Two Key Legal Considerations in Urgent Care Transactions

October 16, 2012

Urgent care is a rapidly growing treatment modality, with a national growth rate of approximately 300 centers per year since 2008. As a result, urgent care has attracted a lot of attention from financial buyers, including large healthcare systems and private equity funds.

When structuring an urgent care transaction, several legal issues must be evaluated, including the following:

  1. Corporate Practice of Medicine. Several states prohibit the employment of physicians by corporations. This prohibition is based on a legal principle called the corporate practice of medicine doctrine. In states where an investor desires to acquire or establish an urgent care center, whether the state has a corporate practice of medicine prohibition is a key consideration in determining how to structure the transaction. There are several mechanisms through which non-physicians participate in urgent care in states that do not allow corporate practice. Such strategies include the formation of a medical holding company, or the formation of a “captive professional corporation” or “captive PC” model. In a captive PC model, a physician forms a professional corporation to own the center and enters into a contract with a separate entity to manage/operate the clinic. There are a number of legal issues involved with using the captive PC model that go beyond the scope of this article.
  2. State Licensure. State law regarding healthcare facility licensure varies significantly. With certain exceptions, such as Arizona, states do not license stand-alone urgent care providers as healthcare facilities. Some other states have placed restrictions on how urgent care centers can be identified and marketed to the public. However as urgent care centers become more prolific, more states may enact licensure laws pertaining to urgent care. Depending on the service offered by the centers, other licenses may be required, such as CLIA certificates or certificates of waiver for clinical laboratory testing and x-ray permits or licensing.

For more information about regulatory issues in the urgent care industry contact the attorneys on this page.