The Risky Business of Paying Physicians as Contractors

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From Medscape, Jehan N. Jayakumar and Matthew M. Stokke discuss the challenges of paying physicians as independent contractors in California after the Dynamex decision. They write:

Healthcare practices, in particular, customarily engage the services of licensed physicians and other healthcare providers as independent contractors. However, as the old adage notes: Just because everyone else is doing it does not necessarily make it legal. This seems especially true now under the more demanding test. Under the new ABC test, classifying licensed service providers as independent contractors is problematic because healthcare practices in such situations will often be unlikely to establish part A and part B.

Part A of the test requires the practice to prove that it is not directing or controlling the licensed provider in the rendering of his or her services. This factor was one of the many factors of the old Borello test. Like the Borello test, a court would determine various facts, such as whether the healthcare practice provides the service provider with a facility; professional supplies; equipment; guidelines on how to perform the services; and administrative services, such as scheduling patient visits. The presence of any of these factors has historically indicated substantial control of the service provider by the healthcare practice and would be indicative of an employer-employee relationship.

Part B of the test requires the healthcare practice to prove that the licensed provider it engaged provides services outside the usual scope of services of the practice. For obvious reasons, this will be nearly impossible in the case of a healthcare practice that engages a doctor, because both practitioners render medical services.

An argument can be made that a medical specialist in one area who engages a medical specialist in another meets this test because the services wouldn’t necessarily be in the usual course of business, but this determination ultimately depends on how narrowly or broadly a court interprets this factor. In other words, it is possible that a court deems all providers to be engaged in the same “business” even when the providers have different specialties or licenses. Until enough case precedent has been established here, a healthcare practice runs a risk when it engages providers as independent contractors.

At a minimum, a true independent contractor must be incorporated and must provide services elsewhere. Thus, a healthcare practice could most plausibly establish part C, because many licensed healthcare providers render services in multiple practices and sometimes even have their own practice simultaneously. These factors certainly support an independent contractor classification, but establishing just one—or even two—factors still fails the new test, which requires all three standards to be met. This may prove especially problematic when it comes to locum tenens providers.

Read the full story at The Risky Business of Paying Physicians as Contractors

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