Berlin v. Sarah Bush Lincoln Health Center
Annotate this Case
Berlin v. Sarah Bush Lincoln Health Center, No. 81059 (10/23/97)
NOTICE: Under Supreme Court Rule 367 a party has 21 days after the filing of the
opinion to request a rehearing. Also, opinions are subject to modification, correction
or withdrawal at anytime prior to issuance of the mandate by the Clerk of the Court.
Therefore, because the following slip opinion is being made available prior to the
Court's final action in this matter, it cannot be considered the final decision of the
Court. The official copy of the following opinion will be published by the Supreme
Court's Reporter of Decisions in the Official Reports advance sheets following final
action by the Court.
Docket No. 81059--Agenda 10--January 1997.
RICHARD B. BERLIN, JR., M.D., Appellee, v. SARAH BUSH LINCOLN
HEALTH CENTER, Appellant.
Opinion filed October 23, 1997.
JUSTICE NICKELS delivered the opinion of the court:
Plaintiff, Richard Berlin, Jr., M.D., filed a complaint for declaratory
judgment and a motion for summary judgment seeking to have a restrictive
covenant contained in an employment agreement with defendant, Sara Bush
Lincoln Health Center (the Health Center), declared unenforceable. The circuit
court of Coles County, finding the entire employment agreement unenforceable,
granted summary judgment in favor of Dr. Berlin. The circuit court reasoned that
the Health Center, as a nonprofit corporation employing a physician, was
practicing medicine in violation of the prohibition on the corporate practice of
medicine. A divided appellate court affirmed (279 Ill. App. 3d 447), and this court
granted the Health Center's petition for leave to appeal (155 Ill. 2d R. 315(a)).
The central issue involved in this appeal is whether the "corporate practice
doctrine" prohibits corporations which are licensed hospitals from employing
physicians to provide medical services. We find the doctrine inapplicable to
licensed hospitals and accordingly reverse.
BACKGROUND
The facts are not in dispute. The Health Center is a nonprofit corporation
duly licensed under the Hospital Licensing Act (210 ILCS 85/1 et seq. (West
1994)) to operate a hospital. In December 1992, Dr. Berlin and the Health Center
entered into a written agreement whereby the Health Center employed Dr. Berlin
to practice medicine for the hospital for five years. The agreement provided that
Dr. Berlin could terminate the employment relationship for any reason prior to the
end of the five-year term by furnishing the Health Center with 180 days advance
written notice of such termination. The agreement also contained a restrictive
covenant which prohibited Dr. Berlin from competing with the hospital by
providing health services within a 50-mile radius of the Health Center for two
years after the end of the employment agreement.
On February 4, 1994, Dr. Berlin informed the Health Center by letter that
he was resigning effective February 7, 1994, and accepting employment with the
Carle Clinic Association. After his resignation, Dr. Berlin immediately began
working at a Carle Clinic facility located approximately one mile from the Health
Center. Shortly thereafter, the Health Center sought a preliminary injunction to
prohibit Dr. Berlin from practicing at the Carle Clinic based on the restrictive
covenant contained in the aforesaid employment agreement.
The circuit court granted the Health Center's request and enjoined Dr.
Berlin from working for any competing health care provider within a 50-mile
radius of the Health Center. Subsequently, the appellate court reversed the circuit
court's order granting the preliminary injunction because Dr. Berlin's trial court
motion for substitution of judge had been improperly denied. The appellate court
remanded the action to the circuit court for further proceedings. Sarah Bush
Lincoln Health Center v. Berlin, 268 Ill. App. 3d 184 (1994).
Before any further action could be taken on the Health Center's request for
a preliminary injunction, Dr. Berlin filed a complaint for declaratory judgment and
a motion for summary judgment seeking to have the restrictive covenant declared
unenforceable. The Health Center filed a cross-motion for summary judgment
seeking enforcement of the restrictive covenant. The circuit court, finding the
entire employment agreement unenforceable, granted Dr. Berlin's motion for
summary judgment and denied the Health Center's cross-motion for summary
judgment. Relying primarily on this court's decision in People ex rel. Kerner v.
United Medical Service, Inc., 362 Ill. 442 (1936), the circuit court determined that
the Health Center, by hiring Dr. Berlin to practice medicine as its employee,
violated the prohibition against corporations practicing medicine. A divided
appellate court affirmed. The majority agreed with the circuit court's reliance on
Kerner and further determined that the Health Center did not fall under any
exception to its rule. 279 Ill. App. 3d at 455. The dissent contended that any
prohibition on corporations engaging in health services did not prohibit the Health
Center's employment of Dr. Berlin. 279 Ill. App. 3d at 461 (McCullough, J.,
dissenting).
This court granted the Health Center's petition for leave to appeal. 155 Ill.
2d R. 315(a). We granted the County of Cook, the Illinois Hospital and
Healthsystems Association, the Metropolitan Chicago Healthcare Council, the
American Hospital Association, and OSF HealthCare System leave to file amicus
curiae briefs in support of the Health Center. We granted leave to the American
Medical Association, the Illinois State Medical Society, the Illinois State Dental
Society, and several regional medical societies to file amicus curiae briefs in
support of Dr. Berlin's position. 155 Ill. 2d R. 345.
ISSUES
We are asked to consider two issues: (1) whether the expiration of the two-
year term of the restrictive covenant of the employment agreement renders this
appeal moot; and (2) whether the "corporate practice doctrine," as set forth by this
court in People ex rel. Kerner v. United Medical Service, Inc., 362 Ill. 442 (1936),
prohibits licensed hospitals from employing physicians to provide medical
services.
ANALYSIS
In appeals from summary judgment rulings, review is de novo. Delaney v.
McDonald's Corp., 158 Ill. 2d 465, 467 (1994). Summary judgment is to be
granted only if the pleadings, affidavits, depositions, admissions, and exhibits on
file, when reviewed in the light most favorable to the nonmovant, show that there
is no genuine issue as to any material fact and that the movant is entitled to
judgment as a matter of law. 735 ILCS 5/2--1005(c) (West 1994); Busch v.
Graphic Color Corp., 169 Ill. 2d 325, 333 (1996); Gilbert v. Sycamore Municipal
Hospital, 156 Ill. 2d 511, 517-18 (1993). Summary judgment is a drastic means
of disposing of litigation and therefore it must be clear that the moving party is
truly entitled to such remedy. Jackson Jordan, Inc. v. Leydig, Voit & Mayer, 158 Ill. 2d 240, 249 (1994).
Mootness
In a motion filed November 25, 1996, Dr. Berlin contended that, because
the two-year term of the restrictive covenant had concluded, there no longer
remains any justiciable issue for which this court could grant relief. This motion
was taken with the case.
The Health Center argues that this action is not moot because, if this court
determines that the employment agreement is enforceable, it has a viable cause of
action for breach of contract against Dr. Berlin. In the alternative, the Health
Center urges this court to find that this case falls within the public policy
exception to the mootness doctrine.
A case becomes moot where the occurrence of events since filing of the
appeal make it impossible for the reviewing court to render effectual relief.
Balmoral Racing Club, Inc. v. Illinois Racing Board, 151 Ill. 2d 367, 387 (1992).
A court should not decide a case where the judgment would have only an advisory
effect. People ex rel. Black v. Dukes, 96 Ill. 2d 273, 276 (1983). The court would
have, in effect, rendered an advisory opinion where a decision on the merits
cannot result in appropriate relief to the prevailing party. Balmoral Racing Club,
151 Ill. 2d at 387, citing George W. Kennedy Construction Co. v. City of Chicago,
112 Ill. 2d 70, 76 (1986). Further, this court does not review cases merely to set
precedent or guide future litigation. Madison Park Bank v. Zagel, 91 Ill. 2d 231,
235 (1982).
However, where a decision "could have a direct impact on the rights and
duties of the parties" there is life in the appeal. People ex rel. Bernardi v. City of
Highland Park, 121 Ill. 2d 1, 6-7 (1988). In addition, this court has recognized
that, where a decision could have "important consequences" for the parties before
the court, it is proper to entertain the appeal. Balmoral Racing Club, 151 Ill. 2d
at 387. A determination in this case that hospitals are prohibited from employing
physicians could mean that the Health Center must implement significant changes
in its working relationships with its medical staff. See Balmoral Racing Club, 151 Ill. 2d at 387-88. Moreover, such a finding could subject both the Health Center
and Dr. Berlin to disciplinary action and civil penalties for violations of the
Medical Practice Act of 1987 (225 ILCS 60/1 et seq. (West 1994)). In contrast,
a determination that hospitals may legally employ physicians may mean that the
Health Center may have various causes of actions against Dr. Berlin based upon
the contract. Therefore, we conclude that the appeal is not moot. We now consider
the various contentions regarding the corporate practice of medicine doctrine.
Hospital Employment of Physicians
The Health Center and its supporting amicus curiae contend that no
judicial determination exists which prohibits hospitals from employing physicians.
