Title: Carter-Shields v. Alton Health Institute

State: illinois

Issuer: Illinois Supreme Court

Document:

1On January 31, 1997, Dr. Tucker executed a written consent to\
appoint Kessler as the executive director of CPCP.
     2Although there is no record of CPCP’s motion to intervene having\
been granted by the circuit court, CPCP was allowed to participate in\
the proceedings below and was characterized as an “intervenor” by the\
circuit court. 
     3The Hospital Licensing Act is intended to “provide for the better\
protection of the public health through the development, establishment,\
and enforcement of standards (1) for the care of individuals in hospitals,\
(2) for the construction, maintenance, and operation of hospitals which,\
in light of advancing knowledge, will promote safe and adequate\
treatment of such individuals in hospital, and (3) that will have regard\
to the necessity of determining that a person establishing a hospital have\
the qualifications, background, character and financial resources to\
adequately provide a proper standard of hospital service for the\
community.” 210 ILCS 85/2(a) (West 2000).
     4The Act defines a “[h]ospital affiliate” as an organization “devoted\
primarily to the provision, management, or support of health care\
services” and that “directly or indirectly controls, is controlled by, or is\
under the common control of the hospital.” The Act defines “[c]ontrol”\
as having at least an equal or majority interest, and requires that the\
affiliate “shall be 100% owned or controlled by any combination of\
hospitals, their parent corporations, or physicians licensed to practice\
medicine in all its branches in Illinois.” 210 ILCS 85/10.8(b) (West\
Supp. 2001).
            Docket No. 90767–Agenda 28–September 2001.
VERA E. CARTER-SHIELDS, M.D., Appellee, v. ALTON
HEALTH INSTITUTE et al., Appellants.
Opinion filed September 19, 2002.
 
 
      CHIEF JUSTICE McMORROW delivered the opinion of the   
court:
 
      Plaintiff, Dr. Vera E. Carter-Shields, entered into an   
employment agreement with defendant, Alton Health Institute   
(AHI), a nonlicensed, general not-for-profit corporation, to provide   
services as a primary care physician. The employment agreement   
contained a restrictive covenant stating that plaintiff could not   
practice medicine within a 20-mile radius of AHI for two years   
after her separation from AHI. As a result of numerous disputes   
between plaintiff and AHI, plaintiff filed a complaint for   
declaratory judgment in the circuit court of Madison County,   
alleging that her employment agreement with AHI violated the   
prohibition against the corporate practice of medicine and,   
therefore, was illegal and unenforceable. During the pendency of   
her action, plaintiff resigned her position with AHI and opened her   
own medical office within the noncompetition area. Thereafter, the   
circuit court denied plaintiff’s request for declaratory judgment.   
Relying upon this court’s decision in Berlin v. Sarah Bush Lincoln   
Health Center, 179 Ill. 2d 1 (1997), the circuit court held that the   
employment agreement between AHI and plaintiff was valid and   
enforceable because it fell within an exception to the prohibition   
against the corporate practice of medicine. The circuit court also   
granted partial summary judgment in favor of defendants on their   
subsequently filed counterclaim requesting injunctive relief against   
plaintiff on the basis that plaintiff breached her employment   
contract by improperly resigning her position. In accordance with   
the restrictive covenant contained within the employment   
agreement, the circuit court enjoined plaintiff from practicing   
medicine for a period of two years within a 20-mile radius of   
AHI’s office. The appellate court reversed, holding that under the   
corporate practice of medicine doctrine and this court’s ruling in   
Berlin, the employment agreement between plaintiff and AHI was   
void and unenforceable. 317 Ill. App. 3d 260. The appellate court   
further held that, in any event, the noncompetition covenant   
contained within the employment agreement constituted “an   
unreasonable restraint of trade and is unenforceable on public-policy grounds.” 317 Ill. App. 3d at 271. For the reasons that   
follow, the judgment of the appellate court is affirmed in part, and   
vacated in part.
 
