Arizona passed a new law[1] clarifying that licensed health professionals can form and practice through different types of business entities.
Arizona Revised Statutes Section 32-3230; Health Professionals; Practice; Employment; Business Entities
This new law, A.R.S. § 32-3230, provides that health professionals may engage in their professional and licensed health care practices in any form of business entity recognized under Arizona law and be employed by any form of business entity in Arizona. Although Arizona health professionals have utilized various business entities for their practices for years, this new law appears to clarify the ability for professionals to work for business entities not owned or controlled by other licensed health professionals.
Lone Exception: Optometrists
Although the definition of health professional is broad, it’s important to note that this new law carves out an exception for optometrists. This exception[2] provides that an optometrist may practice the profession of optometry only as: (i) a sole practitioner; (ii) a partner with other health professionals; (iii) a professional limited liability company or professional corporation in which health professionals collectively possess at least 51 percent of the ownership interest; or (iv) an employee or independent contractor of an authorized optometry business.
Health Care Facilities Licensure
This new law was added to Title 32 under which the laws covering health professionals are found. There is no mention of the relation between this new law and the existing laws under Title 36 governing health care facility licensure by the Arizona Department of Health Services (ADHS). Title 36 excludes from ADHS facility licensing the “private offices and clinics of health care providers licensed under Title 32.”[3] However, ADHS’ longstanding interpretation is that this exemption only applies to practices wholly owned by licensed health professionals. Therefore, although this new law allows for health professionals to work through any type of business entity, whether owned by health professionals or not, ADHS still requires a health care facility license in the event the entity is not wholly owned by licensed health professionals.
Conclusion
In passing this new law, the Arizona legislature sent a signal—Arizona is a state that is open for business with respect to health professionals. However, health professionals should still be cognizant of how this new law will affect ADHS health care facility licensure requirements. For questions on how this new law applies to your practice, please contact Jim Taylor and Aaron Kacer.
[1] SB 1637 (2022), signed by Arizona Governor Doug Ducey on May 2, 2022, enacted A.R.S. § 32-3230. This law becomes effective on September 24, 2022.