In support of this contention, the Health Center argues that this court has
acknowledged the legitimacy of such employment practices in past decisions. See,
e.g., Gilbert v. Sycamore Municipal Hospital, 156 Ill. 2d 511 (1993); Darling v.
Charleston Community Memorial Hospital, 33 Ill. 2d 326 (1965). In the
alternative, the Health Center contends that if a judicial prohibition on hospital
employment of physicians does exist, it should be overruled. In support of this
contention, the Health Center argues that the public policies behind such a
prohibition are inapplicable to licensed hospitals, particularly nonprofit hospitals.
The Health Center also contends that there is no statutory prohibition on
the corporate employment of physicians. The Health Center notes that no statute
has ever expressly stated that physicians cannot be employed by corporations. To
the contrary, the Health Center argues that other legislative actions recognize that
hospitals can indeed employ physicians. See, e.g., 210 ILCS 70/0.01 et seq. (West
1994) (Emergency Medical Treatment Act); 225 ILCS 62/1 et seq. (West 1994)
(Osteopathic and Allopathic Healthcare Discrimination Act).
Dr. Berlin and supporting amicus curiae contend that this court, in People
ex rel. Kerner v. United Medical Service, Inc., 362 Ill. 442 (1936), adopted the
corporate practice of medicine doctrine, which prohibits corporations from
employing physicians. Dr. Berlin concludes that the Health Center, as a nonprofit
corporation, is prohibited by the Kerner rule from entering into employment
agreements with physicians.
Dr. Berlin also disputes the Health Center's contention that public policy
supports creating an exception to the Kerner rule for hospitals. He argues that,
because no legislative enactment subsequent to the Kerner case expressly grants
hospitals the authority to employ physicians, the legislature has ratified the
corporate practice of medicine doctrine as the public policy of Illinois. At this
point, a review of the corporate practice of medicine doctrine is appropriate.
Corporate Practice of Medicine Doctrine
The corporate practice of medicine doctrine prohibits corporations from
providing professional medical services. Although a few states have codified the
doctrine, the prohibition is primarily inferred from state medical licensure acts,
which regulate the profession of medicine and forbid its practice by unlicensed
individuals. See A. Rosoff, The Business of Medicine: Problems with the
Corporate Practice Doctrine, 17 Cumb. L. Rev. 485, 490 (1987). The rationale
behind the doctrine is that a corporation cannot be licensed to practice medicine
because only a human being can sustain the education, training, and character-
screening which are prerequisites to receiving a professional license. Since a
corporation cannot receive a medical license, it follows that a corporation cannot
legally practice the profession. See 17 Cumb. L. Rev. at 491; see also Kerner, 362 Ill. at 454.
The rationale of the doctrine concludes that the employment of physicians
by corporations is illegal because the acts of the physicians are attributable to the
corporate employer, which cannot obtain a medical license. See M. Hall,
Institutional Control of Physician Behavior: Legal Barriers to Health Care Cost
Containment, 137 U. Pa. L. Rev. 431, 509-10 (1988). The prohibition on the
corporate employment of physicians is invariably supported by several public
policy arguments which espouse the dangers of lay control over professional
judgment, the division of the physician's loyalty between his patient and his
profitmaking employer, and the commercialization of the profession. See A.
Willcox, Hospitals and the Corporate Practice of Medicine, 45 Cornell L.Q. 432,
442-43 (1960); see also Kerner, 362 Ill. at 455-56, citing Dr. Allison, Dentist, Inc.
v. Allison, 360 Ill. 638 (1935).
Application of Doctrine in Illinois
This court first encountered the corporate practice doctrine in Dr. Allison,
Dentist, Inc. v. Allison, 360 Ill. 638 (1935). In Allison, the plaintiff corporation
owned and operated a dental practice. When defendant, a dentist formerly
employed by plaintiff, opened a dental office across the street from plaintiff's
location, plaintiff brought an action to enforce a restrictive covenant contained in
defendant's employment contract. Defendant's motion to dismiss the action was
granted on the grounds that plaintiff was practicing dentistry in violation of
section 18a of the Dental Practice Act of 1933 (Ill. Rev. Stat. 1935, ch. 91, par.
88(1)). In affirming the judgment of the lower court, this court stated:
"To practice a profession requires something more than the
financial ability to hire competent persons to do the actual work.
It can be done only by a duly qualified human being, and to
qualify something more than mere knowledge or skill is essential.
The qualifications include personal characteristics, such as honesty,
guided by an upright conscience and a sense of loyalty to clients
or patients, even to the extent of sacrificing pecuniary profit, if
necessary. These requirements are spoken of generically as that
good moral character which is a pre-requisite to the licensing of
any professional man. No corporation can qualify." Allison, 360 Ill. at 641-42.
Soon after the Allison decision, this court further clarified the corporate
practice doctrine as it pertains to dentists. In Winberry v. Hallihan, 361 Ill. 121
(1935), the plaintiff corporation operated a dental office in which it employed only
licensed dentists. Plaintiff filed an action to enjoin the state from enforcing the
Dental Practice Act against it, arguing that there was no danger to the public
health in a corporate-owned dental office where all services are performed by
licensed dentists. Winberry, 361 Ill. at 129.
This court observed that the Dental Practice Act provided that it was
unlawful "to conduct, maintain, operate, own or provide a dental office" under the
name of a corporation. See Ill. Rev. Stat. 1935, ch. 91, par. 88. In addition, the
court observed that section 18(a) of the Act provided that "[n]o corporation shall
practice dentistry or engage therein, or hold itself out as being entitled to practice
dentistry, or furnish dental services or dentists ***." (Emphasis added.) Ill. Rev.
Stat. 1935, ch. 91, par. 88(1).
This court rejected plaintiff's contention that the Dental Practice Act was
discriminatory because it denied corporations the right to operate a dental office
while there was no such prohibition pertaining to medical clinics and similar
professional establishments. In concluding, the court stated that it was "well settled
that the State may deny to corporations the right to practice professions"; however,
the legislature was not compelled to treat all professions in the same manner.
Winberry, 361 Ill. at 129-30.
The year following the Allison and Winberry decisions, this court addressed
the corporate practice doctrine as it pertained to medicine. People ex rel. Kerner
v. United Medical Service, Inc., 362 Ill. 442 (1936), involved a corporation which
operated a low-cost health clinic in which all medical services were rendered by
duly-licensed physicians. The State brought a quo warranto action against the
corporation, alleging it was illegally engaged in the practice of medicine in
violation of the Medical Practice Act (Ill. Rev. Stat. 1935, ch. 91, par. 1 et seq.).
The lower court found the corporation guilty and rendered the judgment of ouster
against it. Kerner, 362 Ill. at 444-45.
In affirming, this court rejected defendant's contention that the practice of
medicine does not encompass the corporate ownership of a health clinic where
treatment is rendered solely by licensed physician employees. The court observed
that section 24 of the Medical Practice Act specifically prohibits the performance
of certain acts without a medical license, including the diagnosis and treatment of
human ailments and the maintenance of an office for the examination and
treatment of human ailments. (Emphasis added.) Ill. Rev. Stat. 1935, ch. 91, par.
25. The court stated that "[t]he legislative intent manifest from a view of the entire
[Medical Practice Act] is that only individuals may obtain a license thereunder.
No corporation can meet the requirements of the statute essential to the issuance
of a license." Kerner, 362 Ill. at 454.
Prior to the instant action, apparently no Illinois court has applied the
corporate practice of medicine rule set out in People ex rel. Kerner v. United
Medical Service, Inc., 362 Ill. 442 (1936), or specifically addressed the issue of
whether licensed hospitals are prohibited from employing physicians. We therefore
look to other jurisdictions with reference to the application of the corporate
practice of medicine doctrine to hospitals.
Applicability of Doctrine to Hospitals in Other Jurisdictions
Although the corporate practice of medicine doctrine has long been
recognized by a number of jurisdictions, the important role hospitals serve in the
health care field has also been increasingly recognized. Accordingly, numerous
jurisdictions have recognized either judicial or statutory exceptions to the
corporate practice of medicine doctrine which allow hospitals to employ
physicians and other health care professionals. See, e.g., Cal. Bus. & Prof. Code
sec. 2400 (West 1990) (exception for charitable hospitals); Colo. Rev. Stat. sec.
25--3--103.7(2) (West Supp. 1997) (hospitals may employ physicians); Rush v.
City of St. Petersburg, 205 So. 2d 11 (Fla. App. 1967); St. Francis Regional
Medical Center, Inc. v. Weiss, 254 Kan. 728, 869 P.2d 606 (1994); People v. John
H. Woodbury Dermatological Institute, 192 N.Y. 454, 85 N.E. 697 (1908); see
generally 17 Cumb. L. Rev. at 494. A review of this authority reveals that there
are primarily three approaches utilized in determining that the corporate practice
of medicine doctrine is inapplicable to hospitals.
First, some states refused to adopt the corporate practice of medicine
doctrine altogether when initially interpreting their respective medical practice act.