BACKGROUND
      The following facts are not in dispute. Plaintiff is a board-certified, family-practice physician who holds an Illinois license  
to practice medicine. Plaintiff practiced medicine with the United  
States Army from 1982, when plaintiff graduated from medical  
school, until 1995, when plaintiff relocated to the Alton area.
      On January 4, 1995, plaintiff entered into a “Physician  
Services Agreement” (agreement) with Alton Health Institute  
(AHI). AHI is a nonlicensed, not-for-profit corporation organized  
under the General Not For Profit Corporation Act of 1986 (805  
ILCS 105/101.01 (West 1996)). Two entities share equal  
ownership of AHI. AHI is 50% owned by St. Anthony’s Health  
Systems (St. Anthony’s). St. Anthony’s is a tax-exempt, not-for-profit corporation which is wholly owned by the Sisters of St.  
Francis of the Martyr St. George. St. Anthony’s is not licensed as  
a hospital or medical services corporation. However, St.  
Anthony’s does control two licensed hospitals located in the Alton  
area: St. Anthony’s Hospital and St. Clare’s Hospital. The  
president of St. Anthony’s is William Kessler, who is also the  
president of AHI. Kessler is not a physician, and he does not hold  
a medical license. The remaining 50% of AHI is owned by Alton  
Health Care Partnership (partnership). The partnership does not  
have tax-exempt status. Although the partnership is composed  
primarily of physician groups, it includes at least one nonphysician  
member.
      The agreement entered into between plaintiff and AHI  
provided that plaintiff was to be employed by AHI on a full-time  
basis as a primary-care physician, that plaintiff was to receive an  
annual salary from AHI, and that plaintiff would be eligible for  
certain bonuses. The agreement outlined plaintiff’s duties as a  
physician in AHI’s employ. For example, the agreement set forth  
AHI’s expectations with respect to the productivity of plaintiff’s  
practice, including the number of weekly patient appointments  
plaintiff was required to schedule, as well as guidelines plaintiff  
was expected to follow in requesting time off. The agreement also  
outlined the obligations of AHI as plaintiff’s employer. For  
example, the agreement stated that AHI was to provide plaintiff  
with office space and was to furnish plaintiff with the equipment,  
services, supplies, and personnel that AHI “reasonably determines  
necessary” for the operation of plaintiff’s medical practice.
      By its terms, the agreement was valid for an initial period of  
three years and was to automatically renew for an additional three-year period unless it was terminated in accordance with conditions  
specified within that document. The agreement provided that AHI  
had the right to immediately terminate the agreement for cause, as  
defined in the contract. In addition, the agreement provided that  
upon either party’s failure to cure a breach of a material provision  
of the agreement within 30 days following receipt of written notice  
from the nonbreaching party, the nonbreaching party could  
terminate the agreement upon an additional 10 days’ written  
notice. The agreement also contained a nonassignment clause,  
which provided that the agreement “may not be amended or  
revised except with the written consent of the parties thereto, and  
may not be assigned by any party except with the written consent  
of [the] other party; provided, however, [that AHI] may assign this  
Agreement to a subsidiary or affiliate without the prior written  
consent of Physician.”
       In addition, the agreement contained a noncompetition clause,  
which prohibited plaintiff from practicing medicine within 20  
miles of AHI’s offices for two years after her employment with  
AHI ended. This clause provided as follows:
“During the term of this Agreement and for a period of
two (2) years from the date this Agreement is terminated
for any reason (the 'Protected Period’), Physician agrees
that he or she will not, without the prior written consent
of [AHI], directly or indirectly (i) provide, or become
associated with any other hospital group or other entity of
any type engaged in the provision of medical or health
care services or related administrative services within the
medical practice area, which for purposes of this
Agreement is the area within a twenty (20) mile radius of
the Office; (ii) solicit, divert, take away, interfere with or
contract to provide or render medical services to patients
treated by Physician during the term of this Agreement; or
(iii) solicit any person who is now or is hereafter an
employee of [AHI] or is now or hereafter engaged as an
independent contractor of [AHI] to become an employee
or to be engaged as an independent contractor of a
hospital medical group or any other entity that is
competitive with [AHI].”
      The agreement between plaintiff and AHI became effective on  
April 1, 1995, when plaintiff began her employment as an AHI  
physician. However, relations between plaintiff and AHI soon  
became strained. On October 6, 1995, plaintiff sent a five-page,  
single-spaced letter to William Kessler, president of AHI. In this  
letter, plaintiff informed Kessler that she wanted to bring “certain  
issues concerning my employment with [AHI]” to his attention,  
and stated that she had discussed these matters on several  
occasions with AHI’s practice manager but that the issues had not  
been resolved. Plaintiff then set forth, with specificity, five  
separate complaints with respect to her employment with AHI: (1)  
that, contrary to earlier assurances made by AHI that plaintiff  
would be able to fulfill her obligations to perform Army reserve  
duty without negative repercussions, she was subsequently  
informed that she would be forced to use vacation time or take  
unpaid leave; (2) that plaintiff’s attendance at mandatory meetings  
set up by AHI reduced the amount of office time she could spend  
with patients; (3) that AHI failed to provide plaintiff with adequate  
staffing to set up and operate her medical practice; (4) that plaintiff  
had a dispute with AHI as to whether AHI had the right to  
compensation received by plaintiff as a result of her outside  
activity as a nursing home medical director; and (5) that although  
plaintiff had been assured by AHI that it would establish a  
retirement plan, she was concerned that AHI had taken no action  
to set up such a plan. In her letter, plaintiff stated that AHI’s  
interpretation of her employment contract was “vastly different  
from the understanding I reached with AHI for the job of which I  
was recruited,” and she requested that she be “involved in issues  
and decisions involving my office that relate to the practice.”
      Over nine months later, on July 15,1996, plaintiff’s attorney  
sent a letter to counsel for AHI stating that representations made  
to plaintiff by AHI at the time plaintiff entered into the agreement  
“have never been fulfilled.” According to the letter, plaintiff’s  
concerns with respect to inadequate staffing had “not been heard”  
by AHI, and that plaintiff’s patients “have voiced their concern”  
upon observing plaintiff performing routine office duties such as  
“setting up rooms, giving shots, and taking care of their needs  
when others are sitting around.” In light of this situation, counsel  
for plaintiff proposed to negotiate an “equitable [s]eparation  
[a]greement” with AHI. To this end, plaintiff’s counsel stated that  
plaintiff would remain in the employ of AHI until September 9,  
1996, and requested that the noncompetition provision of the  
agreement “be modified to allow my client to practice medicine  
everywhere, including Alton, Illinois except exceedingly close to  
[AHI].” These issues were never resolved to the satisfaction of the  
parties.
      In April 1996, our appellate court rendered its decision in  
Berlin v. Sarah Bush Lincoln Health Center, 279 Ill. App. 3d 447  
(1996). A divided panel of the appellate court held that a  
restrictive covenant contained within an employment agreement  
between a surgeon and a licensed hospital was unenforceable  
because the hospital, through its employment agreement, was  
practicing medicine in violation of the prohibition against the  
corporate practice of medicine. Shortly thereafter, we agreed to  
review the decision of the appellate court in Berlin and granted the  
hospital’s petition for leave to appeal. Berlin v. Sarah Bush  
Lincoln Health Center, 168 Ill. 2d 582 (1996).
      On January 1, 1997, AHI assigned all of its physician service  
agreements, including that of plaintiff, to Community Primary  
Care Physicians, Ltd. (CPCP), the other defendant at bar. CPCP is  
a medical services corporation, organized under the Medical  
Corporation Act (805 ILCS 15/1 et seq. (West 1996)) and  
incorporated on December 9, 1996. The sole shareholder of CPCP  
is a licensed medical doctor, George Tucker.  
  
