Can a Delaware physical therapist work for or accept patient referrals from a physician who profits from those referrals?

Official title

02-IB25 10/10/2002 AG Opinion Letter to Philip N. Barkins, P.T. re: Referrals Prohibited to Physical Therapists pursuant to 24 Del. C. §2616(a)(8)

Plain-English summary

The chairperson of Delaware's State Examining Board of Physical Therapists asked the AG's office to interpret a statute restricting how physical therapists can be paid when a physician sends them patients. The Board wanted to know whether the law bars a physical therapist from working for a physician or physician group that refers its own patients to that therapist, whether it functions as a ban on physician-owned physical therapy practices, whether antitrust law might block the rule, and whether an exception protects therapists already working in that kind of arrangement.

The AG concluded that a physical therapist cannot split fees with, or accept money, wages, discounts, commissions, or gratuities from, anyone who refers patients to them, physicians included, and that this does bar a physician or physician group from referring their own patients to a physical therapist they employ. The statute doesn't stop physical therapists from organizing into any legally recognized business entity in Delaware, as long as that arrangement doesn't itself involve fee-splitting with a referring person. Antitrust and restraint-of-trade laws don't block the rule, because Delaware's regulation of physical therapy licensing is protected state action actively supervised by a state licensing board. And the statute's last sentence works as a grandfather clause: physical therapist and athletic trainer positions that already existed with a referring physician when the law took effect can keep going, though a physician still cannot sell or transfer one of those grandfathered positions to someone new.

Currency note

This opinion was issued in 2002. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Can a Delaware physician's practice employ its own physical therapist and refer patients directly to them?

Not under this arrangement, according to this opinion. The AG found the statute bars a physical therapist from accepting referrals from anyone, physician or otherwise, with whom the therapist splits, transfers, or shares fees, and this reaches an in-house physical therapist employed by the referring practice, unless the position already existed when the statute took effect.

Does Delaware's fee-splitting rule for physical therapists violate antitrust or restraint-of-trade laws?

No, according to this opinion. The AG found the rule protected under the state-action doctrine because the Delaware General Assembly clearly enacted this restriction as state policy and created a licensing board that actively supervises the practice of physical therapy, taking it outside the reach of federal antitrust law.

If a physical therapist already worked for a referring physician before this law passed, do they have to quit?

No, according to this opinion. The AG found the statute's last sentence grandfathers in physical therapist and athletic trainer positions that existed at the time the law was enacted, though the physician cannot sell or transfer that grandfathered position to a different person.

Can physical therapists form a business partnership or corporation together and split their combined earnings?

Yes, according to this opinion. The AG found nothing in the statute stops physical therapists or athletic trainers from organizing into any properly recognized Delaware business entity and dividing their joint operating costs among themselves, as long as doing so doesn't involve fee-splitting with someone who referred a patient to them.

Background and statutory framework

Delaware's physical therapy practice act allows the State Examining Board of Physical Therapy to discipline a therapist who splits, transfers, or profits from fees shared with a referring person, subject to two exceptions: business entities made up of physical therapists or athletic trainers dividing their own joint costs, and positions already held by therapists employed by physicians when the law was enacted, 24 Del. C. § 2616(a)(8). The AG applied the plain-meaning rule from Ingram v. Thorpe to read the statute's two operative clauses (barring both fee-splitting itself and profiting through credits, commissions, or gratuities) and drew on the legislative history of a near-identical, later-enacted provision for massage therapists, 24 Del. C. § 5313(a)(7), and Carper v. New Castle County Board of Education for treating that legislative synopsis as confirmation of the physical therapy statute's intended reach. On the business-entity question, the AG applied General Motors Corp. v. Burgess and Rubick v. Security Instrument Corp. for the rule that courts cannot read words like "solely" or "exclusively" into a statute the legislature didn't write. On antitrust, the AG applied the state-action doctrine from Parker v. Brown and its line of U.S. Supreme Court progeny, including Southern Motor Carriers Rate Conference, Inc. v. United States, Goldfarb v. Virginia State Bar, and California Retail Dealers Assn. v. Midcal Aluminum, along with 24 Del. C. § 2601's own statement that protecting the public from anti-competitive referral practices is a purpose of the Board. The opinion also looked to Alabama's Medical Association of State of Alabama v. Shoemake for how a similar rule had been read in another state, and noted several other states with comparable physical therapy referral statutes.