These states generally determined that a hospital corporation which employs a
physician is not practicing medicine, but rather is merely making medical
treatment available. See, e.g., State ex rel. Sager v. Lewin, 128 Mo. App. 149,
155, 106 S.W. 581, 583 (1907) ("[H]ospitals are maintained by private
corporations, incorporated for the purpose of furnishing medical and surgical
treatment to the sick and wounded. These corporations do not practice medicine
but they receive patients and employ physicians and surgeons to give them
treatment."); State Electro-Medical Institute v. Platner, 74 Neb. 23, 29, 103 N.W. 1079, 1081 (1905) ("A hospital which is controlled by a corporation, and which
receives patients, and contracts to care for them and to furnish them with medical
attendance, does not by so doing practice medicine within the meaning of [the
Medical Practice Act]"); State Electro-Medical Institute v. State, 74 Neb. 40, 43,
103 N.W. 1078, 1079 (1905) ("The intention of the [Medical Practice Act] is that
one who undertakes to judge the nature of a disease *** must have certain
personal qualifications; and, if he does these things without having complied with
the law he is subject to its penalties. Making contracts is not practicing medicine.
Collecting the compensation therefor is not practicing medicine within the
meaning of this statute. No professional qualifications are requisite for doing these
things").
Under the second approach, the courts of some jurisdictions determined
that the corporate practice doctrine is inapplicable to nonprofit hospitals and health
associations. These courts reasoned that the public policy arguments supporting
the corporate practice doctrine do not apply to physicians employed by charitable
institutions. See, e.g., Group Health Ass'n v. Moor, 24 F. Supp. 445, 446 (D.D.C.
1938) (actions of nonprofit association which contracts with licensed physicians
to provide medical treatment to its members in no way commercializes medicine
and is not the practice of medicine), aff'd, 107 F.2d 239 (D.C. Cir. 1939); People
ex rel. State Board of Medical Examiners v. Pacific Health Corp., 12 Cal. 2d 156,
159-61, 82 P.2d 429, 431 (1938) (en banc) (same); Goldwater v. Citizens Casualty
Co., 7 N.Y.S.2d 242 (N.Y. Mun. Ct. 1938) (charitable hospital corporation
sanctioned by law to treat sick are exception to general rule that corporation may
not practice medicine), aff'd, 36 N.Y.S.2d 413 (N.Y. Sup. Ct. 1939); see generally
45 Cornell L.Q. at 466-79.
In the third approach, the courts of several states have determined that the
corporate practice doctrine is not applicable to hospitals which employ physicians
because hospitals are authorized by other laws to provide medical treatment to
patients. See, e.g., Rush, 205 So. 2d 11; Weiss, 254 Kan. 728, 869 P.2d 606; John
H. Woodbury Dermatological Institute, 192 N.Y. 454, 85 N.E. 697; Republic
Reciprocal Insurance Ass'n v. Colgin Hospital & Clinic, 123 Tex. 31, 65 S.W.2d 286 (1933).
We find the rationale of the latter two approaches persuasive. We decline
to apply the corporate practice of medicine doctrine to licensed hospitals. The
instant cause is distinguishable from Kerner, Allison, and Winberry. None of those
cases specifically involved the employment of physicians by a hospital. More
important, none of those cases involved a corporation licensed to provide health
care services to the general public. See Weiss, 254 Kan. at 746, 869 P.2d at 618.
Accordingly, we decline to extend the Kerner corporate practice rule to licensed
hospitals.
The corporate practice of medicine doctrine set forth in Kerner was not an
interpretation of the plain language of the Medical Practice Act. The Medical
Practice Act contains no express prohibition on the corporate employment of
physicians.[fn1] Rather, the corporate practice of medicine doctrine was inferred
from the general policies behind the Medical Practice Act. See Kerner, 362 Ill. at
454. Such a prohibition is entirely appropriate to a general corporation possessing
no licensed authority to offer medical services to the public, such as the appellant
in Kerner. However, when a corporation has been sanctioned by the laws of this
state to operate a hospital, such a prohibition is inapplicable.[fn2] Accord Rush,
205 So. 2d at 13-14; Weiss, 254 Kan. at 744-45, 869 P.2d at 617; John H.
Woodbury Dermatological Institute, 192 N.Y. at 457-58, 85 N.E. at 698-99;
Republic Reciprocal Insurance Ass'n, 123 Tex. at 34, 65 S.W.2d at 287.
The legislative enactments pertaining to hospitals provide ample support
for this conclusion. For example, the Hospital Licensing Act defines "hospital" as:
"any institution, place, building, or agency, public or
private, whether organized for profit or not, devoted primarily to
the maintenance and operation of facilities for the diagnosis and
treatment or care of *** persons admitted for overnight stay or
longer in order to obtain medical, including obstetric, psychiatric
and nursing, care of illness, disease, injury, infirmity, or
deformity." (Emphasis added.) 210 ILCS 85/3 (West Supp. 1995).
In addition, the Hospital Lien Act (770 ILCS 35/0.01 et seq. (West 1994))
provides "[e]very hospital rendering service in the treatment, care and
maintenance, of such injured person" a lien upon a patient's personal injury cause
of action. (Emphasis added.) Pub. Act 89--280, eff. January 1, 1996 (amending
770 ILCS 35/1 (West 1994))[fn3] Moreover, the Hospital Emergency Service Act
(210 ILCS 80/0.01 et seq. (West 1994)) requires "[e]very hospital *** which
provides general medical and surgical hospital services" to also provide
emergency services. (Emphasis added.) 210 ILCS 80/1 (West 1994); see also 210
ILCS 70/1 (West 1994) (requires licensed providers of professional health care,
including hospitals, to provide emergency medical treatment in life-threatening
situations, regardless of patient's ability to pay).
The foregoing statutes clearly authorize, and at times mandate, licensed
hospital corporations to provide medical services. We believe that the authority to
employ duly-licensed physicians for that purpose is reasonably implied from these
legislative enactments. Accord Weiss, 254 Kan. at 745, 869 P.2d at 618; Albany
Medical College v. McShane, 66 N.Y.2d 982, 983, 489 N.E.2d 1278, 1279, 499 N.Y.S.2d 376, 377 (1985); John H. Woodbury Dermatological Institute, 192 N.Y. at 458, 85 N.E. at 699; Republic Reciprocal Insurance Ass'n, 123 Tex. at 33-34,
65 S.W.2d at 287. We further see no justification for distinguishing between
nonprofit and for-profit hospitals in this regard. The authorities and duties of
licensed hospitals are conferred equally upon both entities.[fn4] Accord Weiss,
254 Kan. at 746, 869 P.2d at 618.
In addition, we find the public policy concerns which support the corporate
practice doctrine inapplicable to a licensed hospital in the modern health care
industry. The concern for lay control over professional judgment is alleviated in
a licensed hospital, where generally a separate professional medical staff is
responsible for the quality of medical services rendered in the facility. See 210
ILCS 85/4.5 (West Supp. 1995); 77 Ill. Adm. Code secs. 250.150, 250.310 (1997);
see also 45 Cornell L.Q. at 445-46.[fn5]
Furthermore, we believe that extensive changes in the health care industry
since the time of the Kerner decision, including the emergence of corporate health
maintenance organizations (see 215 ILCS 125/1--1 et seq. (West 1994) (Health
Maintenance Organization Act)), have greatly altered the concern over the
commercialization of health care. In addition, such concerns are relieved when a
licensed hospital is the physician's employer. Hospitals have an independent duty
to provide for the patient's health and welfare. See Gilbert, 156 Ill. 2d at 518
(recognizing hospital's duty to review and supervise the medical treatment of a
patient); Darling, 33 Ill. 2d at 332-33 (recognizing hospital's duty to assume
responsibility for the care of its patients); see also 410 ILCS 50/0.01 et seq. (West
1994) (Medical Patient Rights Act) (establishing right of patient to receive health
care from hospital which is consistent with sound medical practices); 45 Cornell
L.Q. at 446.
We find particularly appropriate the statement of the Kansas Supreme
Court that "[i]t would be incongruous to conclude that the legislature intended a
hospital to accomplish what it is licensed to do without utilizing physicians as
independent contractors or employees. *** To conclude that a hospital must do
so without employing physicians is not only illogical but ignores reality." Weiss,
254 Kan. at 745, 869 P.2d at 618. Accordingly, we conclude that a duly-licensed
hospital possesses legislative authority to practice medicine by means of its staff
of licensed physicians and is excepted from the operation of the corporate practice
of medicine doctrine.
Consequently, the employment agreement between the Health Center and
Dr. Berlin is not unenforceable merely because the Health Center is a corporate
entity. The circuit court has not yet adjudicated the substantive merits of the
instant employment agreement. Therefore, we remand this cause to the circuit
court to proceed with the original action in a manner consistent herewith.
