Is the Purchase of Chiropractic Practices by CliniCorp/PMA Illegal?

On February 24, 1992, Peter G. Fernandez, D.C., president and sole owner of Practice Management Associates (PMA), announced to his clients that "On January 18, 1992, PMA Management Services, Inc., became part of CliniCorp, Inc." In the letter Dr. Fernandez added: "In addition to continuing PMA seminars, CliniCorp will own and manage chiropractic clinics throughout the United States and provide comprehensive management services and financing alternatives to doctors of chiropractic."

In a letter dated February 26, 1992, on letterhead identical to that of Dr. Fernandez's February 24th letter (address, phone number and fax number identical, only company name and officer were different), Robert S. Goldsamt, chairman of the board, announced: "Clinicorp, Inc., the nation's leading publicly traded company in the business of owning and managing chiropractic clinics, is interested in purchasing your practice." The purchase of "your practice" can "include a cash and/or stock payment." The letter went on to say that CliniCorp will begin "assembling a nationwide network of chiropractic clinics beginning in California and Florida."

Clinicorp was funded through a public offering earlier this year (please see "PMA Becomes Clinicorp" in the February 28, 1992 issue). But the public offering was only for 48% of the total CliniCorp stock. According to CliniCorp Secretary and General Council, Norbert A. Schlei:

"The Ultimate control of a corporation flows from its voting stock. As CliniCorp's prospectus makes clear, Mr. Goldsamt and members of his group own 923,460 shares of voting stock. That was 85% of all outstanding voting stock before the recent public offering, 44% afterward. Dr. Fernandez and his group own 150,000 voting shares, which was 14% before the public offering, 7% afterward. (Members of the public now own 48% of CliniCorp's voting stock.)"

In response to questions expressed by California Chiropractic Association members over CliniCorp/PMA buying chiropractic practices, Gary Cuneo, executive director of the California Chiropractic Association, sought the opinion of Vivian R. Davis, executive director of the California Board of Chiropractic Examiners. This is her response:

 

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March 16, 1992

Gary Cuneo
California Chiropractic Association
7801 Folsom Blvd., Suite 375
Sacramento, CA 95826

Dear Gary:

You have asked for my comments on the CliniCorp proposal from Florida to purchase California chiropractic practices. In addition to my instant distrust of a proposal offering to increase the revenue producing time a doctor of chiropractic can spend in his or her office, an unlicensed person may not own a chiropractic practice in California.

While an individual unlicensed in California may own the real property and equipment, the practice must remain in the control of a California licensed doctor of chiropractic. The Board of Chiropractic Examiners will hold the California doctor of chiropractic responsible for the actions taken in the chiropractic office.

Doctors of chiropractic responding to this proposal should scrutinize the terms of the agreement to assure that there is no conflict with the law in California. As always when entering into an agreement or contract likely to affect the doctors future livelihood, I encourage interested parties to seek legal assistance in reviewing the terms and conditions of the proposal.

Sincerely,
BOARD OF CHIROPRACTIC EXAMINERS

Vivian R. Davis
Executive Director

VRD:bp

 

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As the question of the legality and other considerations involved in the sale of a chiropractic practice to CliniCorp/PMA come to light, Dynamic Chiropractic will present them for our readers' consideration.