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Berlin v. Sarah Bush Lincoln Health Center

Citations: 664 N.E.2d 337; 279 Ill. App. 3d 447; 215 Ill. Dec. 940Docket: 4-95-0569

Court: Appellate Court of Illinois; April 12, 1996; Illinois; State Appellate Court

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In January 1995, Richard B. Berlin, Jr., M.D. filed a complaint and a motion for summary judgment to declare a restrictive covenant in his employment agreement with Sarah Bush Lincoln Health Center unenforceable. The Health Center responded with a cross-motion for summary judgment. In June 1995, the trial court ruled in favor of Dr. Berlin, determining that the restrictive covenant was unenforceable due to the Health Center's violation of statutory prohibitions against corporate practice of medicine. The Health Center appealed, arguing that the trial court erred in granting Dr. Berlin's motion, denying its own cross-motion, and finding the restrictive covenant ambiguous.

The background involves a general surgery employment agreement established in December 1992, which required Dr. Berlin to dedicate his full work time to the Health Center. The agreement included a restrictive covenant preventing Dr. Berlin from engaging with competing health services within a 50-mile radius for two years after termination. After resigning in February 1994 to work at a nearby Carle Clinic, Dr. Berlin faced an injunction from the Health Center, which was later reversed due to procedural issues regarding the denial of a substitution of judge. Ultimately, the appellate court affirmed the trial court's decision, agreeing with its findings on the unenforceability of the restrictive covenant.

The Health Center filed a cross-motion for summary judgment, referencing the record from a prior preliminary injunction proceeding. In June 1995, the trial court granted Dr. Berlin's motion for summary judgment after reviewing evidence and oral arguments. The Health Center argues that this ruling was erroneous, asserting that the doctrine against the corporate practice of medicine does not apply to nonprofit hospitals for three reasons: (1) relevant case law does not involve hospitals, (2) there are no legislative prohibitions against nonprofit hospitals employing physicians in the Medical Practice Acts of 1923 and 1987, and (3) public policy concerns linked to the doctrine do not apply to licensed nonprofit hospitals. Alternatively, the Health Center claims that if the 1987 Act does prohibit corporate practice, hospitals are exempt under section 4 due to their licensing under the Illinois Hospital Licensing Act. 

Summary judgment is appropriate when no genuine issue of material fact exists, allowing the moving party to prevail as a matter of law. The court reviews summary judgment decisions de novo. The doctrine against corporate practice of medicine was established in Dr. Allison, Dentist, Inc. v. Allison, where the Illinois Supreme Court ruled that a corporation employing licensed dentists violated regulations, emphasizing that practice of a profession must adhere to licensing and cannot be commercialized. Similarly, in People v. United Medical Service, Inc., the court held that a corporation cannot practice medicine or employ physicians without violating the 1923 Act, rejecting arguments that such arrangements did not interfere with professional relationships.

The supreme court has established that corporations cannot be licensed to practice medicine, as evidenced by its decision in United Medical Service, which reinforced the legislative intent of the 1923 Act that only individuals may obtain medical licenses. The court emphasized that practicing medicine requires more than financial capability; it necessitates qualifications beyond mere knowledge or skill. The court has not modified this prohibition in the 60 years since its ruling. The Health Center argued that its nonprofit status allows it to employ physicians, but the court disagreed, asserting that the precedent applies to all corporate entities. The court emphasized adherence to stare decisis, asserting that established legal principles should remain undisturbed unless legislatively revised. The court also noted that the age of the precedents does not diminish their authority, as the doctrine of stare decisis serves to maintain legal stability and respects the legislative process.

Considerations of stare decisis carry significant weight in statutory construction, as deviating from established precedent effectively alters the statute. The court affirms the rulings in *Allison* and *United Medical Service*, which interpret the 1923 Act as prohibiting corporate practice of medicine. The Health Center argues for an exemption for hospitals based on the absence of explicit legislative prohibition against their employment of physicians. However, this interpretation is rejected. The 1923 Act's prohibition is upheld, supported by legislative actions that have created specific exceptions allowing certain corporations to employ physicians under strict conditions. The Voluntary Health Services Plans Act (1951) permits corporations to employ licensed physicians, provided they do not interfere with medical judgment, and mandates submission of employment agreements to the Department of Insurance. The Medical Corporation Act (1963) allows licensed individuals to form corporations for medical practice, with restrictions ensuring that only licensed personnel provide medical services. The Professional Service Corporation Act (1969) permits a group to organize as a corporation for professional services, ensuring all corporate members are licensed in their respective fields. The Health Maintenance Organization Act (1974) authorizes HMOs to contract with healthcare providers under a detailed regulatory framework, and the Limited Health Service Organization Act (1989) establishes a similar regulatory scheme.

