2009 California Business and Professions Code - Section 2400-2417 :: Article 18. Corporations

BUSINESS AND PROFESSIONS CODE
SECTION 2400-2417

2400.  Corporations and other artificial legal entities shall have
no professional rights, privileges, or powers. However, the Division
of Licensing may in its discretion, after such investigation and
review of such documentary evidence as it may require, and under
regulations adopted by it, grant approval of the employment of
licensees on a salary basis by licensed charitable institutions,
foundations, or clinics, if no charge for professional services
rendered patients is made by any such institution, foundation, or
clinic.

2401.  (a) Notwithstanding Section 2400, a clinic operated primarily
for the purpose of medical education by a public or private
nonprofit university medical school, which is approved by the
Division of Licensing or the Osteopathic Medical Board of California,
may charge for professional services rendered to teaching patients
by licensees who hold academic appointments on the faculty of the
university, if the charges are approved by the physician and surgeon
in whose name the charges are made.
   (b) Notwithstanding Section 2400, a clinic operated under
subdivision (p) of Section 1206 of the Health and Safety Code may
employ licensees and charge for professional services rendered by
those licensees. However, the clinic shall not interfere with,
control, or otherwise direct the professional judgment of a physician
and surgeon in a manner prohibited by Section 2400 or any other
provision of law.
   (c) Notwithstanding Section 2400, a narcotic treatment program
operated under Section 11876 of the Health and Safety Code and
regulated by the State Department of Alcohol and Drug Programs, may
employ licensees and charge for professional services rendered by
those licensees. However, the narcotic treatment program shall not
interfere with, control, or otherwise direct the professional
judgment of a physician and surgeon in a manner prohibited by Section
2400 or any other provision of law.
   (d) Notwithstanding Section 2400, a hospital owned and operated by
a health care district pursuant to Division 23 (commencing with
Section 32000) of the Health and Safety Code may employ a licensee
pursuant to Section 2401.1, and may charge for professional services
rendered by the licensee, if the physician and surgeon in whose name
the charges are made approves the charges. However, the hospital
shall not interfere with, control, or otherwise direct the physician
and surgeon's professional judgment in a manner prohibited by Section
2400 or any other provision of law.

2401.1.  (a) The Legislature finds and declares as follows:
   (1) Due to the large number of uninsured and underinsured
Californians, a number of California communities are having great
difficulty recruiting and retaining physicians and surgeons.
   (2) In order to recruit physicians and surgeons to provide
medically necessary services in rural and medically underserved
communities, many district hospitals have no viable alternative but
to directly employ physicians and surgeons in order to provide
economic security adequate for a physician and surgeon to relocate
and reside in their communities.
   (3) The Legislature intends that a district hospital meeting the
conditions set forth in this section be able to employ physicians and
surgeons directly, and to charge for their professional services.
   (4) The Legislature reaffirms that Section 2400 provides an
increasingly important protection for patients and physicians and
surgeons from inappropriate intrusions into the practice of medicine,
and further intends that a district hospital not interfere with,
control, or otherwise direct a physician and surgeon's professional
judgment.
   (b) A pilot project to provide for the direct employment of a
total of 20 physicians and surgeons by qualified district hospitals
is hereby established in order to improve the recruitment and
retention of physicians and surgeons in rural and other medically
underserved areas.
   (c) For purposes of this section, a qualified district hospital
means a hospital that meets all of the following requirements:
   (1) Is a district hospital organized and governed pursuant to the
Local Health Care District Law (Division 23 (commencing with Section
32000) of the Health and Safety Code).
   (2) Provides a percentage of care to Medicare, Medi-Cal, and
uninsured patients that exceeds 50 percent of patient days.
   (3) Is located in a county with a total population of less than
750,000.
   (4) Has net losses from operations in fiscal year 2000-01, as
reported to the Office of Statewide Health Planning and Development.
   (d) In addition to the requirements of subdivision (c), and in
addition to other applicable laws, a qualified district hospital may
directly employ a licensee pursuant to subdivision (b) if all of the
following conditions are satisfied:
   (1) The total number of physicians and surgeons employed by all
qualified district hospitals under this section does not exceed 20.
   (2) The medical staff and the elected trustees of the qualified
district hospital concur by an affirmative vote of each body that the
physician and surgeon's employment is in the best interest of the
communities served by the hospital.
   (3) The licensee enters into or renews a written employment
contract with the qualified district hospital prior to December 31,
2006, for a term not in excess of four years. The contract shall
provide for mandatory dispute resolution under the auspices of the
board for disputes directly relating to the licensee's clinical
practice.
   (4) The total number of licensees employed by the qualified
district hospital does not exceed two at any time.
   (5) The qualified district hospital notifies the board in writing
that the hospital plans to enter into a written contract with the
licensee, and the board has confirmed that the licensee's employment
is within the maximum number permitted by this section. The board
shall provide written confirmation to the hospital within five
working days of receipt of the written notification to the board.
   (e) The board shall report to the Legislature not later than
October 1, 2008, on the evaluation of the effectiveness of the pilot
project in improving access to health care in rural and medically
underserved areas and the project's impact on consumer protection as
it relates to intrusions into the practice of medicine.
   (f) Nothing in this section shall exempt the district hospital
from any reporting requirements or affect the board's authority to
take action against a physician and surgeon's license.
   (g) This section shall remain in effect only until January 1,
2011, and as of that date is repealed, unless a later enacted statute
that is enacted before January 1, 2011, deletes or extends that
date.