  
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 The record reflects  
that plaintiff never consented in writing to the assignment of the
agreement to CPCP. Shortly after the purported assignment, CPCP
tendered a new employment agreement to plaintiff. Plaintiff did
not sign the agreement tendered to her by CPCP and continued to
work under the terms of her original agreement with AHI.
       On January 31, 1997, plaintiff brought an action in the circuit  
court of Madison County seeking a declaratory judgment that the  
employment agreement she entered into with AHI was invalid. In  
support of her position, plaintiff relied on the appellate court’s  
opinion in Berlin and alleged that the provisions contained within  
the agreement, including the noncompetition clause, were not  
enforceable because AHI, through its employment agreement with  
her, was practicing medicine in violation of the prohibition against  
the corporate practice of medicine. The record reflects that the  
parties refrained from actively pursuing this litigation while they  
were awaiting our review of the Berlin decision. During this time,  
plaintiff continued to work for AHI and to negotiate their dispute.
      Approximately three months later, in a letter dated April 3,  
1997, counsel for plaintiff advised Kessler that plaintiff was  
“providing notice of exercise of her right to terminate the  
Physician Services Agreement *** because of on-going breaches  
by [AHI] of material provisions of the Agreement.” This letter  
alleged three material breaches of the agreement by AHI: (1)  
AHI’s failure to provide office space and equipment reasonably  
necessary for the proper operation and conduct of plaintiff’s  
medical practice; (2) AHI’s failure to employ competent,  
adequately trained personnel necessary for the proper operation  
and conduct of plaintiff’s practice; and (3) AHI’s failure to timely  
and accurately bill for medical services provided by plaintiff’s  
practice. The letter concluded that AHI had not only materially  
breached the agreement, but also had significantly interfered with  
plaintiff’s “ability to practice medicine in accordance with the  
professional and ethical standards to which she is held accountable  
*** [and which, therefore,] endangers the welfare of her patients.”  
The letter stated that, in the near future, plaintiff “must end her  
association” with AHI. Plaintiff, however, did not resign from AHI  
at this time and continued to perform medical services in  
accordance with the agreement.
      On April 17, 1997, an attorney representing both AHI and  
CPCP wrote a letter to plaintiff’s attorney, stating that plaintiff had  
not properly communicated her intention to terminate the  
agreement in accordance with the agreement’s terms. In addition,  
defendants’ attorney construed plaintiff’s April 3 letter as an  
anticipatory breach of the agreement, and counsel stated that, in  
the event of an actual breach, CPCP intended to pursue its  
remedies and enforce the termination provisions and covenants  
under the agreement. Counsel for defendants then responded in  
writing to each claim made by plaintiff in her April 3 letter. In the  
course of this response, counsel stated that “most of the allegations  
simply do not constitute a breach of the Agreement [and] [f]or  
those that arguably might, [AHI] and CPCP have corrected them  
or are in the process of correcting them.”
      In October 1997, this court handed down its decision in Berlin  
v. Sarah Bush Lincoln Health Center, 179 Ill. 2d 1 (1997). We  
reversed the judgment of the appellate court and held that a  
licensed hospital is exempt from the prohibition against the  
corporate practice of medicine. We concluded, therefore, that a  
licensed hospital may employ licensed physicians to provide  
medical services.
      On January 15, 1998, plaintiff wrote a letter to Kessler, stating  
that she was “sorry that we were not able to reach an  
accommodation to amicably resolve our differences” and that her  
resignation from AHI was effective as of that day. Following her  
resignation, plaintiff set up her own practice within the  
noncompetition area set forth in the agreement.
      On February 2, 1998, AHI filed in the circuit court a  
counterclaim against plaintiff, seeking injunctive relief enforcing  
the noncompetition provision of the agreement. The counterclaim  
also sought monetary damages from plaintiff. CPCP thereafter  
moved to intervene in the case.  
  