Citations

• 24 Del. C. § 2616(a)(8) (referral and fee-splitting prohibition for physical therapists; business-entity exception; grandfather clause)
• 24 Del. C. § 5313(a)(7) (parallel fee-splitting provision for massage and bodywork therapists)
• 24 Del. C. § 2601 (Board of Physical Therapy's purpose includes protecting the public from anti-competitive referral practices)
• Ingram v. Thorpe, Del. Supr., 747 A.2d 545, 547 (2000) (plain meaning controls when statutory language is unambiguous)
• Carper v. New Castle County Board of Education, Del. Supr., 432 A.2d 1202, 1205 (1981) (legislative synopsis of a related statute confirms intent)
• Medical Association of State of Alabama v. Shoemake, 656 So.2d 863 (Ala. Civ. App. 1995) (similar rule barring physical therapist employment by a referring physician)
• General Motors Corp. v. Burgess, Del. Supr. 545 A.2d 1186, 1191 (1988) (courts cannot read unwritten limiting words into a statute)
• Rubick v. Security Instrument Corp., 766 A.2d 15, 18 (Del. 2000) (plain meaning controls an unambiguous statute)
• Parker v. Brown, 317 U.S. 341 (1943) (U.S. Supreme Court; state-action doctrine exempts state-directed action from federal antitrust law)
• Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48 (1985) (U.S. Supreme Court; state-action doctrine requires active state supervision)
• Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975) (U.S. Supreme Court; state-action doctrine and professional regulation)
• California Retail Dealers Assn. v. Midcal Aluminum, 445 U.S. 97 (1980) (U.S. Supreme Court; state policy must be clearly articulated and actively supervised)

Source

• Landing page: https://attorneygeneral.delaware.gov/2002/10/10/02-ib25-10-10-2002-ag-opinion-letter-to-philip-n-barkins-p-t-re-referrals-prohibited-to-physical-therapists-pursuant-to-24-del-c-§2616a8/
• Original PDF: https://attorneygeneral.delaware.gov/wp-content/uploads/sites/50/2022/07/AG-Opinion-02-IB25.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

M. JANE BRADY
ATTORNEY GENERAL

NEW CASTLE COUNTY

Carvel State Building
820 N. French Street

Wilmington, DE 19801

Criminal Division (302) 577-8500
Fax: (302) 577-2496
Civil Division (302) 577-8400

Fax: (302) 577-6630

TTY: (302) 577-5783

PLEASE REPLY TO:

New Castle County/Civil Division

Philip N. Barkins, P.T.

Chairperson

STATE OF DELAWARE
DEPARTMENT OF JUSTICE

KENT COUNTY
102 West Water Street
Dover, DE 19901
Criminal Division (302) 739-4211
Fax: (302) 739-6727
Civil Division (302) 739-7641
Fax: (302) 739-7652
TTY: (302) 739-1545

October 10, 2002

State Examining Board of Physical Therapists

Division of Professional Regulation

Cannon Building

861 Silver Lake Boulevard
Dover, Delaware 19904

Dear Mr. Barkins:

Atty Gen. Op. No, 220-1225

SUSSEX COUNTY
114 E. Market Street
Georgetown, DE 19947
(302) 856-5352
Fax: (302) 856-5369
TTY: (302) 856-2500

RE: Referrals Prohibited to Physical Therapists pursuant to 24 Del. C. § 2616 (a) (8)

You have asked for an interpretation of Title 24 Del. C. Section 2616 (a) (8) which

restricts the practice of physical therapy in Delaware. Specifically, you have asked:

Does this statutory provision prohibit a physical therapist from working for a physician or

group of physicians (group practice) when the physician refers his/her patients to the

physical therapist for physical therapy services?

I. Does this statutory provision amount to an anti-physician-owned practice law (anti-POP)

for physical therapy services? Does it matter how the physician or group practice is

Mr. Philip Barkins
October 10, 2002
Page 2

organized under the law (corporation, limited liability corporation, partnership, limited
liability partnership etc.)?

Il. Would anti-trust or restraint of trade concerns bar the enforcement of this provision?