2402.  The provisions of Section 2400 do not apply to a medical or
podiatry corporation practicing pursuant to the Moscone-Knox
Professional Corporation Act (Part 4 (commencing with Section 13400)
of Division 3 of Title 1 of the Corporations Code) and this article,
when such corporation is in compliance with the requirements of these
statutes and all other statutes and regulations now or hereafter
enacted or adopted pertaining to such corporations and the conduct of
their affairs.

2406.  A medical corporation or podiatry corporation is a
corporation which is authorized to render professional services, as
defined in Sections 13401 and 13401.5 of the Corporations Code, so
long as that corporation and its shareholders, officers, directors
and employees rendering professional services who are physicians,
psychologists, registered nurses, optometrists, podiatrists or, in
the case of a medical corporation only, physician assistants, are in
compliance with the Moscone-Knox Professional Corporation Act, the
provisions of this article and all other statutes and regulations now
or hereafter enacted or adopted pertaining to the corporation and
the conduct of its affairs.
   With respect to a medical corporation or podiatry corporation, the
governmental agency referred to in the Moscone-Knox Professional
Corporation Act is the Division of Licensing.

2407.  A medical or podiatry corporation shall be subject to the
provisions of Sections 2285 and 2415.

2408.  Except as provided in Sections 13401.5 and 13403 of the
Corporations Code, each shareholder, director and officer of a
medical or podiatry corporation, except an assistant secretary or an
assistant treasurer, shall be a licensed person as defined in Section
13401 of the Corporations Code.
   Notwithstanding the provisions of this section or Sections
13401.5, 13403, 13406, and 13407 of the Corporations Code, a
shareholder of a medical corporation which renders professional
services may be a medical corporation which has only one shareholder
who shall be a licensed person as defined in Section 13401 of the
Corporations Code. The shareholder of the latter corporation may be
an officer or director of the former corporation.
   Nothing in this section shall be construed as prohibiting a
nonlicensed person from using the business titles of executive vice
president, chief executive officer, executive secretary, or any other
title denoting an administrative function within the professional
corporation.

2409.  The income of a medical and podiatry corporation attributable
to professional services rendered while a shareholder is a
disqualified person, as defined in Section 13401 of the Corporations
Code, shall not in any manner accrue to the benefit of such
shareholder or his or her shares in such a professional corporation.

2410.  A medical or podiatry corporation shall not do or fail to do
any act the doing of which or the failure to do which would
constitute unprofessional conduct under any statute or regulation now
or hereafter in effect. In the conduct of its practice, it shall
observe and be bound by such statutes and regulations to the same
extent as a licensee under this chapter.

2411.  Notwithstanding any other provision of law, the offering and
operation by a medical corporation of a health care service plan
licensed pursuant to the provisions of Chapter 2.2 (commencing with
Section 1340) of Division 2 of the Health and Safety Code is hereby
authorized. For such purpose a medical corporation may employ, or
enter into contracts or other arrangements with, any person or
persons authorized to practice any of the healing arts, but no such
employment, contract, or arrangement shall provide for the rendering,
supervision, or control of professional services other than as
authorized by law.

2412.  The Division of Licensing may adopt and enforce regulations
to carry out the purposes and objectives of this article and the
Moscone-Knox Professional Corporation Act including regulations
requiring (a) that the bylaws of a medical or podiatry corporation
shall include a provision whereby the capital stock of such
corporation owned by a disqualified person (as defined in Section
13401 of the Corporations Code), or a deceased person, shall be sold
to the corporation or to the remaining shareholders of such
corporation within such time as such regulations may provide, and (b)
that a medical or podiatry corporation shall provide adequate
security by insurance or otherwise for claims against it by its
patients arising out of the rendering of professional services.

2413.  This article shall apply to medical corporations which have
physicians and surgeons licensed by the Osteopathic Medical Board of
California as shareholders, officers, and directors only to the
extent that this article is not in conflict with or inconsistent with
Section 2454.

