Opinion ID: 2601888
Heading Depth: 2
Heading Rank: 2

Heading: The Antirebate Statute

Text: ¶ 25 Columbia's third claim is that the physician-members and the physical therapists of BFOA violate the antirebate statute, chapter 19.68 RCW, by receiving and paying unearned profits. Though the antirebate statute applies to a referring physician with an ownership interest in the business to which patients are referred, Day v. Inland Empire Optical, Inc., 76 Wash.2d 407, 456 P.2d 1011 (1969), the statute exempts from its coverage profits earned by an employee of a firm and flowing to the firm's owners, provided the owners practice in the firm, RCW 19.68.040. As such, BFOA is entitled to summary judgment on Columbia's antirebate statute claim. [6] ¶ 26 Though we have previously noted that the antirebate statute is not a model of clarity by any means, we have nonetheless determined that it prohibits both paying and receiving anything of value, including unearned profits, in return for a referral of patients. Wright, 158 Wash.2d at 381, 144 P.3d 301. The benefit of such a law is that it discourages unnecessary referrals, thereby lowering health care costs. Our most extensive and on-point discussion of the statute came in Day. In Day, a group of ophthalmologists practiced together in the Spokane Eye Clinic, a medical partnership. 76 Wash.2d at 410, 456 P.2d 1011. Those ophthalmologists also owned all the capital stock of the Inland Empire Optical Company, which was located on the lower floor of the same building and operated an optical dispensing business, employing four licensed dispensing opticians. Id. In the eye clinic, the ophthalmologists advertised on a sign that they owned an optical shop downstairs but that patients were free to take their prescriptions to other opticians. Id. at 412, 456 P.2d 1011. The court in Day found that this arrangement violated the antirebate statute, reasoning that the sign constituted a referral by the ophthalmologists and that any benefit to Inland Empire Optical ultimately benefited its owners. Id. at 418-19, 456 P.2d 1011. ¶ 27 The present case largely parallels Day. The physician-owners of BFOA refer patients to physical therapists employed by a business entity owned by the referring physicians and the owners thereby benefit from the referral. Without more, this would violate the antirebate statute since any profit from the work by the physical therapists would, absent the exception contained in RCW 19.68.040, be unearned as to the referring physicians. A physician may receive compensation only for services rendered by that particular physician. RCW 19.68.040. ¶ 28 Unlike Day, which involved two entirely distinct entities, the referring physician-members here provided their own professional services through the same firm as the physical therapists to whom they referred patients. RCW 19.68.040 instructs that the chapter is not intended to prohibit two or more licensees who practice their profession as copartners to charge or collect compensation for any professional services by any member of the firm. The antirebate statute was enacted in 1949. At that time, 20 years prior to passage of the PSCA, the corporate practice of medicine doctrine prohibited corporations from practicing medicine through their employees. As such, the only business arrangement under which two or more licensees could practice together was a partnership. The PSCA expressly provides that professional service corporations remain subject to the antirebate statute, RCW 18.100.140, thereby establishing that the antirebate statute's terms are no longer limited to partnerships. In line with basic principles of statutory interpretation, we read the antirebate statute in harmony with the PSCA. Doing so, it becomes clear that the legislature did not intend to prohibit licensees practicing their profession together through a lawful business arrangement from receiving compensation for the professional services of other members of the firm. The result is that profits from professional services rendered by employees of a firm are not unearned by the owners, as that term is used in RCW 19.68.010(1), so long as the owners practice as part of that firm. The physician-members of BFOA do practice as part of the firm and thus any profit they receive from their referrals to BFOA-employed physical therapists is not unearned and, therefore, not barred by the antirebate statute. ¶ 29 The trial court declined to grant BFOA's summary judgment motion on the antirebate statute claim because it believed that there remained a question of fact as to whether BFOA physicians adequately supervised the physical therapists employed by BFOA, and Columbia advances that argument here. The antirebate statute, however, contains no supervision requirement. The mistaken belief to the contrary appears to stem from a misreading of Day. In Day, the court first determined that the referrals by the ophthalmologists ran afoul of the prohibitions in RCW 19.68.010 and .020. 76 Wash.2d at 418-19, 456 P.2d 1011. It then noted, however, that a separate statute, RCW 18.34.010, specifically permitted employment of a licensed optician by an ophthalmologist, provided the ophthalmologist provided personal supervision of the optician. Id. at 419-20, 456 P.2d 1011. The court then determined that in order for the ophthalmologists in that case to take advantage of RCW 19.68.040, they would have to demonstrate that they met the requirements of RCW 18.34.010 (i.e., that they personally supervised the opticians). Id. It was a separate statute that imposed a personal supervision requirement in Day, not the antirebate statute. There is no independent personal supervision requirement in either the PSCA or chapter 18.74 RCW. BFOA physicians therefore need not show that they personally supervised the physical therapists employed by BFOA. ¶ 30 In sum, even construing all material facts in the light most favorable to Columbia, BFOA physicians and physical therapists have not violated the antirebate statute. On remand, the trial court is directed to enter summary judgment for BFOA physicians and physical therapists on Columbia's antirebate statute claim.