  
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 In response, plaintiff filed in the  
circuit court her own petition for injunctive relief, alleging that
AHI and CPCP interfered with the medical practice she set up
after leaving AHI.
      In December 1998, the circuit court conducted a hearing to  
resolve plaintiff’s original declaratory judgment action. In a  
written order and opinion entered on December 14, 1998, the  
circuit court held that plaintiff’s employment by AHI and CPCP  
did not violate the prohibition against the corporate practice of  
medicine. First, the circuit court determined that plaintiff’s  
employment by CPCP from January 1, 1997, to January 15, 1998,  
was “unquestionably valid.” The circuit court noted that CPCP, as  
a medical services corporation formed under the Medical  
Corporation Act (805 ILCS 15/1 et seq. (West 1996)), has been  
sanctioned by the legislature to employ licensed physicians.  
Therefore, the court reasoned, the prohibition against the corporate  
practice of medicine did not prohibit CPCP from employing  
plaintiff. The circuit court, however, did not specifically address  
whether the assignment of the agreement by AHI to CPCP was  
valid and effective.
      Second, with respect to plaintiff’s employment by AHI in  
1995 and 1996, the circuit court also found that no violation of the  
corporate practice doctrine occurred. Relying upon our decision in  
Berlin, the circuit court held that AHI fit within an exception to  
the prohibition against the corporate practice of medicine on the  
sole basis that AHI is a nonprofit, charitable organization.  
Accordingly, the circuit court held that the terms of plaintiff’s  
employment agreement were legal and enforceable. Plaintiff  
thereafter filed a motion to certify the circuit court’s order for  
interlocutory appeal. The circuit court denied plaintiff’s  
certification motion.
      Defendants subsequently moved for partial summary  
judgment on their counterclaim for injunctive relief and for  
summary judgment on plaintiff’s injunctive relief action. On April  
28, 1999, the circuit court granted defendants’ motions. The circuit  
court found that plaintiff’s letter dated April 3, 1997, was the only  
communication sent by plaintiff to AHI that explicitly referenced  
material breaches of the agreement. The circuit court held that this  
communication failed to properly invoke the agreement’s  
termination provisions, as it purported to terminate the agreement  
immediately upon the delivery of the letter. In addition, the court  
found that even if plaintiff’s letters did provide the requisite  
notice, the allegations made by plaintiff against defendants did not  
amount to breaches of the agreement. Therefore, the court  
concluded that it was plaintiff who had breached the agreement,  
and that AHI and CPCP were entitled to summary judgment on  
this issue. The circuit court further found the noncompetition  
provision in the agreement to be reasonable and enforceable.  
Accordingly, the circuit court enjoined plaintiff from practicing  
medicine within a 20-mile radius of the offices of AHI. The circuit  
court, however, reserved ruling on the issue of what, if any,  
monetary damages were due defendants. With respect to plaintiff’s  
request for injunctive relief based on allegations that defendants  
interfered with her medical practice after leaving AHI, the circuit  
court held that in light of its grant of injunctive relief to  
defendants, “the issue of injunctive relief to protect [plaintiff’s]  
now-enjoined practice is moot.” Upon plaintiff’s filing of an  
emergency motion for stay and a motion to reconsider, the circuit  
court modified its partial summary judgment order to interpret the  
20-mile area described in the noncompetition provision as driving  
distance rather than as a straight line on a map.
      On appeal, the appellate court, in a two-part opinion, reversed  
the judgment of the circuit court. 317 Ill. App. 3d 260. In the  
portion of the opinion designated as part “I,” the appellate court  
construed our decision in Berlin as reaffirming the viability of the  
corporate practice of medicine doctrine, and as creating a “narrow”  
exception to the application of the doctrine which arises only when  
“a licensed hospital *** enter[s] into contracts with physicians.”  
(Emphasis in original.) 317 Ill. App. 3d at 267. Thus, the appellate  
court held that AHI, which is an unlicensed health-care institute  
and which is controlled in part by a partnership of which one  
member is a nonphysician, did not fit within this narrow exception  
and was barred by the corporate practice of medicine doctrine  
from entering into an employment agreement with plaintiff. In the  
course of its ruling, the appellate court noted the long-standing  
conflict between plaintiff and William Kessler, AHI’s  
nonphysician president, which, in the view of the appellate court,  
“demonstrates the pitfalls of corporations practicing medicine.”  
317 Ill. App. 3d at 267. Accordingly, the appellate court held that,  
from its inception, the agreement between AHI and plaintiff was  
void, unenforceable, and unassignable. In the portion of the  
opinion designated as part “II,” the appellate court went on to state  
that, even if it were “assum[ed] arguendo that Berlin applies to the  
facts in the instant case,” the noncompetition covenant in the  
agreement between AHI and plaintiff was “an unreasonable  
restraint of trade and is unenforceable on public-policy grounds.”  
317 Ill. App. 3d at 271. The appellate court explained that an  
agreement restricting the right of a physician to practice medicine  
after leaving the employ of a health-care provider “limits not only  
the physician’s professional autonomy but also the patients’  
freedom to chose a doctor.” 317 Ill. App. 3d at 270.
      Defendants petitioned this court for leave to appeal pursuant  
to Rule 315(a) (177 Ill. 2d R. 315(a)). We granted defendants’  
petition.
 
