Where Are Hospitals Not Allowed to Directly Employ Anesthesiologists?

In the United States, the employment structure of physicians, including anesthesiologists, varies significantly across states due to differences in legal and regulatory frameworks. In most states, hospitals and health systems commonly employ anesthesiologists directly. However, in a few jurisdictions, longstanding legal doctrines, particularly the “corporate practice of medicine,” limit or do not allow hospitals or non-physician-owned entities to directly employ physicians, including anesthesiologists. These laws are intended to prevent business interests from interfering with medical judgment and patient care.

The corporate practice of medicine doctrine is a legal principle that restricts corporations or non-physician entities from employing physicians to provide clinical care. The rationale behind this rule is to preserve the autonomy of the physician–patient relationship and to ensure that medical decisions are based solely on patient welfare, rather than corporate profit motives. While not universally adopted, several states still enforce this doctrine either strictly or in a modified form ^1,2.

Various states have historically upheld versions of the corporate practice of medicine doctrine. In California, the Medical Board and courts have consistently held that only physicians or physician-owned entities may directly employ other physicians to practice medicine, while hospitals can contract with independent groups of surgeons, anesthesiologists, and other doctors; an exception exists for hospitals that qualify as government or teaching institutions. Texas also limits the corporate practice of medicine through state law, although exceptions exist for nonprofit health organizations certified by the Texas Medical Board. These organizations can directly employ physicians, including anesthesiologists, at hospitals or other medical facilities under certain conditions. Direct employment by for-profit hospitals is generally not permitted unless specific exemptions apply. Finally, in New York, while the corporate practice of medicine doctrine is recognized, it is interpreted more flexibly. Hospitals can employ physicians in nonprofit settings, and integrated health systems often structure their employment relationships through affiliated professional corporations or medical groups ^3–8.

In states with corporate practice of medicine restrictions, hospitals and health systems often use independent contractor models or establish physician management service organizations and professional corporations that are legally separate from the hospital. These entities can directly employ anesthesiologists while maintaining formal independence from hospital administration, thereby complying with corporate practice of medicine laws while facilitating clinical integration ^9,10.

These employment restrictions influence how anesthesia services are delivered and managed. In corporate practice of medicine-restricted states, large anesthesia groups or private practices often contract with hospitals to provide services, leading to separated anesthesia practice. While this system can preserve clinical independence, it may also create challenges in aligning goals between hospitals and anesthesia providers.

Although most U.S. states allow hospitals to directly employ anesthesiologists, a handful maintain restrictions under the corporate practice of medicine doctrine, imposing varying degrees of limitations, shaping how anesthesiology services are structured and managed. Understanding these legal frameworks is essential for both hospitals and physicians in navigating employment arrangements and ensuring compliance with state law.

References

1. The Corporate Practice of Medicine: Protecting Patient Care and Physician Autonomy – AAEM. https://www.aaem.org/the-corporate-practice-of-medicine-protecting-patient-care-and-physician-autonomy/.

2. Schaff, M. F. & Krisza, J. J. Corporate Practice of Medicine. in Laws of Medicine : Core Legal Aspects for the Healthcare Professional (ed. Pasha, A. S.) 239–245 (Springer International Publishing, Cham, 2022). DOI:10.1007/978-3-031-08162-0_14.

3. Permit Health – The Corporate Practice of Medicine 50-State Guide. https://www.permithealth.com.

4. Corporate Practice of Medicine Bills | The Source on Healthcare Price & Competition. The Source on HealthCare Price and Competition https://sourceonhealthcare.org/corporate-practice-of-medicine-bills-full/.

5.  22 Tex. Admin. Code § 177.17 – Exceptions to Corporate Practice of Medicine Doctrine. LII / Legal Information Institute https://www.law.cornell.edu/regulations/texas/22-Tex-Admin-Code-SS-177-17.

6. Private Equity and the Corporate Practice of Medicine: What Texas Physicians Need to Know. Hendershot Cowart P.C. https://www.hchlawyers.com/blog/2025/march/private-equity-and-the-corporate-practice-of-med/.

7. Permit Health – California Corporate Practice of Medicine (CPOM) Guide. https://www.permithealth.com.

8. Navigating California’s Corporate Practice of Medicine Doctrine. The Law Office of Kris Mukherji https://kmsdlawoffice.com/blog/navigating-californias-corporate-practice-of-medicine-doctrine/ (2025).

9. Understanding management services organizations (MSOs): Benefits, compliance risks, and best practices. https://www.mgma.com/articles/understanding-management-services-organizations-msos-benefits-compliance-risks-and-best-practices (2025).

10. Doctors – Avoid the Corporate Practice of Medicine. Law Office of Daniel Horowitz https://www.lawyersinlafayette.com/blog/2025/april/doctors-avoid-the-corporate-practice-of-medicine/.