IV. Does the last sentence of this paragraph operate as a "grandfather" clause? Does it allow
those physical therapists or athletic trainers who were employed by physicians at the time
the statute was passed to continue to work in this capacity?

ANSWER
We conclude that physical therapists cannot accept referrals from any person (including a

physician) with whom they divide, transfer, assign, refund, or rebate fees. 24 Del. C. § 2616 (a)

(8) bars a physician-owned practice or group practice from referring their own patients to an in-

house physical therapist in their employ. We also conclude that a physical therapist cannot

accept pecuniary gain in the form of a credit, wages, discount, commission, or gratuity from
persons who have referred patients to them. The main purpose of 24 Del. C. § 2616 (a) (8) is the
protection of the public from unnecessary referrals to physical therapists which are based upon
financial gain. Although certain financial relationships with referring persons (including
physicians) are prohibited, physical therapists and athletic trainers may utilize any legally
recognized business entity in the State of Delaware, as long as they do not violate the referral
provisions of 24 Del. C. § 2616 (a) (8). Anti-trust or restraint of trade provisions do not bar the
enforcement of this statutory provision. The last sentence of 24 Del. C. § 2616 (a) (8) does
operate as a grandfather clause which exempts those positions which were in existence at the

time of the enactment of the statutory provision from the referral prohibitions provided in the

Mr. Philip Barkins
October 10, 2002
Page 3

statute. Please be cautioned that this opinion is not offered in response to a specific fact scenario,
and it is impossible and impractical to anticipate every factual determination that could be
relevant to the application and enforcement of 24 Del. C. § 2616 (a) (8). A specific request
should be made if a particular case occurs in which the Board needs guidance.

I. Referral Prohibitions

Chapter 26 of Title 24 of the Delaware Code is the physical therapy practice act. The
State Examining Board of Physical Therapy may suspend or revoke the license of a physical
therapist who:

Engages directly or indirectly in the division, transferring, assigning, rebating or
refunding of fees received for professional services or who profits by means of a
credit or other valuable consideration such as wages, an unearned commission,
discount or gratuity with any person who referred a patient, or with any relative or
business associate of the referring person. Nothing in this paragraph shall be
construed as prohibiting the members of any regularly and properly organized
business entity recognized by Delaware law and comprised of physical therapists
or athletic trainers from making any division of their total fees among themselves
as they determine by contract necessary to defray their joint operating costs. This
paragraph shall not apply to physical therapist or athletic trainer positions
currently held by physical therapists or athletic trainers employed by licensed
medical and osteopathic physicians.

24 Del. C. § 2616 (a) (8).

The plain meaning of the words of a statute are controlling if the language of the statute is
unambiguous. Ingram v. Thorpe, Del. Supr., 747 A.2d 545, 547 (2000). The first sentence of
24 Del. C. § 2616 (a) (8) can be divided into two clauses which address the limitations placed on
physical therapists. The first clause states that a physical therapist may be disciplined if the

physical therapist "engages directly or indirectly in the division, transferring, assigning, rebating,

Mr. Philip Barkins
October 10, 2002
Page 4

or refunding of fees received for professional services." 24 Del. C. § 2616 (a) (8). This first
clause of the sentence is controlled by the verb "engages". Id. The plain meaning of the words
provides that a physical therapist may not divide fees or convey fees from the physical therapist
to the referring person. A physical therapist may not: 1) transfer his/her fees in trust to the
referring person; 2) make a deduction from his/her fees; or 3) give back or return fees to the
referring person. A physical therapist is prohibited from sharing the proceeds received for
rendering professional services with the referring person.

Similarly, the second clause of the sentence addresses limitations placed on physical
therapists. The second clause states, "who profits by means of a credit or other valuable
consideration such as wages, an unearned commission, discount or gratuity." Id. This second
clause of the sentence is controlled by the verb, "profits". Id. Applying the plain meaning of the
words, a physical therapist may not receive a recompense or payment having monetary value
from the referring person. A physical therapist may not receive, from the referring person,
money that is paid for his/her services nor an additional fee paid for transacting business or
performing a service. A physical therapist may not profit from the act of a deduction from the
referring person. A physical therapist may not profit from a tip or money beyond the obligation
due for service from the referring person. This clause prevents a physical therapist from profiting
by the receipt of a credit, valuable consideration, wages, an unearned commission, discount, or
gratuity from the referring person.