ANALYSIS
      At issue in this appeal is whether the agreement entered into  
between AHI and plaintiff, including the noncompetition clause,  
is valid and enforceable. Defendants contend that the appellate  
court erred in holding that the corporate practice of medicine  
doctrine barred AHI from employing physicians such as plaintiff.  
AHI advances the argument that, under our decision in Berlin, a  
charitable nonprofit organization such as AHI is excepted from  
application of the prohibition against the corporate practice of  
medicine, even if the organization is not licensed to practice  
medicine. Plaintiff contends that the appellate court correctly  
declined to extend the Berlin exception to unlicensed health  
centers such as AHI. We agree with plaintiff.
      In Berlin, the plaintiff physician entered into a five-year  
employment agreement with the defendant, Sarah Bush Lincoln  
Health Center. The defendant was a nonprofit corporation licensed  
under the Hospital Licensing Act (210 ILCS 85/1 et seq. (West  
1994)) to operate a hospital. The employment agreement contained  
a noncompetition covenant which prohibited the plaintiff from  
providing health services within a 50-mile radius of the defendant  
for two years after the end of the employment agreement.
       After being in the employ of the defendant for two years, the  
plaintiff informed the defendant by letter that he was resigning and  
accepting another employment offer. After his resignation, the  
plaintiff immediately began working at a medical facility located  
one mile from the defendant. The defendant sought a preliminary  
injunction to prohibit the plaintiff from practicing at the competing  
facility based on the restrictive covenant contained within the  
employment agreement. In response, the plaintiff filed a complaint  
for declaratory judgment and a motion for summary judgment  
seeking to have the restrictive covenant invalidated on the basis  
that the defendant, by hiring the plaintiff to practice medicine as  
its employee, violated the proscription against a corporation  
practicing medicine. The circuit court agreed with the plaintiff,  
found the entire employment agreement unenforceable, and  
granted the plaintiff’s motion for summary judgment. As stated, a  
divided panel of the appellate court affirmed. Berlin, 279 Ill. App.  
3d at 459. This court reversed the judgment of the appellate court.
      The issue addressed by this court in Berlin was framed  
narrowly: “whether the 'corporate practice doctrine,’ as set forth  
by this court in People ex rel. Kerner v. United Medical Service,  
Inc., 362 Ill. 442 (1936), prohibits licensed hospitals from  
employing physicians to provide medical services.” Berlin, 179 Ill. 2d  at 6-7. We began our analysis by reviewing the genesis of the  
prohibition against the corporate practice of medicine. We  
observed that this doctrine is premised on the rationale that “a  
corporation cannot be licensed to practice medicine because only  
a human being can sustain the education, training, and character-screening which are prerequisites to receiving a professional  
license,” and “[s]ince a corporation cannot receive a medical  
license, it follows that a corporation cannot legally practice the  
profession.” Berlin, 179 Ill. 2d  at 10. Accordingly, it has long been  
held that “the employment of physicians by corporations is illegal  
because the acts of the physicians are attributable to the corporate  
employer, which cannot obtain a medical license.” Berlin, 179 Ill. 2d  at 10. We further observed in Berlin that the prohibition against  
the corporate practice of medicine is also supported by “several  
public policy arguments which espouse the dangers of lay control  
over professional judgment, the division of the physician’s loyalty  
between his patient and his profitmaking employer, and the  
commercialization of the profession.” Berlin, 179 Ill. 2d  at 10.
      We noted in Berlin that this court first addressed the corporate  
practice doctrine as it pertained to medicine in the 1936 decision  
in People ex rel. Kerner v. United Medical Service, Inc., 362 Ill. 442 (1936). In Kerner, a general corporation operated a low-cost  
health clinic in which all medical services were rendered by duly-licensed physicians. The State alleged that the corporation was  
illegally engaged in the practice of medicine in violation of the  
Medical Practice Act (Ill. Rev. Stat. 1935, ch. 91, par. 1 et seq.).  
This court agreed with the State, and rejected the contention  
advanced by the defendant that the practice of medicine does not  
encompass the corporate ownership of a health clinic where  
treatment is rendered solely by licensed physician employees.  
Berlin, 179 Ill. 2d  at 13, citing Kerner, 362 Ill.  at 454.
      We observed in Berlin that, since this court’s decision in  
Kerner, “no Illinois court has applied the corporate practice of  
medicine [doctrine] *** or specifically addressed the issue of  
whether licensed hospitals are prohibited from employing  
physicians.” Berlin, 179 Ill. 2d  at 13. Therefore, we engaged in a  
survey of decisions from other jurisdictions with respect to the  
application of the corporate practice of medicine doctrine to  
hospitals and concluded that these rulings could be divided into  
