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Medical Foundations: One Model for Hospital-Physician Alignment

hfm Magazine

May 2012

Authors: Joan W. Feldman

Several states have traditionally adhered to the corporate practice of medicine doctrine, which prohibits corporations (with the exception of hospitals and certain licensed healthcare facilities, such as clinics) from employing physicians to provide physician services. Regardless of whether states that have such a prohibition actively enforce it, many hospitals have chosen to comply.


  • Some states that enforce a corporate practice of medicine prohibition have created medical foundation statutes allowing hospitals or health systems to own corporations providing physician services.
  • Medical foundations may be useful in the coordination of care through employed or contracted physicians.
  • Medical foundations that qualify as tax-exempt entities have lower risks associated with tax-exempt rules as long as payments to physicians are reasonable and don’t result in private inurement.

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