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Michigan appeals court case could test lay-ownership of MR facility laws

by Thomas Dworetzky , Contributing Reporter
A Michigan MR facility that is for-profit and its non-physician owner are in court, in a case that brings the question of physician-only ownership to the legal forefront.

Late last year Judge Daniel O'Brien of Oakland County Circuit Court made a determination that Oakland MRI could be run as an LLC and that owner Susan Swider did not, in fact, have to be a doctor.

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But that ruling was met with disagreement in both the health care and legal arenas.

"If you are a lay, for-profit corporation, you cannot employ physicians to furnish medical services," Mark Kopson, chair of the health care practice at Plunkett Cooney in Bloomfield Hills told Crain's Detroit Business. "The public policy behind the prohibition against the corporate practice of medicine is to prevent profit motives of for-profit corporations from affecting how medical care is delivered."

The case is now in the Appeals Court.

The case, which could be heard this year or early in 2018, would provide an opportunity for the appeals court to state that lay ownership is legal if real doctors perform medical services.

Kopson noted such a ruling could represent "a de facto acknowledgment of changes in the health care industry over the past 40 years."

When the appeal was launched in January, attorney Christine Derdarian, on behalf of the Michigan Radiological Society, stated that, "the trial court failed to reference the correct statutes and erred in its conclusion, an interpretation that resulted in a clear abuse of discretion."

The problem, which is “nationwide,” she advised, is that ownership is not considered when granting a Certificate of Need (CON). "It determines whether there is a market need, do they have proper equipment and the location for the service."

Oakland MRI's lawyer Chris Cataldo, of Jaffe Raitt Heuer & Weiss, argued that the facility was formed legally.

"The court ruled with us," he explained to Crain's. "The statutes are crystal clear on corporate practice, and we are right. If they don't like it, they should be talking with the Legislature seeking to change state law or taking it up with the CON Commission, not with my client."

Crain's estimates that there could be 500 lay-owned medical companies in Michigan alone. This number suggests that a ruling against the facility might lead to significant legal changes in Michigan – and perhaps throughout the country.

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