three categories. First, we observed that some jurisdictions refused  
to adopt the prohibition against the corporate practice of medicine  
altogether. We rejected this approach. Second, we noted that other  
jurisdictions determined that the corporate practice of medicine  
doctrine is inapplicable to nonprofit hospitals and health  
associations on the basis that the public policy arguments  
supporting the doctrine do not apply to physicians employed by  
charitable institutions. Third, we observed that the remainder of  
jurisdictions have determined that the prohibition against the  
corporate practice of medicine does not apply to hospitals which  
employ physicians because hospitals are authorized under other  
laws to provide medical treatment to patients. We commented that  
we found the latter two approaches “persuasive.” Berlin, 179 Ill. 2d  at 15.
      We then underscored that the matter before us in Berlin was  
factually distinguishable from Kerner. We explained that the  
corporate practice of medicine prohibition set forth in Kerner was  
“inferred from the general policies behind the Medical Practice  
Act” and that “[s]uch a prohibition is entirely appropriate to a  
general corporation possessing no licensed authority to offer  
medical services to the public, such as the appellant in Kerner.”  
Berlin, 179 Ill. 2d  at 16. We declined in Berlin, however, to apply  
the corporate practice of medicine doctrine to licensed hospitals.  
We reasoned that the prohibition against the corporate practice of  
medicine is inapplicable “when a corporation has been sanctioned  
by the laws of this state to operate a hospital.” Berlin, 179 Ill. 2d   
at 16. We held that this narrow exception to the application of the  
corporate practice doctrine was supported by the fact that  
numerous statutes have been enacted by the General Assembly  
which “clearly authorize, and at times mandate, licensed hospital  
corporations to provide medical services” and that the “authority  
to employ duly-licensed physicians for that purpose is reasonably  
implied from these legislative enactments.” Berlin, 179 Ill. 2d  at  
17.
      In addition, we noted that the public policy concerns  
supporting the prohibition against the corporate practice of  
medicine do not arise where a licensed hospital enters into an  
employment agreement with physicians. For example, we  
observed that the “concern for lay control over professional  
judgment is alleviated in a licensed hospital, where generally a  
separate professional medical staff is responsible for the quality of  
medical services rendered in the facility.” Berlin, 179 Ill. 2d  at 18.  
We further noted that concerns with respect to the  
commercialization of health care “are relieved when a licensed  
hospital is the physician’s employer,” because “[h]ospitals have an  
independent duty to provide for the patient’s health and welfare.”  
Berlin, 179 Ill. 2d  at 19. Therefore, we concluded that because “a  
duly-licensed hospital possesses legislative authority to practice  
medicine by means of its staff of licensed physicians,” it is  
therefore “excepted from the operation of the corporate practice of  
medicine doctrine.” Berlin, 179 Ill. 2d  at 19.
      Our decision in Berlin stands for the proposition that the  
proscription against the corporate practice of medicine is, at root,  
animated by the public policy purpose of safeguarding the public  
health and welfare by protecting the physician-patient relationship  
from lay interference with the physician’s professional judgment.  
The exercise of control or influence over the medical decision making of a physician by a lay, unlicensed corporation  
results in a division of the physician’s loyalty between the often  
divergent interests of the corporation and the patient. We  
determined in Berlin that the public policy purpose underpinning  
the corporate practice doctrine would not be adversely affected by  
carving out a narrow exception for an entity, such as a hospital,  
that must meet certain professional criteria established by the  
legislature to become a licensed health-care provider. Indeed, our  
decision in Berlin repeatedly emphasized the role of licensing in  
the genesis and development of the corporate practice doctrine. As  
stated in Berlin, the prohibition against the corporate practice of  
medicine was derived from the legislative intent manifest in  
enacting the Medical Practice Act (225 ILCS 60/1 et seq. (West  
1996)). The Medical Practice Act “regulat[es] medical  
professionals in order to protect the public welfare” (Potts v.  
Illinois Department of Registration & Education, 128 Ill. 2d 322,  
330 (1989)) and, to this end, mandates that medicine shall not be  
practiced without a valid license. See 225 ILCS 60/3 (West 1996).  
We concluded in Berlin that in light of the fact that the General  
Assembly enacted a comprehensive licensing scheme for hospitals,  
and thereby extended to hospitals the authority to provide medical  
services to the public, the corporate practice doctrine did not apply  
in that instance. Indeed, the stated purpose of the Hospital  
Licensing Act (210 ILCS 85/1 et seq. (West 2000)) mirrors the  
public policy purpose in enacting the Medical Practice Act: the  
safeguarding of the public health.  
  
