Published 4/1/2008

Physician Provided Physical Therapy Banned in South Carolina

The South Carolina Supreme Court has ruled in Sloan v. South Carolina Board of Physical Therapy Sloan1 (“Sloan”) that the state’s Physical Therapy Practice Act2 (“Act”) prohibits physical therapists from working in a physician’s office and providing physical therapy to the physician’s patients through what are known as “in-practice referrals.” The decision has tremendous ramifications in that it changes how patients get physical therapy (i.e. not in the physician’s office), forces many physical therapists out of their current jobs,3 reverses the longstanding public policy decision of a state agency,4 and changes how medicine/physical therapy has been practiced in South Carolina for decades.5 While the impact of Sloan6 is dramatic, what is remarkable is that the decision interprets the Act contrary to the overwhelming support for in-practice referrals by relying on a dubious opinion7 (“Opinion”) of the South Carolina Attorney General (“AG”). As a result, Sloan interprets the Act to be a blanket ban on in-practice referrals despite there being no evidence of a problem and it being unnecessary, as in-practice referral abuse is already prohibited in South Carolina.8 Consequently, Sloan is, according to the dissent, an “absurd”9 and “illogical”10 interpretation of the Act.

1. Act modified in 1998
The origins of Sloan date back to 1998 when the Act was modified and the South Carolina Board of Physical Therapy Examiners (“Board”) interpreted the revised Act as allowing the continuation of in-practice referrals in South Carolina. The Board’s interpretation was (and is) consistent with the determinations made by the federal government, the overwhelming majority of laws of other states, and the view of the medical community as expressed by the American Medical Association (“AMA”).

2. APTA involvement
Despite the vast support for the Board’s interpretation of the Act, however, the American Physical Therapy Association11 (“APTA”) was able to utilize the AG to successfully overturn the Board. Sloan is the culmination of a national campaign started over a quarter century ago12 by the APTA to eliminate in-practice referrals. As a part of this campaign, APTA developed a strategic plan which focuses, in part, on reviewing state physical therapy statutes for opportunities to prohibit in-practice referrals.13 In implementing this plan, the APTA identifies states with ambiguous physical therapy statutes (such as South Carolina) which could be interpreted by the state attorney general to overturn an undesirable decision of a state agency which regulates physical therapy.14 The advantage of this strategy is that it requires convincing only one person (the state attorney general), who does not necessarily have any expertise on the topic, 15 to issue an edict without the messiness of a public debate required through a legislative or administrative change.16 Since the sources and quality of the opinion are solely within the discretion of the state attorney general, it is possible for a state attorney general to prohibit in-practice referrals without a thorough understanding of the issue.

3. AG Opinion
APTA, through its local chapter, initiated Sloan in 2004 by getting two state senators to urge the AG to issue the Opinion interpreting the Act to prohibit in-practice referrals.17 As part of their efforts, the two state senators supplied the AG with a letter from APTA (“APTA Letter”) which contained their views of in-practice referrals in South Carolina.18 APTA wanted the Act interpreted broadly to be a blanket ban on in-practice referrals.19 The AG agreed and relied upon20 the APTA Letter in issuing the Opinion interpreting the Act to prohibit in-practice referrals.21 The AG’s apparent unquestioned reliance on the APTA Letter is unfortunate as it prevented the Opinion from considering that it contradicted the Board, federal law, the medical community, and laws of 47 other states.

Nevertheless, with the issuance of the Opinion in 2004, the Board was forced to overturn its 1998 policy decision and adopt the Opinion as its new position since the AG is the statutory legal advisor to the Board.22 The physician plaintiffs were then forced to sue in Sloan to prevent the Board from implementing the Opinion. The Sloan court, unfortunately, deferred to the Opinion because it was necessary to prevent physicians from overusing physical therapy and putting “their own financial gain…[above] their patients’ medical needs.”23 Sloan’s rationale, however, is flawed as its interpretation of the Act is: A) inconsistent with other sources; B) not in the best interests of consumers; and C) improperly deferring to the Opinion.

4. Sloan’s interpretation of Act is flawed
A. Inconsistent with the other sources

The first mistake Sloan made in deriving its interpretation of the Act is ignoring that there is a long history of in-practice referrals being accepted in South Carolina which is consistent with the near unanimous opinion throughout the United States. Sloan is not only at odds with the policy determination of 47 states; it also contradicts federal policy. While Sloan states that the Act and federal law on referrals are both designed “to protect consumers”,24 it then curiously claims that federal law “is immaterial in interpreting” the Act.25 Rejecting the federal perspective on in-practice referrals without explanation is perplexing given that the federal system has been active for nearly two decades26 in eliminating any improper self referrals.27 Sloan apparently realizes this and attempts to minimize it by claiming that South Carolina has authority to “further restrict [in-practice referrals]…regardless of federal laws.”28

Sloan confuses that the issue is not whether South Carolina must follow federal law but rather should it deviate from the federal policy determination. Sloan, unfortunately, fails to explain why interpreting the Act more restrictively than federal law is beneficial or desirable. Sloan also fails to consider that since federal law allowed in-practice referrals when the Act was modified in 1998, the better interpretation is that the Act was likely intended to be consistent with federal law in permitting in-practice referrals. Regardless, given the resources dedicated by the federal government on eliminating any improper self referrals, Sloan should have answered the dissents criticism by explaining how its deviation from the policy judgment of the federal government serves the consumers of South Carolina.