CONCLUSION
For the reasons stated, the judgment of the appellate court affirming the
circuit court's award of summary judgment for plaintiff is reversed. The judgment
of the circuit court is reversed and the cause is remanded to the circuit court for
further proceedings not inconsistent with this opinion.
Appellate court judgment reversed;
circuit court judgment reversed;
cause remanded.
JUSTICE HARRISON, dissenting:
In People ex rel. Kerner v. United Medical Service, Inc., 362 Ill. 442
(1936), this court held that a corporation cannot employ physicians and collect
fees for their services because such conduct constitutes the practice of medicine
and the practice of medicine by corporations is prohibited. The court based its
conclusion on the Medical Practice Act, reasoning that under the statute, a license
is required to practice medicine and
"[t]he legislative intent manifest from a view of the entire law is
that only individuals may obtain a license thereunder. No
corporation can meet the requirements of the statute essential to the
issuance of a license." Kerner, 362 Ill. at 454.
More than 60 years have passed since Kerner was decided. If the
legislature believed that our construction of the Act was erroneous or that the rule
announced in Kerner should be changed, it could have amended the law to
authorize the practice of medicine by entities other than individuals. With limited
exceptions not applicable here, it has not done so. To the contrary, it has
continued to adhere to the requirements that medicine can only be practiced by
those who hold valid licenses from the state (225 ILCS 60/3 (West 1994)) and
that only individuals can obtain such licenses (225 ILCS 60/9, 11 (West 1994);
68 Ill. Adm. Code sec. 1285.20 et seq. (1997)).
The legislature is presumed to know the construction the courts have
placed upon a statute. When it amends a statute but does not alter a previous
interpretation by this court, we assume that the legislature intended for the
amendment to have the same interpretation previously given. Williams v.
Crickman, 81 Ill. 2d 105, 111 (1980). Moreover, where the legislature has
acquiesced in a judicial construction of the law over a substantial period of time,
as it did here, the court's construction becomes part of the fabric of the law, and
a departure from that construction by the court would be tantamount to an
amendment of the statute itself. Charles v. Seigfried, 165 Ill. 2d 482, 492 (1995).
The power to make such amendments does not lie in the courts. Independent
Voters v. Illinois Commerce Comm'n, 117 Ill. 2d 90, 100 (1987).
That the legislature has acquiesced in the judiciary's construction of the
Medical Practice Act is especially clear given recent developments in the law.
Under section 4.9 of the Regulatory Agency Sunset Act (5 ILCS 80/4.9 (West
1994)), the Medical Practice Act was scheduled for repeal on December 31, 1997,
unless the General Assembly enacted legislation providing for its continuation (5
ILCS 80/4 (West 1994)). On April 12, 1996, the appellate court filed its opinion
in this case, holding under Kerner that the Medical Practice Act bars the corporate
practice of medicine by hospitals. Subsequent to that decision, the General
Assembly passed and the Governor signed new legislation extending the Medical
Practice Act until January 1, year 2007. The new legislation made no substantive
changes to the licensing requirements and included no provisions contrary to the
appellate court's holding. See 225 ILCS 60/1 et seq. (West 1996). Because the
legislature is presumed to know the construction the statute has been given by the
courts, its reenactment of the law can only be understood as an endorsement of
the construction followed by the appellate court here. The corporate practice of
medicine by hospitals is prohibited.
As previously indicated, the Medical Practice Act does contain certain
exemptions. By its terms, it does not apply to:
"persons lawfully carrying on their particular profession or
business under any valid existing regulatory Act of this State, nor
to persons rendering gratuitous services in cases of emergency, nor
to persons treating human ailments by prayer or spiritual means as
an exercise or enjoyment of religious freedom." 225 ILCS 60/4
(West 1994).
In addition, the Act provides that
"a physician who holds an active license in another state or
a second year resident enrolled in a residency program accredited
by the Liaison Committee on Graduate Medical Education or the
American Osteopathic Association Committee on Post-Graduate
Education may provide medical services to patients in Illinois
during a bonafide emergency in immediate preparation for or
during interstate transit." 225 ILCS 60/3 (West 1994).
Hospitals do not fall within any of these exceptions. The majority argues
that additional exceptions can be implied based on other statutes enacted by the
General Assembly. It is a fundamental rule of statutory construction, however, that
the enumeration of certain things in a statute implies the exclusion of all other
things. In re Estate of Leichtenberg, 7 Ill. 2d 545, 552 (1956). Expressio unius est
exclusio alterius. Where, as here, a statute specifies exceptions to a general rule,
no exceptions other than those designated will be recognized. In re Estate of
Tilliski, 390 Ill. 273, 283 (1945); Allen v. Conken, 39 Ill. 2d 427, 429-30 (1968).
Wholly aside from this problem, none of the other statutes invoked by my
colleagues supports their position. The most that can be said of those statutes is
that they authorize hospitals to operate facilities for the diagnosis and care of
patients (see 210 ILCS 85/3 (West 1994)) and to make emergency service
available (210 ILCS 80/1 (West 1994)) regardless of ability to pay (210 ILCS
70/1 (West 1994)). Hospitals may also employ physician's assistants, provided
such assistants function under the supervision of a licensed physician. 225 ILCS
95/7 (West 1994). None of those endeavors, however, requires that hospitals have
the power to employ physicians directly or to charge patients for the physicians'
services. All may be accomplished by granting staff privileges to duly licensed
private physicians, and the Hospital Licensing Act presumes that hospitals will
staff their facilities in precisely that way. See 210 ILCS 85/10.4 (West 1994).
As noted earlier, the Medical Practice Act provides that it is inapplicable
to "persons lawfully carrying on their particular profession or business under any
valid existing regulatory Act of this State." 225 ILCS 60/4 (West 1994). Through
this exemption, the statute recognizes that activities and enterprises otherwise in
violation of the Medical Practice Act may be sanctioned by the General Assembly
through separate enactments. In accordance with the exemption, the General
Assembly has expressly authorized the employment of physicians by Health
Maintenance Organizations (HMOs) under the Health Maintenance Organization
Act (215 ILCS 125/1--1 et seq. (West 1994)). If the General Assembly had
intended to grant the same authority to hospitals, I believe that it would have been
similarly straightforward and unambiguous in doing so.
In addition to creating special rules for HMOs, the General Assembly has
also decided to allow physicians to employ various forms of business
organizations in practicing their profession. Physicians may incorporate in
accordance with the Professional Service Corporation Act (805 ILCS 10/1 et seq.
(West 1994)), they may form corporations to provide medical services under the
Medical Corporation Act (805 ILCS 15/1 et seq. (West 1994)), they have the right
to practice in a professional association organized pursuant to the Professional
Association Act (805 ILCS 305/1 et seq. (West 1994)), and they can organize and
operate limited liability companies to practice medicine under the recently
amended Limited Liability Company Act (805 ILCS 180/1--1 et seq. (West
1996)). Again, however, none of these provisions pertains to hospitals, and no
inference can be drawn from any of them that the General Assembly intended to
alter the prohibition against the corporate practice of medicine by hospitals.
For the foregoing reasons, I agree with the appellate court that the
corporate practice doctrine prohibited defendant, Sarah Bush Lincoln Health
Center, from entering into an employment agreement with Dr. Berlin. That
agreement, including its restrictive covenant, was void and unenforceable. Dr.
Berlin's motion for summary judgment was therefore properly granted, and the
judgment of the appellate court should be affirmed.
JUSTICE MILLER joins in this dissent.
[fn1] In contrast, the Dental Practice Act, applied by this court in Winberry and
Allison, expressly prohibited a corporation from furnishing dentists and owning
and operating a dental office. See Ill. Rev. Stat. 1935, ch. 91, pars. 88, 88(1).
[fn2] It is noteworthy that this court in Kerner observed that the defendant
corporation's activities violated section 24 of the Medical Practice Act, which
prohibited "the maintenance of an office for the examination and treatment of"
afflicted persons without a medical license. Kerner, 362 Ill. at 454. In contrast,
this same activity by a licensed hospital is expressly sanctioned. See 210 ILCS
85/3(A) (West 1994) (hospital is an institution "devoted primarily to the
maintenance and operation of facilities for the diagnosis and treatment or care" of
afflicted persons).
[fn3] Compare to the Physicians Lien Act (770 ILCS 80/0.01 et seq. (West 1994)),
which provides a similar lien to a physician "who renders services by way of
treatment to injured persons." 770 ILCS 80/1 (West 1994).
[fn4] Notably, the legislature has recently acted to further advance the equality of
treatment between nonprofit and for-profit hospitals. Compare 770 ILCS 35/1
(West 1994) (hospital liens provided only for nonprofit or county hospitals) with
Pub. Act 89--280, eff. January 1, 1996, amending 770 ILCS 35/1 (West 1994)
(recent amendment provides liens for all hospitals).
[fn5] Moreover, in the instant case, the employment agreement expressly provided
that the Health Center had no control or direction over Dr. Berlin's medical
judgment and practice, other than that control exercised by the professional
medical staff. Dr. Berlin has never contended that the Health Center's lay
management attempted to control his practice of medicine.
