therapy services for a patient injured in an automobile accident, such services to be performed by a physical therapist employed by the PC. The internist signed the report as the attending physician for physical therapy services rendered by the PC, between May 20 and July 31, 1999. The PC included the report in its claim submission to the No-Fault insurer, billing under its corporate name. The internist is neither an officer nor shareholder of the PC, nor an employee of the PC.
The Departments analysis is based upon the specific facts as Attorney A has presented them, which states that the internist has entered into a contract with the PC to provide health services to patients and is deemed to be an independent contractor of the PC under the contract.
New York Business Corporation Law Article 15 (McKinney 2000) authorizes the incorporation of Professional Service Corporations. New York Business Corporation Law § 1504(a) (McKinney 2000) provides in pertinent part that "[n]o professional service corporation may render professional services except through individuals authorized by law to render such professional services as individuals."
New York Business Corporation Law § 1507 (McKinney 2000) restricts issuance of shares in a professional service corporation to individuals licensed to practice the profession and New York Business Corporation Law § 1511 (McKinney 2000) similarly restricts transfer of shares in the corporation. Therefore, medical PCs must be owned by licensed medical providers and services must be performed by licensed medical providers.
New York Business Corporation Law § 1515 (McKinney 2000) provides that the regulation of, inter alia, the health professions shall be in accordance with the Education Law. New York Education Law § 6509-a (McKinney 2000), which denominates fee sharing as unprofessional conduct, provides, inter alia, that the prohibition shall not be deemed to prohibit a professional service corporation from receiving or sharing in the fees earned by its shareholders and employees.
Therefore, a PC may bill for medical services rendered by the owner(s) of the PC and licensed employees of the PC under the supervision of the physician owner(s). A medical PC would be considered a "licensed provider" within the purview of Insurance Department Regulation 68 eligible for reimbursement for health services provided.
An insurer shall pay benefits for any element of loss, other than death benefits, directly to the applicant or, when appropriate, to the applicants parent or legal guardian or to any person legally responsible for necessities, or, upon assignment by the applicant or any of the aforementioned persons, shall pay the providers of services or the applicants employer directly. Death benefits shall be paid to the estate of the eligible injured person. (Emphasis added).
N. Y. Comp. R. & Regs., tit. 11, § 65.15(j) (2001) (Regulation 68).
An independent contractor is construed to be "[o]ne who, in exercising an independent employment, contracts to do certain work according to his or her own methods, and without being subject to the control of the employer. . . ." G.D. Searle & Co. v. Medicore Communications, Inc., 843 Fed Supp. 893 (S.D.N.Y. 1994).
Because of the lack of control, the principal is not usually held liable for the negligence of the independent contractor. Beck v. Woodward Affiliates, 226 App. Div. 2d 328, 640 N.Y.S. 2d 205 (2d Dept. 1996).
Therefore, the physician performing services as an independent contractor affiliated with the PC is limited to billing in his or her own name. When services are provided by an independent contractor affiliated with a PC, the PC is not entitled to receive reimbursement under the No-Fault law since it is not deemed to be the licensed provider of those services.
If the PC wished to modify its contractual arrangement with the independent contractor into a traditional employer-employee relationship, the internist may then sign reports in bill submissions for reimbursement on behalf of the PC. Otherwise, the PC and internist are bound by their legal arrangement established under the contract entered into and are required to honor it accordingly.
For further information you may contact Associate Attorney Jeffrey A. Stonehill at the New York City Office.