B. Fails to protect consumers
The second mistake made by Sloan is that its interpretation of the Act actually harms patients for three reasons being: there is no evidence of abuse, referral misconduct is already prohibited in South Carolina, and blanket bans are poor policy. First, Sloan harms consumers (i.e. patients) because it is an unnecessary solution (blanket ban physical therapists working for physicians) to a problem (physician abuse) that does not exist. Neither the Opinion nor Sloan could identify one circumstance in South Carolina where a consumer has been harmed by in-practice referral abuse. Given this, it is surprising that the Sloan would disrupt an entire industry without evidence of a demonstrated need.

Second, even assuming, arguendo, that in-practice referrals were being abused, South Carolina already has a well established system to prevent abuse through the South Carolina Board of Medical Examiners (“Medical Examiners”) which regulates the practice of medicine.29 The Medical Examiners have the authority to levy a substantial fine and permanently suspend a physician’s right to practice medicine if in-practice referrals are abused.30 Such a penalties are virtually immeasurable and an ultimate deterrent. Consequently, given the existing huge incentive for physicians not to abuse in-practice referrals, interpreting the Act to eliminate a financial conflict of interest for physicians is meaningless.

Third, organized medicine (as represented by the AMA) has determined that the type of blanket ban imposed in Sloan is detrimental to consumers.31 The AMA believes that blanket bans not only harm patients but also damage the national health care system as they reduce physician investment. 32 Sloan’s interpretation of the Act, therefore, does nothing to protect patients and is an unnecessary blanket ban on conduct which is already prohibited.

C. Deference to the Opinion was error
The final error made by Sloan is deferring to the Opinion. Rather than interpreting the Act consistent with the overwhelming consensus in the United States, as suggested by the dissent, Sloan instead apparently relies on the legal determinations of the Opinion in making South Carolina an anomaly. This reliance on the Opinion is misplaced because it is poorly reasoned.

If Sloan had not given the Opinion undeserved deference, it would have likely realized that it was ill-conceived and of dubious value. Even a cursory glance at the length of the court opinion (32 pages)33 to the Opinion (5 ¼ pages including the title page)34 hints at the Opinion’s shortcomings. A more thorough examination reveals that the Opinion discusses only one legal issue (interpretation of the Act) in prohibiting in-practice referrals,35 while Sloan addresses eight additional legal issues.

These eight additional issues are weighty matters and were so closely contested that five36 of them were only able to generate a 3-2 majority. While the Opinion failing to address one of these crucial issues demonstrates a significant lack of thoroughness, failing to address all of them is inexplicable particularly since the AG claims that all opinions are thoroughly researched and “resolve questions of law as the author believes a court would decide the issue.” 37 Despite these major deficiencies, Sloan still relied on the Opinion’s legal conclusions in the face of overwhelming support to the contrary. Sloan erred, therefore, in deferring to the Opinion despite obvious flaws and should have deferred, instead, to the policy judgments of the Board.

5. Conclusion
In summary, Sloan misinterpreted the Act by expanding its scope to fundamentally change how patients receive physical therapy in South Carolina. Sloan did this by mistakenly relying on a flawed Opinion despite the fact that it contradicted the Board, federal/state law, and the medical community. Further, Sloan is poor policy as it is an unnecessary ban on improper relationships that are already prohibited in South Carolina.

Despite APTA’s twenty five year campaign, virtually all states and the federal government have rejected APTA’s position. Nevertheless, APTA claims that Sloan is a “step forward”38 and plans to increase its efforts to ban in-practice referrals in other states by creating a grant program to fund similar initiatives.39 As part of its renewed efforts, APTA has even recently changed how it refers to in-practice referrals from the innocuous “physician owned physical therapy services” to the more ominous “referral for profit.”40 Opponents will likely argue that this is an attempt to suggest improper motives of physicians utilizing in-practice referrals in an effort to recast the debate in other states with ambiguous physical therapy acts such as: Arkansas, Arizona, Florida, Louisiana and Tennessee.41 The likelihood of a result similar to Sloan in these states is largely dependent on how diligent the state attorney general and judiciary are in taking measured evaluation of the issue.

It is also possible that Sloan could be used as a basis to attack similar in-office ancillary services offered by physicians, such as occupational therapy42 or office imaging.43 As with physical therapy, there is a similar movement to prevent imaging services from being provided in a physician’s office with Maryland recently being the first state to forbid in-office MRIs.44 It is yet to be seen if the Maryland decision and Sloan are the beginning of a trend of limiting services that patients can receive at their physician’s office. If so, both physicians and patients could be facing major changes in the future.