Facts
- A nonprofit, licensed hospital employed Dr. Richard B. Berlin, Jr., a general surgeon, under a five-year written agreement beginning in December 1992.
- The agreement permitted early termination with 180 days’ written notice and included a post-employment restrictive covenant barring competition within 50 miles for two years.
- Berlin resigned effective February 4, 1994, and began practicing at a clinic about one mile from the hospital.
- The hospital sued to preliminarily enjoin Berlin from competing under the restrictive covenant.
- Berlin sought declaratory and summary judgment that the restrictive covenant and agreement were unenforceable because a hospital corporation’s employment of a physician allegedly violated the corporate practice of medicine doctrine.
- The circuit court granted summary judgment for Berlin, holding the hospital’s employment of Berlin constituted unlawful corporate practice of medicine and rendered the agreement unenforceable.
- A divided appellate court affirmed on the same rationale.
Issues
- Whether the corporate practice of medicine doctrine prohibits a licensed hospital corporation from employing physicians to provide medical services.
- If not, whether a physician’s employment agreement and restrictive covenant may be invalidated solely because the employer is a hospital corporation.
Decision
- The Illinois Supreme Court reversed the appellate court and the circuit court’s summary judgment for Berlin.
- The Court held the corporate practice doctrine is inapplicable to licensed hospitals; the hospital’s employment of Berlin was not illegal on that basis.
- The Court remanded for further proceedings, leaving unresolved any separate, traditional challenges to the restrictive covenant (e.g., reasonableness or other public-policy limits).
Legal Principles
- A judicially created corporate practice doctrine aimed at preventing lay control of medical judgment does not apply to hospitals duly licensed and regulated to operate as hospitals.
- The Medical Practice Act does not expressly prohibit corporations, including licensed hospitals, from employing licensed physicians.
- Hospital-related statutes and regulation contemplate that licensed hospitals provide medical care through physicians, supporting an exception to any general corporate practice prohibition.
- The legality of a physician’s employment contract with a licensed hospital cannot be defeated solely by claiming the arrangement constitutes corporate practice of medicine.
- A court may reject a categorical distinction between nonprofit and for-profit hospitals for corporate practice purposes when both are duly licensed and regulated.
Conclusion
The Illinois Supreme Court held that Illinois’ corporate practice of medicine doctrine does not bar licensed hospitals from employing physicians, so the physician’s employment agreement could not be deemed void on that ground; the case was remanded to address any remaining enforceability questions under ordinary restrictive-covenant analysis.