On June 11, 2019, the New York Court of Appeals issued an opinion in Andrew Carothers, M.D., P.C. v. Progressive Insurance Company, 2019 NY Slip Op 04643, holding that an insurer could withhold payments for medical services provided by professional corporations “when there is willful and material failure to abide by licensing and incorporation statutes” without a direct finding of fraud.  The court found that medical professional corporations (PCs) ceding too much control of management activities, including finances and operations, to a non-physician violates the Business Corporation law and the corporate practice of medicine doctrine, making the entity improperly incorporated, thus allowing an insurance company to withhold payment. While the scope of the Carothers case was limited to “no-fault” insurance reimbursement, this opinion is instructive on how New York courts may in the future examine the arrangements between PCs and management service organizations (MSOs).
Continue Reading New York Court of Appeals Holds that PCs that Cede Excessive Control to MSOs Violate the Corporate Practice of Medicine Doctrine