The persons prohibited from compensating a physical therapist for a referral are any

person who referred a patient or any relative or business associate of the referring person. This

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October 10, 2002
Page 5
modifying clause specifies the persons with whom the physical therapist are prohibited from
splitting fees or otherwise sharing compensation as expressed above. There is no other
reasonable interpretation of the meaning of this modifying clause.
Similar Provision in Delaware

Chapter 53 of the Delaware Code is the practice act for the Board of Massage and
Bodywork. It contains a similar provision to 24 Del. C. § 2616 (a) (8). The provision, 24 Del. C.
§ 5313 (a) (7), relates to the grounds for discipline for massage or bodyworks therapists and
massage technicians and was enacted after 24 Del. C. § 2616 (a) (8). The first two sentences of
24 Del. C. § 5313 (a) (7) are identical to the first two sentences of 24 Del. C. § 2616 (a) (8). The
synopsis to Senate Amendment No. 2 to Senate Substitute No. 1 for Senate Bill 74 of the 139th
General Assembly states:

An additional ground for discipline would be added, similar to language in the

physical therapy Act, which would prohibit the licensed massage therapist from

engaging in fee splitting from any referral, or fee splitting with the employing

medical or osteopathic physician or chiropractor.
This synopsis makes a direct reference to the legislative intent in enacting the provision regarding
physical therapy, 24 Del. C. § 2616 (a) (8). It establishes that the General Assembly intended to
prohibit physical therapists from engaging in fee splitting with persons who refer patients to them

or with the physicians who employ them. Carper v. New Castle County Board of Education,

Del. Supr., 432 A.2d 1202, 1205 (1981).

Mr. Philip Barkins
October 10, 2002
Page 6

Similar Provisions in Other States

In Medical Association of State of Alabama vs. Shoemake, 656 So.2d 863 (Ala. Civ. App.
1995), the court considered a provision similar to 24 Del. C. § 2616 (a) (8) that was promulgated
by the Board of Physical Therapists of Alabama. A group of physicians claimed that a proposed
amendment to a rule for physical therapists would interfere with their practices. The proposed
amendment to Alabama rule 700-X-3-.02 recommended disciplinary action for a physical
therapist who:

[r]equests, receives, participates, or engages directly or indirectly in the division,

transferring, assigning, rebating or refunding of fees received for professional

services or. . . profits by means of a credit or other valuable consideration such as

wages, an unearned commission, discount or gratuity with any person who

referred a patient, or with any relative or business associate of the referring

person. Physical therapists employed by licensed medical and osteopathic

physicians and dentists will be allowed six months, from the effective date of this

rule, to comply.
Shoemake, 656 So.2d at 864. The court interpreted the proposed amendment to prohibit "a
physical therapist from being employed by, or from otherwise participating in a professional
financial arrangement with, a referring physician." Id.

Several states have enacted physical therapy legislation which is very similar to 24 Del.
C. § 2616 (a) (8): See, e.g., Arizona (Ariz. Rev. Stat. Ann. § 32-2044), Arkansas (Ark. Code Ann.
§ 17-93-308), Florida (Fla. Stat. Ann. § 486.125), Louisiana (La. Rev. Stat. Ann. 37:2413), South
Carolina (S.C. Code Ann. § 40-45-10), Tennessee (Tenn. Code Ann. § 63-13-312) and Wyoming

(Wyo. Stat. § 33-25-11). All of these provisions are contained in statutory sections delineating

the grounds for discipline of physical therapists.

Mr. Philip Barkins
October 10, 2002
Page 7
Il. Business Entity

The second sentence of 24 Del. C. § 2616 (a) (8) clarifies whether physical therapists may
belong to legally recognized business entities in the State of Delaware, given the referral
prohibitions on the practice of physical therapy enumerated in the first sentence. The second
sentence of 24 Del. C. § 2616 (a) (8) states that "[n]othing in this paragraph shall be construed as
prohibiting the members of any regularly and properly organized business entity recognized by
Delaware law and comprised of physical therapists or athletic trainers from making any division
of their total fees among themselves as they determine by contract necessary to defray their joint
operating costs."