  
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 Thus, because health-care  
services provided by hospitals are regulated through state licensing
procedures and agencies, the public policy concerns supporting the
application of the prohibition against the corporate practice of
medicine do not arise in the hospital context.
      In the matter at bar, defendants contend that “the rationale that 
excepts licensed hospitals from the corporate practice of medicine 
doctrine also applies to charitable nonprofit health organizations.” 
In their submissions to this court, defendants emphasize that AHI 
is a nonprofit organization which has as its charitable mission the 
delivery of health-care services for all residents of the Alton 
community, especially the poor. Therefore, defendants contend, 
AHI “fits squarely within” the approach adopted by other 
jurisdictions, and commented upon favorably by this court in 
Berlin, which holds that the public policy arguments underpinning 
the prohibition against the corporate practice of medicine do not 
apply where physicians are employed by charitable institutions. 
We decline to afford our decision in Berlin the expansive 
interpretation advocated by defendants. As stated, the holding in 
Berlin that hospitals are exempt from application of the corporate 
practice of medicine doctrine was premised on the fact that 
hospitals are sanctioned under state law to provide medical 
services to the public and are regulated by state agencies to assure 
compliance with licensing mandates. Although we noted in Berlin 
that some jurisdictions take the approach that the corporate 
practice doctrine does not apply to nonprofit hospitals and health 
associations, we neither discussed the significance of nonprofit 
status nor relied upon that consideration in arriving at our holding. 
In fact, we expressly stated in Berlin that because the “authorities 
and duties of licensed hospitals are conferred equally” upon
nonprofit and for-profit hospitals, there is “no justification for 
distinguishing” between licensed entities on the basis of profit. 
Berlin, 179 Ill. 2d  at 18. We therefore reject defendants’ 
contention that Berlin created an exception to the corporate 
practice doctrine for nonprofit entities.
      In addition, we decline defendants’ suggestion to now create 
an exception to the prohibition against the corporate practice of 
medicine on the sole basis that a corporation enjoys nonprofit 
status.
      The fact that an entity has achieved nonprofit status is 
unrelated to whether that entity meets the requirements set forth by 
the legislature to ensure that quality medical services are provided 
to the public. Creating an exception to the corporate practice of 
medicine doctrine based exclusively upon the fact that an entity is 
nonprofit would not advance the public interest in safeguarding the 
physician’s professional judgment from lay interference or 
protecting the public’s general health and welfare.
      We conclude that the employment agreement entered into 
between AHI and plaintiff violated the prohibition against the 
corporate practice of medicine and, therefore, was void from its 
inception. At the time AHI and plaintiff entered into the 
agreement, AHI was not licensed to provide medical services to 
the public and, therefore, was not subject to state requirements 
assuring the protection of the public health and welfare. The 
concerns of lay control over professional judgment and the 
division of a physician’s loyalties which underpin the prohibition 
against the corporate practice of medicine are apparent in this case. 
In her October 6, 1995, letter to AHI, plaintiff requests that she be 
“involved in issues and decisions involving my office that relate 
to the practice.” In a subsequent letter dated April 3, 1997, 
plaintiff expresses her frustration that AHI had interfered with her 
“ability to practice medicine in accordance with the professional 
and ethical standards to which she is held accountable *** [and 
which, therefore,] endangers the welfare of her patients.” We agree 
with the appellate court below that this matter demonstrates “the 
pitfalls of corporations practicing medicine.” 317 Ill. App. 3d at 
267.
      Although defendants acknowledge AHI’s status as an 
unlicensed, general not-for-profit corporation, defendants 
nevertheless contend, without citation to authority, that because 
AHI was subject to other rules and regulations applicable to 
health-care providers, such as federal Medicare regulations, this 
regulatory oversight was analogous to being licensed. We reject 
this contention. That AHI was subject to certain rules and 
regulations is not the equivalent of being subject to, and regulated 
by, a comprehensive licensing scheme established by the 
legislature which mandates that medical-care providers meet 
specific requirements to safeguard the public health. Accordingly, 
the appellate court below correctly held that under the corporate 
practice of medicine doctrine, the agreement between plaintiff and 
AHI, including the noncompetition covenant, was void, 
unenforceable and unassignable. Therefore, we affirm the 
judgment of the appellate court with respect to this specific issue.
      In sum, we continue to adhere to our rationale in Berlin that 
the prohibition against the corporate practice of medicine does not 
apply to a corporate entity which has been sanctioned by the 
legislature to practice medicine by means of employing licensed 
physicians. Indeed, the General Assembly has broad regulatory 
power with respect to the health-care professions, and it is within 
the discretion of the legislature to not only determine what is 
required in the public interest and welfare, but also to determine 
the measures needed to secure such interest. Burger v. Lutheran 
General Hospital, 198 Ill. 2d 21, 41 (2001). We conclude that a 
focus upon licensing best protects the public’s interest in quality 
health care and directly addresses the public policy concerns 
underpinning the corporate practice doctrine. It is through state 
licensing requirements that professional competency is assured 
and that the public welfare is protected. See Potts, 128 Ill. 2d  at 
330-31. It is within the province of the legislature, in the exercise 
of its broad regulatory power, to expand the exception to the 
corporate practice doctrine by expanding the types of corporate 
entities that are required to submit to licensing requirements and 
regulatory oversight before they may provide medical services to 
the public. In this way, a corporation, wishing to employ 
physicians, may demonstrate its qualifications and accept its 
responsibilities as a licensed and regulated participant in the 
medical care system.
      Indeed, the General Assembly has recently exercised its 
authority in this regard. In Public Act 92–455, effective September 
30, 2001, the legislature has taken steps to clarify the scope of the 
prohibition against the corporate practice of medicine. This 
enactment amends the Hospital Licensing Act by adding a new 
subsection that allows licensed hospitals and “hospital affiliates” 
 