The legislature amended the Limited Liability Company Act to create a specific exception to the prohibition on the corporate practice of medicine, allowing companies to practice medicine only if all members, managers, and organizers are licensed physicians. This amendment did not alter the overarching prohibition established by the 1923 Act, which was only partially addressed in the 1987 Act regarding hospitals. The court presumes that the legislature acts with awareness of established judicial interpretations in health care law. Although the legislature has recognized hospitals as employers of physician assistants, it has not addressed the employment of physicians by hospitals. Amendments to the Licensing Act and other legislative actions have repeatedly declined to authorize hospitals to employ physicians, reinforcing the prohibition on corporate practice of medicine for hospitals. The court concludes that the legislature has acquiesced in the supreme court's interpretation of the 1923 Act, allowing only limited exceptions that do not include hospitals. Furthermore, the Supreme Court's decision in Darling v. Charleston Community Memorial Hospital did not establish that hospitals may employ physicians; rather, it focused on the hospital's duty to supervise medical care, indicating that hospitals do not treat patients directly but facilitate care through independent medical staff.

Present-day hospitals employ a diverse staff, including physicians, nurses, and administrative workers, and charge patients for medical services, sometimes resorting to legal action for collection. While the Illinois Supreme Court in Darling referenced a New York case regarding hospitals employing physicians, it did not address the legality of such practices under the Illinois Medical Practice Act, nor did it mention the United Medical Service case that established the prohibition on corporate practice of medicine. The Darling language is viewed as dicta and not a definitive ruling on this issue.

Policy arguments are presented by both sides: the Health Center claims that the concerns about lay control over medical practitioners do not apply to licensed hospitals, and that such employment is crucial for serving rural communities and managing healthcare costs. In contrast, Dr. Berlin argues that permitting hospitals to employ physicians could lead to undue control over medical decisions and patient treatment by lay employers.

The doctrine of stare decisis is emphasized, indicating that any change to the prohibition on corporate practice of medicine should originate from the General Assembly, which has yet to enact legislation on this matter. The Illinois Supreme Court has previously noted the importance of legislative authority in shaping public policy, especially when there are competing interests at stake. Therefore, until the legislature addresses the issue, existing laws will remain in effect.

The Health Center contends that the 1987 Act, which prohibits the corporate practice of medicine, does not apply to its employment of Dr. Berlin due to an exemption for hospitals under section 4 of the Act, as they are licensed under the Illinois Hospital Licensing Act. However, the court disagrees, emphasizing that statutory interpretation must reflect legislative intent as expressed in the statute's language. Section 4 of the 1987 Act exempts individuals operating under valid regulatory acts, but the Licensing Act does not explicitly authorize hospitals to employ physicians or provide medical services. It defines a hospital as a facility for diagnosing and treating patients but does not confer the right to practice medicine or employ doctors. The court concludes that mere licensing does not circumvent the prohibition against corporate practice of medicine, and therefore, hospitals are not exempt under section 4 of the 1987 Act. The court upheld the trial court's ruling in favor of Dr. Berlin, determining that the Health Center's employment agreement with him violated the statutory prohibition.

The court refrains from deciding whether hospitals are exempt under section 4 of the 1987 Act for providing emergency medical treatment as mandated by the Emergency Medical Treatment Act, noting that this issue is not before them. While acknowledging the potential implicit authority granted to hospitals by the Emergency Medical Treatment Act, the court chooses not to resolve this matter. The trial court's judgment is affirmed, with Justice Green concurring, emphasizing the unenforceability of a restrictive covenant due to its violation of medical practice regulations. Green notes that the relevant legislation does not alter the precedents set by United Medical Service and Allison. He expresses concern over the employment of physicians by hospitals beyond emergency care, referencing cases that indicate hospitals regularly employ physicians and could potentially face liability for their actions. Green suggests further examination of the status of physicians employed for non-emergency treatment should be addressed in future cases.

The decision's rationale includes two key points: hospitals present themselves as "full-care modern health facilities," and the public lacks awareness of the qualifications of hospital personnel. The supreme court did not indicate that the doctor was acting outside legal parameters or solely under the Emergency Medical Treatment Act. There is a noted confusion regarding the relationships between doctors and hospitals, suggesting a need for clarification from either the Supreme Court of Illinois or the legislature. A narrow decision is favored to serve the public interest. Justice McCullough concurs with the Health Center's argument that a viable doctrine against corporate practice of medicine does not currently exist, affirming that the Health Center was not practicing medicine and can employ physicians. Previous rulings established that corporate practice of medicine was prohibited under the 1923 Act; however, current legislative acts allow corporate involvement in health services. The contract between the parties did not enable the Health Center to practice medicine, nor did it undermine Dr. Berlin's medical practice. The Darling court acknowledged that hospitals often employ physicians on a salary basis, and the Licensing Act should not prevent hospitals or entities like the Health Center from contracting with licensed physicians, provided there is no breach of the Hippocratic oath. The motions for summary judgment from both parties are not granted.