2415.  (a) Any physician and surgeon or any doctor of podiatric
medicine, as the case may be, who as a sole proprietor, or in a
partnership, group, or professional corporation, desires to practice
under any name that would otherwise be a violation of Section 2285
may practice under that name if the proprietor, partnership, group,
or corporation obtains and maintains in current status a
fictitious-name permit issued by the Division of Licensing, or, in
the case of doctors of podiatric medicine, the California Board of
Podiatric Medicine, under the provisions of this section.
   (b) The division or the board shall issue a fictitious-name permit
authorizing the holder thereof to use the name specified in the
permit in connection with his, her, or its practice if the division
or the board finds to its satisfaction that:
   (1) The applicant or applicants or shareholders of the
professional corporation hold valid and current licenses as
physicians and surgeons or doctors of podiatric medicine, as the case
may be.
   (2) The professional practice of the applicant or applicants is
wholly owned and entirely controlled by the applicant or applicants.
   (3) The name under which the applicant or applicants propose to
practice is not deceptive, misleading, or confusing.
   (c) Each permit shall be accompanied by a notice that shall be
displayed in a location readily visible to patients and staff. The
notice shall be displayed at each place of business identified in the
permit.
   (d) This section shall not apply to licensees who contract with,
are employed by, or are on the staff of, any clinic licensed by the
State Department of Health Services under Chapter 1 (commencing with
Section 1200) of Division 2 of the Health and Safety Code or any
medical school approved by the division or a faculty practice plan
connected with that medical school.
   (e) Fictitious-name permits issued under this section shall be
subject to Article 19 (commencing with Section 2420) pertaining to
renewal of licenses, except the division shall establish procedures
for the renewal of fictitious-name permits every two years on an
anniversary basis. For the purpose of the conversion of existing
permits to this schedule the division may fix prorated renewal fees.
   (f) The division or the board may revoke or suspend any permit
issued if it finds that the holder or holders of the permit are not
in compliance with the provisions of this section or any regulations
adopted pursuant to this section. A proceeding to revoke or suspend a
fictitious-name permit shall be conducted in accordance with Section
2230.
   (g) A fictitious-name permit issued to any licensee in a sole
practice is automatically revoked in the event the licensee's
certificate to practice medicine or podiatric medicine is revoked.
   (h) The division or the board may delegate to the executive
director, or to another official of the board, its authority to
review and approve applications for fictitious-name permits and to
issue those permits.
   (i) The California Board of Podiatric Medicine shall administer
and enforce this section as to doctors of podiatric medicine and
shall adopt and administer regulations specifying appropriate
podiatric medical name designations.

2416.  Physicians and surgeons and doctors of podiatric medicine may
conduct their professional practices in a partnership or group of
physician and surgeons or a partnership or group of doctors of
podiatric medicine, respectively. Physician and surgeons and doctors
of podiatric medicine may establish a professional partnership that
includes both physician and surgeons and doctors of podiatric
medicine, if both of the following conditions are satisfied:
   (a) A majority of the partners and partnership interests in the
professional partnership are physician and surgeons or osteopathic
physician and surgeons.
   (b) Notwithstanding Chapter 2 (commencing with Section 15001) of
Title 1 of the Corporations Code, a partner who is not a physician
and surgeon shall not practice in the partnership or vote on
partnership matters related to the practice of medicine that are
outside his or her scope of practice. All partners may vote on
general administrative, management, and business matters.

2417.  (a) If the Department of Insurance has evidence that a
business is being operated in violation of this chapter, Part 4
(commencing with Section 13400) of Division 3 of the Corporations
Code, or Chapter 1 (commencing with Section 1200) of Division 2 of
the Health and Safety Code, and that the business may be in violation
of Section 1871.4 of the Insurance Code or Section 549 or 550 of the
Penal Code, then the department shall report the business, and any
physician and surgeon suspected of knowingly providing medical
services for that business relative to a violation of Section 1871.4
of the Insurance Code or Section 549 or 550 of the Penal Code, to the
appropriate regulatory agency. Upon receiving a report from the
Department of Insurance of a suspected violation, the regulatory
agency shall conduct an investigation. The requirement in subdivision
(a) of Section 1872.95 of the Insurance Code for investigations to
be conducted within existing resources does not apply to
investigations required by this section. The Department of Insurance
may consult with the appropriate regulatory department or agency
prior to making its report to that department or agency, and this
consultation shall not be deemed to require the department or agency
to conduct an investigation.
   (b) A physician and surgeon who practices medicine with a business
organization knowing that it is owned or operated in violation of
Section 1871.4 of the Insurance Code, Section 14107 or 14107.2 of the
Welfare and Institutions Code, or Section 549 or 550 of the Penal
Code shall have his or her license to practice permanently revoked.



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