NOTICE: Under Supreme Court Rule 367 a party has 21 days after the filing of the
opinion to request a rehearing. Also, opinions are subject to modification, correction
or withdrawal at anytime prior to issuance of the mandate by the Clerk of the Court.
Therefore, because the following slip opinion is being made available prior to the
Court's final action in this matter, it cannot be considered the final decision of the
Court. The official copy of the following opinion will be published by the Supreme
Court's Reporter of Decisions in the Official Reports advance sheets following final
action by the Court.
Docket No. 81059--Agenda 10--January 1997.
RICHARD B. BERLIN, JR., M.D., Appellee, v. SARAH BUSH LINCOLN
HEALTH CENTER, Appellant.
Opinion filed October 23, 1997.
JUSTICE NICKELS delivered the opinion of the court:
Plaintiff, Richard Berlin, Jr., M.D., filed a complaint for declaratory
judgment and a motion for summary judgment seeking to have a restrictive
covenant contained in an employment agreement with defendant, Sara Bush
Lincoln Health Center (the Health Center), declared unenforceable. The circuit
court of Coles County, finding the entire employment agreement unenforceable,
granted summary judgment in favor of Dr. Berlin. The circuit court reasoned that
the Health Center, as a nonprofit corporation employing a physician, was
practicing medicine in violation of the prohibition on the corporate practice of
medicine. A divided appellate court affirmed (279 Ill. App. 3d 447), and this court
granted the Health Center's petition for leave to appeal (155 Ill. 2d R. 315(a)).
The central issue involved in this appeal is whether the "corporate practice
doctrine" prohibits corporations which are licensed hospitals from employing
physicians to provide medical services. We find the doctrine inapplicable to
licensed hospitals and accordingly reverse.
BACKGROUND
The facts are not in dispute. The Health Center is a nonprofit corporation
duly licensed under the Hospital Licensing Act (210 ILCS 85/1 et seq. (West
1994)) to operate a hospital. In December 1992, Dr. Berlin and the Health Center
entered into a written agreement whereby the Health Center employed Dr. Berlin
to practice medicine for the hospital for five years. The agreement provided that
Dr. Berlin could terminate the employment relationship for any reason prior to the
end of the five-year term by furnishing the Health Center with 180 days advance
written notice of such termination. The agreement also contained a restrictive
covenant which prohibited Dr. Berlin from competing with the hospital by
providing health services within a 50-mile radius of the Health Center for two
years after the end of the employment agreement.
On February 4, 1994, Dr. Berlin informed the Health Center by letter that
he was resigning effective February 7, 1994, and accepting employment with the
Carle Clinic Association. After his resignation, Dr. Berlin immediately began
working at a Carle Clinic facility located approximately one mile from the Health
Center. Shortly thereafter, the Health Center sought a preliminary injunction to
prohibit Dr. Berlin from practicing at the Carle Clinic based on the restrictive
covenant contained in the aforesaid employment agreement.
The circuit court granted the Health Center's request and enjoined Dr.
Berlin from working for any competing health care provider within a 50-mile
radius of the Health Center. Subsequently, the appellate court reversed the circuit
court's order granting the preliminary injunction because Dr. Berlin's trial court
motion for substitution of judge had been improperly denied. The appellate court
remanded the action to the circuit court for further proceedings. Sarah Bush
Lincoln Health Center v. Berlin, 268 Ill. App. 3d 184 (1994).
Before any further action could be taken on the Health Center's request for
a preliminary injunction, Dr. Berlin filed a complaint for declaratory judgment and
a motion for summary judgment seeking to have the restrictive covenant declared
unenforceable. The Health Center filed a cross-motion for summary judgment
seeking enforcement of the restrictive covenant. The circuit court, finding the
entire employment agreement unenforceable, granted Dr. Berlin's motion for
summary judgment and denied the Health Center's cross-motion for summary
judgment. Relying primarily on this court's decision in People ex rel. Kerner v.
United Medical Service, Inc., 362 Ill. 442 (1936), the circuit court determined that
the Health Center, by hiring Dr. Berlin to practice medicine as its employee,
violated the prohibition against corporations practicing medicine. A divided
appellate court affirmed. The majority agreed with the circuit court's reliance on
Kerner and further determined that the Health Center did not fall under any
exception to its rule. 279 Ill. App. 3d at 455. The dissent contended that any
prohibition on corporations engaging in health services did not prohibit the Health
Center's employment of Dr. Berlin. 279 Ill. App. 3d at 461 (McCullough, J.,
dissenting).
This court granted the Health Center's petition for leave to appeal. 155 Ill.
2d R. 315(a). We granted the County of Cook, the Illinois Hospital and
Healthsystems Association, the Metropolitan Chicago Healthcare Council, the
American Hospital Association, and OSF HealthCare System leave to file amicus
curiae briefs in support of the Health Center. We granted leave to the American
Medical Association, the Illinois State Medical Society, the Illinois State Dental
Society, and several regional medical societies to file amicus curiae briefs in
support of Dr. Berlin's position. 155 Ill. 2d R. 345.
ISSUES
We are asked to consider two issues: (1) whether the expiration of the two-
year term of the restrictive covenant of the employment agreement renders this
appeal moot; and (2) whether the "corporate practice doctrine," as set forth by this
court in People ex rel. Kerner v. United Medical Service, Inc., 362 Ill. 442 (1936),
prohibits licensed hospitals from employing physicians to provide medical
services.
ANALYSIS
In appeals from summary judgment rulings, review is de novo. Delaney v.
McDonald's Corp., 158 Ill. 2d 465, 467 (1994). Summary judgment is to be
granted only if the pleadings, affidavits, depositions, admissions, and exhibits on
file, when reviewed in the light most favorable to the nonmovant, show that there
is no genuine issue as to any material fact and that the movant is entitled to
judgment as a matter of law. 735 ILCS 5/2--1005(c) (West 1994); Busch v.
Graphic Color Corp., 169 Ill. 2d 325, 333 (1996); Gilbert v. Sycamore Municipal
Hospital, 156 Ill. 2d 511, 517-18 (1993). Summary judgment is a drastic means
of disposing of litigation and therefore it must be clear that the moving party is
truly entitled to such remedy. Jackson Jordan, Inc. v. Leydig, Voit & Mayer, 158 Ill. 2d 240, 249 (1994).
Mootness
In a motion filed November 25, 1996, Dr. Berlin contended that, because
the two-year term of the restrictive covenant had concluded, there no longer
remains any justiciable issue for which this court could grant relief. This motion
was taken with the case.
The Health Center argues that this action is not moot because, if this court
determines that the employment agreement is enforceable, it has a viable cause of
action for breach of contract against Dr. Berlin. In the alternative, the Health
Center urges this court to find that this case falls within the public policy
exception to the mootness doctrine.
A case becomes moot where the occurrence of events since filing of the
appeal make it impossible for the reviewing court to render effectual relief.
Balmoral Racing Club, Inc. v. Illinois Racing Board, 151 Ill. 2d 367, 387 (1992).
A court should not decide a case where the judgment would have only an advisory
effect. People ex rel. Black v. Dukes, 96 Ill. 2d 273, 276 (1983). The court would
have, in effect, rendered an advisory opinion where a decision on the merits
cannot result in appropriate relief to the prevailing party. Balmoral Racing Club,
151 Ill. 2d at 387, citing George W. Kennedy Construction Co. v. City of Chicago,
112 Ill. 2d 70, 76 (1986). Further, this court does not review cases merely to set
precedent or guide future litigation. Madison Park Bank v. Zagel, 91 Ill. 2d 231,
235 (1982).
However, where a decision "could have a direct impact on the rights and
duties of the parties" there is life in the appeal. People ex rel. Bernardi v. City of
Highland Park, 121 Ill. 2d 1, 6-7 (1988). In addition, this court has recognized
that, where a decision could have "important consequences" for the parties before
the court, it is proper to entertain the appeal. Balmoral Racing Club, 151 Ill. 2d
at 387. A determination in this case that hospitals are prohibited from employing
physicians could mean that the Health Center must implement significant changes
in its working relationships with its medical staff. See Balmoral Racing Club, 151 Ill. 2d at 387-88. Moreover, such a finding could subject both the Health Center
and Dr. Berlin to disciplinary action and civil penalties for violations of the
Medical Practice Act of 1987 (225 ILCS 60/1 et seq. (West 1994)). In contrast,
a determination that hospitals may legally employ physicians may mean that the
Health Center may have various causes of actions against Dr. Berlin based upon
the contract. Therefore, we conclude that the appeal is not moot. We now consider
the various contentions regarding the corporate practice of medicine doctrine.
Hospital Employment of Physicians
The Health Center and its supporting amicus curiae contend that no
judicial determination exists which prohibits hospitals from employing physicians.