 
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to employ licensed physicians upon meeting specific, enumerated 
requirements designed to safeguard the public health and maintain
quality patient care. 210 ILCS 85/10.8 (West Supp. 2001). The
parties at bar agree that Public Act 92–455 does not apply to the
matter at bar. We comment on this enactment, however, as an
example of the legislature’s exercise of its broad regulatory
powers with respect to the provision of health-care services. For
example, the Act sets forth concise restraints assuring independent
guarantees of medical judgment by physicians (210 ILCS
85/10.8(a)(3) (West Supp. 2001)) and also contains provisions
requiring that '[i]ndependent physicians, who are not employed by
an employing entity, periodically review the quality of the medical
services provided by the employed physician to continuously
improve patient care.” 210 ILCS 85/10.8(a)(2) (West Supp. 2001).
In sum, by passing this legislation, the General Assembly has
taken steps to eliminate the concept of lay control from the
practice of medicine, to require licensed providers to meet certain
qualifications, and to assure the monitoring of the quality of health
care provided to the public.
 
      In light of our holding that the employment agreement entered
into between plaintiff and AHI was, from its inception, void,
unenforceable and unassignable under the corporate practice of
medicine doctrine, we need not address the arguments made by the
parties at bar with respect to the holding of the appellate court
below concerning the general validity of noncompetition
covenants contained in physician employment agreements. Indeed,
as the appellate court had already determined in part “I” of its
opinion that the agreement at bar was void under Berlin and the
corporate practice doctrine, any statements or holdings by the
appellate court in that portion of its opinion designated as part “II”
with respect to the validity of all noncompetition covenants in
physician employment agreements were wholly advisory.
Advisory opinions are to be avoided. Oliveira v. Amoco Oil Co.,
No. 89497, slip op. at 18 (June 20, 2002), citing Barth v. Reagan,
139 Ill. 2d 399, 419 (1990). For this reason, we express no opinion
with respect to the general validity of noncompetition clauses
contained within physician employment agreements. We also
vacate those portions of the appellate court judgment which
addressed this specific issue. See Oliveira, slip op. at 18.
 
CONCLUSION
      For the reasons stated, the judgment of the appellate court is
affirmed in part and vacated in part.
 
Affirmed in part and vacated in part.
 
      JUSTICES FREEMAN and RARICK took no part in the
consideration or decision of this case.