In support of this contention, the Health Center argues that this court has
acknowledged the legitimacy of such employment practices in past decisions. See,
e.g., Gilbert v. Sycamore Municipal Hospital, 156 Ill. 2d 511 (1993); Darling v.
Charleston Community Memorial Hospital, 33 Ill. 2d 326 (1965). In the
alternative, the Health Center contends that if a judicial prohibition on hospital
employment of physicians does exist, it should be overruled. In support of this
contention, the Health Center argues that the public policies behind such a
prohibition are inapplicable to licensed hospitals, particularly nonprofit hospitals.
The Health Center also contends that there is no statutory prohibition on
the corporate employment of physicians. The Health Center notes that no statute
has ever expressly stated that physicians cannot be employed by corporations. To
the contrary, the Health Center argues that other legislative actions recognize that
hospitals can indeed employ physicians. See, e.g., 210 ILCS 70/0.01 et seq. (West
1994) (Emergency Medical Treatment Act); 225 ILCS 62/1 et seq. (West 1994)
(Osteopathic and Allopathic Healthcare Discrimination Act).
Dr. Berlin and supporting amicus curiae contend that this court, in People
ex rel. Kerner v. United Medical Service, Inc., 362 Ill. 442 (1936), adopted the
corporate practice of medicine doctrine, which prohibits corporations from
employing physicians. Dr. Berlin concludes that the Health Center, as a nonprofit
corporation, is prohibited by the Kerner rule from entering into employment
agreements with physicians.
Dr. Berlin also disputes the Health Center's contention that public policy
supports creating an exception to the Kerner rule for hospitals. He argues that,
because no legislative enactment subsequent to the Kerner case expressly grants
hospitals the authority to employ physicians, the legislature has ratified the
corporate practice of medicine doctrine as the public policy of Illinois. At this
point, a review of the corporate practice of medicine doctrine is appropriate.
Corporate Practice of Medicine Doctrine
The corporate practice of medicine doctrine prohibits corporations from
providing professional medical services. Although a few states have codified the
doctrine, the prohibition is primarily inferred from state medical licensure acts,
which regulate the profession of medicine and forbid its practice by unlicensed
individuals. See A. Rosoff, The Business of Medicine: Problems with the
Corporate Practice Doctrine, 17 Cumb. L. Rev. 485, 490 (1987). The rationale
behind the doctrine is that a corporation cannot be licensed to practice medicine
because only a human being can sustain the education, training, and character-
screening which are prerequisites to receiving a professional license. Since a
corporation cannot receive a medical license, it follows that a corporation cannot
legally practice the profession. See 17 Cumb. L. Rev. at 491; see also Kerner, 362 Ill. at 454.
The rationale of the doctrine concludes that the employment of physicians
by corporations is illegal because the acts of the physicians are attributable to the
corporate employer, which cannot obtain a medical license. See M. Hall,
Institutional Control of Physician Behavior: Legal Barriers to Health Care Cost
Containment, 137 U. Pa. L. Rev. 431, 509-10 (1988). The prohibition on the
corporate employment of physicians is invariably supported by several public
policy arguments which espouse the dangers of lay control over professional
judgment, the division of the physician's loyalty between his patient and his
profitmaking employer, and the commercialization of the profession. See A.
Willcox, Hospitals and the Corporate Practice of Medicine, 45 Cornell L.Q. 432,
442-43 (1960); see also Kerner, 362 Ill. at 455-56, citing Dr. Allison, Dentist, Inc.
v. Allison, 360 Ill. 638 (1935).
Application of Doctrine in Illinois
This court first encountered the corporate practice doctrine in Dr. Allison,
Dentist, Inc. v. Allison, 360 Ill. 638 (1935). In Allison, the plaintiff corporation
owned and operated a dental practice. When defendant, a dentist formerly
employed by plaintiff, opened a dental office across the street from plaintiff's
location, plaintiff brought an action to enforce a restrictive covenant contained in
defendant's employment contract. Defendant's motion to dismiss the action was
granted on the grounds that plaintiff was practicing dentistry in violation of
section 18a of the Dental Practice Act of 1933 (Ill. Rev. Stat. 1935, ch. 91, par.
88(1)). In affirming the judgment of the lower court, this court stated:
"To practice a profession requires something more than the
financial ability to hire competent persons to do the actual work.
It can be done only by a duly qualified human being, and to
qualify something more than mere knowledge or skill is essential.
The qualifications include personal characteristics, such as honesty,
guided by an upright conscience and a sense of loyalty to clients
or patients, even to the extent of sacrificing pecuniary profit, if
necessary. These requirements are spoken of generically as that
good moral character which is a pre-requisite to the licensing of
any professional man. No corporation can qualify." Allison, 360 Ill. at 641-42.
Soon after the Allison decision, this court further clarified the corporate
practice doctrine as it pertains to dentists. In Winberry v. Hallihan, 361 Ill. 121
(1935), the plaintiff corporation operated a dental office in which it employed only
licensed dentists. Plaintiff filed an action to enjoin the state from enforcing the
Dental Practice Act against it, arguing that there was no danger to the public
health in a corporate-owned dental office where all services are performed by
licensed dentists. Winberry, 361 Ill. at 129.
This court observed that the Dental Practice Act provided that it was
unlawful "to conduct, maintain, operate, own or provide a dental office" under the
name of a corporation. See Ill. Rev. Stat. 1935, ch. 91, par. 88. In addition, the
court observed that section 18(a) of the Act provided that "[n]o corporation shall
practice dentistry or engage therein, or hold itself out as being entitled to practice
dentistry, or furnish dental services or dentists ***." (Emphasis added.) Ill. Rev.
Stat. 1935, ch. 91, par. 88(1).
This court rejected plaintiff's contention that the Dental Practice Act was
discriminatory because it denied corporations the right to operate a dental office
while there was no such prohibition pertaining to medical clinics and similar
professional establishments. In concluding, the court stated that it was "well settled
that the State may deny to corporations the right to practice professions"; however,
the legislature was not compelled to treat all professions in the same manner.
Winberry, 361 Ill. at 129-30.
The year following the Allison and Winberry decisions, this court addressed
the corporate practice doctrine as it pertained to medicine. People ex rel. Kerner
v. United Medical Service, Inc., 362 Ill. 442 (1936), involved a corporation which
operated a low-cost health clinic in which all medical services were rendered by
duly-licensed physicians. The State brought a quo warranto action against the
corporation, alleging it was illegally engaged in the practice of medicine in
violation of the Medical Practice Act (Ill. Rev. Stat. 1935, ch. 91, par. 1 et seq.).
The lower court found the corporation guilty and rendered the judgment of ouster
against it. Kerner, 362 Ill. at 444-45.
In affirming, this court rejected defendant's contention that the practice of
medicine does not encompass the corporate ownership of a health clinic where
treatment is rendered solely by licensed physician employees. The court observed
that section 24 of the Medical Practice Act specifically prohibits the performance
of certain acts without a medical license, including the diagnosis and treatment of
human ailments and the maintenance of an office for the examination and
treatment of human ailments. (Emphasis added.) Ill. Rev. Stat. 1935, ch. 91, par.
25. The court stated that "[t]he legislative intent manifest from a view of the entire
[Medical Practice Act] is that only individuals may obtain a license thereunder.
No corporation can meet the requirements of the statute essential to the issuance
of a license." Kerner, 362 Ill. at 454.
Prior to the instant action, apparently no Illinois court has applied the
corporate practice of medicine rule set out in People ex rel. Kerner v. United
Medical Service, Inc., 362 Ill. 442 (1936), or specifically addressed the issue of
whether licensed hospitals are prohibited from employing physicians. We therefore
look to other jurisdictions with reference to the application of the corporate
practice of medicine doctrine to hospitals.
Applicability of Doctrine to Hospitals in Other Jurisdictions
Although the corporate practice of medicine doctrine has long been
recognized by a number of jurisdictions, the important role hospitals serve in the
health care field has also been increasingly recognized. Accordingly, numerous
jurisdictions have recognized either judicial or statutory exceptions to the
corporate practice of medicine doctrine which allow hospitals to employ
physicians and other health care professionals. See, e.g., Cal. Bus. & Prof. Code
sec. 2400 (West 1990) (exception for charitable hospitals); Colo. Rev. Stat. sec.
25--3--103.7(2) (West Supp. 1997) (hospitals may employ physicians); Rush v.
City of St. Petersburg, 205 So. 2d 11 (Fla. App. 1967); St. Francis Regional
Medical Center, Inc. v. Weiss, 254 Kan. 728, 869 P.2d 606 (1994); People v. John
H. Woodbury Dermatological Institute, 192 N.Y. 454, 85 N.E. 697 (1908); see
generally 17 Cumb. L. Rev. at 494. A review of this authority reveals that there
are primarily three approaches utilized in determining that the corporate practice
of medicine doctrine is inapplicable to hospitals.
First, some states refused to adopt the corporate practice of medicine
doctrine altogether when initially interpreting their respective medical practice act.
These states generally determined that a hospital corporation which employs a
physician is not practicing medicine, but rather is merely making medical
treatment available. See, e.g., State ex rel. Sager v. Lewin, 128 Mo. App. 149,
155, 106 S.W. 581, 583 (1907) ("[H]ospitals are maintained by private
corporations, incorporated for the purpose of furnishing medical and surgical
treatment to the sick and wounded. These corporations do not practice medicine
but they receive patients and employ physicians and surgeons to give them
treatment."); State Electro-Medical Institute v. Platner, 74 Neb. 23, 29, 103 N.W. 1079, 1081 (1905) ("A hospital which is controlled by a corporation, and which
receives patients, and contracts to care for them and to furnish them with medical
attendance, does not by so doing practice medicine within the meaning of [the
Medical Practice Act]"); State Electro-Medical Institute v. State, 74 Neb. 40, 43,
103 N.W. 1078, 1079 (1905) ("The intention of the [Medical Practice Act] is that
one who undertakes to judge the nature of a disease *** must have certain
personal qualifications; and, if he does these things without having complied with
the law he is subject to its penalties. Making contracts is not practicing medicine.
Collecting the compensation therefor is not practicing medicine within the
meaning of this statute. No professional qualifications are requisite for doing these
things").
Under the second approach, the courts of some jurisdictions determined
that the corporate practice doctrine is inapplicable to nonprofit hospitals and health
associations. These courts reasoned that the public policy arguments supporting
the corporate practice doctrine do not apply to physicians employed by charitable
institutions. See, e.g., Group Health Ass'n v. Moor, 24 F. Supp. 445, 446 (D.D.C.
1938) (actions of nonprofit association which contracts with licensed physicians
to provide medical treatment to its members in no way commercializes medicine
and is not the practice of medicine), aff'd, 107 F.2d 239 (D.C. Cir. 1939); People
ex rel. State Board of Medical Examiners v. Pacific Health Corp., 12 Cal. 2d 156,
159-61, 82 P.2d 429, 431 (1938) (en banc) (same); Goldwater v. Citizens Casualty
Co., 7 N.Y.S.2d 242 (N.Y. Mun. Ct. 1938) (charitable hospital corporation
sanctioned by law to treat sick are exception to general rule that corporation may
not practice medicine), aff'd, 36 N.Y.S.2d 413 (N.Y. Sup. Ct. 1939); see generally
45 Cornell L.Q. at 466-79.
In the third approach, the courts of several states have determined that the
corporate practice doctrine is not applicable to hospitals which employ physicians
because hospitals are authorized by other laws to provide medical treatment to
patients. See, e.g., Rush, 205 So. 2d 11; Weiss, 254 Kan. 728, 869 P.2d 606; John
H. Woodbury Dermatological Institute, 192 N.Y. 454, 85 N.E. 697; Republic
Reciprocal Insurance Ass'n v. Colgin Hospital & Clinic, 123 Tex. 31, 65 S.W.2d 286 (1933).
We find the rationale of the latter two approaches persuasive. We decline
to apply the corporate practice of medicine doctrine to licensed hospitals. The
instant cause is distinguishable from Kerner, Allison, and Winberry. None of those
cases specifically involved the employment of physicians by a hospital. More
important, none of those cases involved a corporation licensed to provide health
care services to the general public. See Weiss, 254 Kan. at 746, 869 P.2d at 618.
Accordingly, we decline to extend the Kerner corporate practice rule to licensed
hospitals.
The corporate practice of medicine doctrine set forth in Kerner was not an
interpretation of the plain language of the Medical Practice Act. The Medical
Practice Act contains no express prohibition on the corporate employment of
physicians.[fn1] Rather, the corporate practice of medicine doctrine was inferred
from the general policies behind the Medical Practice Act. See Kerner, 362 Ill. at
454. Such a prohibition is entirely appropriate to a general corporation possessing
no licensed authority to offer medical services to the public, such as the appellant
in Kerner. However, when a corporation has been sanctioned by the laws of this
state to operate a hospital, such a prohibition is inapplicable.[fn2] Accord Rush,
205 So. 2d at 13-14; Weiss, 254 Kan. at 744-45, 869 P.2d at 617; John H.
Woodbury Dermatological Institute, 192 N.Y. at 457-58, 85 N.E. at 698-99;
Republic Reciprocal Insurance Ass'n, 123 Tex. at 34, 65 S.W.2d at 287.
The legislative enactments pertaining to hospitals provide ample support
for this conclusion. For example, the Hospital Licensing Act defines "hospital" as:
"any institution, place, building, or agency, public or
private, whether organized for profit or not, devoted primarily to
the maintenance and operation of facilities for the diagnosis and
treatment or care of *** persons admitted for overnight stay or
longer in order to obtain medical, including obstetric, psychiatric
and nursing, care of illness, disease, injury, infirmity, or
deformity." (Emphasis added.) 210 ILCS 85/3 (West Supp. 1995).
In addition, the Hospital Lien Act (770 ILCS 35/0.01 et seq. (West 1994))
provides "[e]very hospital rendering service in the treatment, care and
maintenance, of such injured person" a lien upon a patient's personal injury cause
of action. (Emphasis added.) Pub. Act 89--280, eff. January 1, 1996 (amending
770 ILCS 35/1 (West 1994))[fn3] Moreover, the Hospital Emergency Service Act
(210 ILCS 80/0.01 et seq. (West 1994)) requires "[e]very hospital *** which
provides general medical and surgical hospital services" to also provide
emergency services. (Emphasis added.) 210 ILCS 80/1 (West 1994); see also 210
ILCS 70/1 (West 1994) (requires licensed providers of professional health care,
including hospitals, to provide emergency medical treatment in life-threatening
situations, regardless of patient's ability to pay).
The foregoing statutes clearly authorize, and at times mandate, licensed
hospital corporations to provide medical services. We believe that the authority to
employ duly-licensed physicians for that purpose is reasonably implied from these
legislative enactments. Accord Weiss, 254 Kan. at 745, 869 P.2d at 618; Albany
Medical College v. McShane, 66 N.Y.2d 982, 983, 489 N.E.2d 1278, 1279, 499 N.Y.S.2d 376, 377 (1985); John H. Woodbury Dermatological Institute, 192 N.Y. at 458, 85 N.E. at 699; Republic Reciprocal Insurance Ass'n, 123 Tex. at 33-34,
65 S.W.2d at 287. We further see no justification for distinguishing between
nonprofit and for-profit hospitals in this regard. The authorities and duties of
licensed hospitals are conferred equally upon both entities.[fn4] Accord Weiss,
254 Kan. at 746, 869 P.2d at 618.
In addition, we find the public policy concerns which support the corporate
practice doctrine inapplicable to a licensed hospital in the modern health care
industry. The concern for lay control over professional judgment is alleviated in
a licensed hospital, where generally a separate professional medical staff is
responsible for the quality of medical services rendered in the facility. See 210
ILCS 85/4.5 (West Supp. 1995); 77 Ill. Adm. Code secs. 250.150, 250.310 (1997);
see also 45 Cornell L.Q. at 445-46.[fn5]
Furthermore, we believe that extensive changes in the health care industry
since the time of the Kerner decision, including the emergence of corporate health
maintenance organizations (see 215 ILCS 125/1--1 et seq. (West 1994) (Health
Maintenance Organization Act)), have greatly altered the concern over the
commercialization of health care. In addition, such concerns are relieved when a
licensed hospital is the physician's employer. Hospitals have an independent duty
to provide for the patient's health and welfare. See Gilbert, 156 Ill. 2d at 518
(recognizing hospital's duty to review and supervise the medical treatment of a
patient); Darling, 33 Ill. 2d at 332-33 (recognizing hospital's duty to assume
responsibility for the care of its patients); see also 410 ILCS 50/0.01 et seq. (West
1994) (Medical Patient Rights Act) (establishing right of patient to receive health
care from hospital which is consistent with sound medical practices); 45 Cornell
L.Q. at 446.
We find particularly appropriate the statement of the Kansas Supreme
Court that "[i]t would be incongruous to conclude that the legislature intended a
hospital to accomplish what it is licensed to do without utilizing physicians as
independent contractors or employees. *** To conclude that a hospital must do
so without employing physicians is not only illogical but ignores reality." Weiss,
254 Kan. at 745, 869 P.2d at 618. Accordingly, we conclude that a duly-licensed
hospital possesses legislative authority to practice medicine by means of its staff
of licensed physicians and is excepted from the operation of the corporate practice
of medicine doctrine.
Consequently, the employment agreement between the Health Center and
Dr. Berlin is not unenforceable merely because the Health Center is a corporate
entity. The circuit court has not yet adjudicated the substantive merits of the
instant employment agreement. Therefore, we remand this cause to the circuit
court to proceed with the original action in a manner consistent herewith.
CONCLUSION
For the reasons stated, the judgment of the appellate court affirming the
circuit court's award of summary judgment for plaintiff is reversed. The judgment
of the circuit court is reversed and the cause is remanded to the circuit court for
further proceedings not inconsistent with this opinion.
Appellate court judgment reversed;
circuit court judgment reversed;
cause remanded.
JUSTICE HARRISON, dissenting:
In People ex rel. Kerner v. United Medical Service, Inc., 362 Ill. 442
(1936), this court held that a corporation cannot employ physicians and collect
fees for their services because such conduct constitutes the practice of medicine
and the practice of medicine by corporations is prohibited. The court based its
conclusion on the Medical Practice Act, reasoning that under the statute, a license
is required to practice medicine and
"[t]he legislative intent manifest from a view of the entire law is
that only individuals may obtain a license thereunder. No
corporation can meet the requirements of the statute essential to the
issuance of a license." Kerner, 362 Ill. at 454.
More than 60 years have passed since Kerner was decided. If the
legislature believed that our construction of the Act was erroneous or that the rule
announced in Kerner should be changed, it could have amended the law to
authorize the practice of medicine by entities other than individuals. With limited
exceptions not applicable here, it has not done so. To the contrary, it has
continued to adhere to the requirements that medicine can only be practiced by
those who hold valid licenses from the state (225 ILCS 60/3 (West 1994)) and
that only individuals can obtain such licenses (225 ILCS 60/9, 11 (West 1994);
68 Ill. Adm. Code sec. 1285.20 et seq. (1997)).
The legislature is presumed to know the construction the courts have
placed upon a statute. When it amends a statute but does not alter a previous
interpretation by this court, we assume that the legislature intended for the
amendment to have the same interpretation previously given. Williams v.
Crickman, 81 Ill. 2d 105, 111 (1980). Moreover, where the legislature has
acquiesced in a judicial construction of the law over a substantial period of time,
as it did here, the court's construction becomes part of the fabric of the law, and
a departure from that construction by the court would be tantamount to an
amendment of the statute itself. Charles v. Seigfried, 165 Ill. 2d 482, 492 (1995).
The power to make such amendments does not lie in the courts. Independent
Voters v. Illinois Commerce Comm'n, 117 Ill. 2d 90, 100 (1987).
That the legislature has acquiesced in the judiciary's construction of the
Medical Practice Act is especially clear given recent developments in the law.
Under section 4.9 of the Regulatory Agency Sunset Act (5 ILCS 80/4.9 (West
1994)), the Medical Practice Act was scheduled for repeal on December 31, 1997,
unless the General Assembly enacted legislation providing for its continuation (5
ILCS 80/4 (West 1994)). On April 12, 1996, the appellate court filed its opinion
in this case, holding under Kerner that the Medical Practice Act bars the corporate
practice of medicine by hospitals. Subsequent to that decision, the General
Assembly passed and the Governor signed new legislation extending the Medical
Practice Act until January 1, year 2007. The new legislation made no substantive
changes to the licensing requirements and included no provisions contrary to the
appellate court's holding. See 225 ILCS 60/1 et seq. (West 1996). Because the
legislature is presumed to know the construction the statute has been given by the
courts, its reenactment of the law can only be understood as an endorsement of
the construction followed by the appellate court here. The corporate practice of
medicine by hospitals is prohibited.
As previously indicated, the Medical Practice Act does contain certain
exemptions. By its terms, it does not apply to:
"persons lawfully carrying on their particular profession or
business under any valid existing regulatory Act of this State, nor
to persons rendering gratuitous services in cases of emergency, nor
to persons treating human ailments by prayer or spiritual means as
an exercise or enjoyment of religious freedom." 225 ILCS 60/4
(West 1994).
In addition, the Act provides that
"a physician who holds an active license in another state or
a second year resident enrolled in a residency program accredited
by the Liaison Committee on Graduate Medical Education or the
American Osteopathic Association Committee on Post-Graduate
Education may provide medical services to patients in Illinois
during a bonafide emergency in immediate preparation for or
during interstate transit." 225 ILCS 60/3 (West 1994).
Hospitals do not fall within any of these exceptions. The majority argues
that additional exceptions can be implied based on other statutes enacted by the
General Assembly. It is a fundamental rule of statutory construction, however, that
the enumeration of certain things in a statute implies the exclusion of all other
things. In re Estate of Leichtenberg, 7 Ill. 2d 545, 552 (1956). Expressio unius est
exclusio alterius. Where, as here, a statute specifies exceptions to a general rule,
no exceptions other than those designated will be recognized. In re Estate of
Tilliski, 390 Ill. 273, 283 (1945); Allen v. Conken, 39 Ill. 2d 427, 429-30 (1968).
Wholly aside from this problem, none of the other statutes invoked by my
colleagues supports their position. The most that can be said of those statutes is
that they authorize hospitals to operate facilities for the diagnosis and care of
patients (see 210 ILCS 85/3 (West 1994)) and to make emergency service
available (210 ILCS 80/1 (West 1994)) regardless of ability to pay (210 ILCS
70/1 (West 1994)). Hospitals may also employ physician's assistants, provided
such assistants function under the supervision of a licensed physician. 225 ILCS
95/7 (West 1994). None of those endeavors, however, requires that hospitals have
the power to employ physicians directly or to charge patients for the physicians'
services. All may be accomplished by granting staff privileges to duly licensed
private physicians, and the Hospital Licensing Act presumes that hospitals will
staff their facilities in precisely that way. See 210 ILCS 85/10.4 (West 1994).
As noted earlier, the Medical Practice Act provides that it is inapplicable
to "persons lawfully carrying on their particular profession or business under any
valid existing regulatory Act of this State." 225 ILCS 60/4 (West 1994). Through
this exemption, the statute recognizes that activities and enterprises otherwise in
violation of the Medical Practice Act may be sanctioned by the General Assembly
through separate enactments. In accordance with the exemption, the General
Assembly has expressly authorized the employment of physicians by Health
Maintenance Organizations (HMOs) under the Health Maintenance Organization
Act (215 ILCS 125/1--1 et seq. (West 1994)). If the General Assembly had
intended to grant the same authority to hospitals, I believe that it would have been
similarly straightforward and unambiguous in doing so.
In addition to creating special rules for HMOs, the General Assembly has
also decided to allow physicians to employ various forms of business
organizations in practicing their profession. Physicians may incorporate in
accordance with the Professional Service Corporation Act (805 ILCS 10/1 et seq.
(West 1994)), they may form corporations to provide medical services under the
Medical Corporation Act (805 ILCS 15/1 et seq. (West 1994)), they have the right
to practice in a professional association organized pursuant to the Professional
Association Act (805 ILCS 305/1 et seq. (West 1994)), and they can organize and
operate limited liability companies to practice medicine under the recently
amended Limited Liability Company Act (805 ILCS 180/1--1 et seq. (West
1996)). Again, however, none of these provisions pertains to hospitals, and no
inference can be drawn from any of them that the General Assembly intended to
alter the prohibition against the corporate practice of medicine by hospitals.
For the foregoing reasons, I agree with the appellate court that the
corporate practice doctrine prohibited defendant, Sarah Bush Lincoln Health
Center, from entering into an employment agreement with Dr. Berlin. That
agreement, including its restrictive covenant, was void and unenforceable. Dr.
Berlin's motion for summary judgment was therefore properly granted, and the
judgment of the appellate court should be affirmed.
JUSTICE MILLER joins in this dissent.
[fn1] In contrast, the Dental Practice Act, applied by this court in Winberry and
Allison, expressly prohibited a corporation from furnishing dentists and owning
and operating a dental office. See Ill. Rev. Stat. 1935, ch. 91, pars. 88, 88(1).
[fn2] It is noteworthy that this court in Kerner observed that the defendant
corporation's activities violated section 24 of the Medical Practice Act, which
prohibited "the maintenance of an office for the examination and treatment of"
afflicted persons without a medical license. Kerner, 362 Ill. at 454. In contrast,
this same activity by a licensed hospital is expressly sanctioned. See 210 ILCS
85/3(A) (West 1994) (hospital is an institution "devoted primarily to the
maintenance and operation of facilities for the diagnosis and treatment or care" of
afflicted persons).
[fn3] Compare to the Physicians Lien Act (770 ILCS 80/0.01 et seq. (West 1994)),
which provides a similar lien to a physician "who renders services by way of
treatment to injured persons." 770 ILCS 80/1 (West 1994).
[fn4] Notably, the legislature has recently acted to further advance the equality of
treatment between nonprofit and for-profit hospitals. Compare 770 ILCS 35/1
(West 1994) (hospital liens provided only for nonprofit or county hospitals) with
Pub. Act 89--280, eff. January 1, 1996, amending 770 ILCS 35/1 (West 1994)
(recent amendment provides liens for all hospitals).
[fn5] Moreover, in the instant case, the employment agreement expressly provided
that the Health Center had no control or direction over Dr. Berlin's medical
judgment and practice, other than that control exercised by the professional
medical staff. Dr. Berlin has never contended that the Health Center's lay
management attempted to control his practice of medicine.
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