The second sentence of Section 2616 (a) (8) does not expressly mandate that the
organized business entities must be comprised solely of physical therapists and athletic trainers.
According to the principles of statutory construction, words of substance and effect such as
"solely," "only," or "exclusively" which have not been included in the statute by the legislature
can not be read into the statutory language when construing its meaning. See General Motors
Corp. v. Burgess, Del. Supr. 545 A.2d 1186, 1191 (1988). If a statute is unambiguous, there is
no room for interpretation and the plain meaning of the words controls. Rubick v. Security
Instrument Corp., 766 A.2d 15, 18 (Del. 2000). Therefore, the plain meaning of Section 2616 (a)
(8) does not preclude physical therapists and athletic trainers from making arrangements to be
members of any properly organized business entities recognized by Delaware law in order to

defray their joint operating costs provided that the referral prohibitions in the first sentence of

Section 2616(a)(8) are not violated.

Mr. Philip Barkins
October 10, 2002
Page 8

Il. Anti-trust Concerns

There are no anti-trust or restraint of trade concerns that would bar the enforcement of the
paragraph at issue. The Sherman Anti-Trust Act is inapplicable to this case under the state action
doctrine espoused in Parker v. Brown, 317 U.S. 341 (1943), and its progeny. See Southern
Motor Carriers Rate Conference, Inc., et. al. v. United States, 471 U.S. 48 (1985), Goldfarb v.
Virginia State Bar, 421 U.S. 773 (1975), California Retail Dealers Assn. vs. Midcal Aluminum,
445 U.S. 97 (1980). In exempting states from the anti-trust provisions of the Sherman Anti-trust
Act, the U.S. Supreme Court observed that the Act "was [not] intended to restrain state action or
official action directed by a state." Parker, 317 U.S. at 351; see also Del. Op. Atty Gen. 88-
1012 at 1. The challenged restraint to the practice of physical therapy is "clearly articulated and
affirmatively expressed as state policy" through the enactment of legislation by the Delaware
General Assembly. See Midcal, 445 U.S. at 105. The state has also demonstrated that it will
"supervise actively any private anti-competitive conduct," through the creation of a state board
which has been charged with regulating and supervising the practice of physical therapy and
athletic training in the State of Delaware. See Southern Motor Carriers, 471 U.S. at 57. In fact,
the legislature expressly stated that one of the purposes of the Examining Board of Physical
Therapy is to "protect the public... from occupational practices which tend to reduce

competition or to fix the price of services rendered." 24 Del. C. § 2601.

Mr. Philip Barkins
October 10, 2002
Page 9

IV. Grandfather Clause

The last sentence of 24 Del. C. § 2616 (a) (8) operates as a grandfather clause according
to a previous opinion, Del. Op. Atty. Gen. 89-IO12, issued by this office. The referral
prohibition in Section 2616(a)(8) does not apply to certain physical therapist and athletic trainer
positions which existed at the time of the enactment of the section. 24 Del. C. § 2616 (a) (8).
However, that a physician may not sell or transfer a physical therapist position pursuant to 24
Del. C. § 2616 (a) (8). Del. Op. Atty. Gen. 89-IO12 at 1. Thus, the interpretation offered in Del.
Op. Atty. Gen. 89-IO12 is consistent with the interpretation espoused in this opinion, that all
other physical therapists or athletic trainers cannot be employed by physicians from whom they
receive referrals.

CONCLUSION

A physical therapist is prohibited from participating in certain financial relationships with
a referring person. Physical therapists cannot share fees with persons who have referred patients
to them. Physical therapists are also prohibited from accepting monetary gain from persons who
have referred patients to them for professional services. Physical therapists and athletic trainers
may belong to lawful business entities in the State of Delaware so long as they do not enter into
the prohibited fee splitting financial relationships with referring persons as specified in 24 Del.

C. § 2616 (a)(8). The physical therapist and athletic trainer positions that existed at the time of

• Provision in a new law or regulation exempting those already in or a part of the existing
  system which is being regulated. An exception to a restriction that allows those already doing
  something to continue doing it even if they would be stopped by the new restriction. Black's
  Law Dictionary 699 (6th ed. 1990).

Mr. Philip Barkins
October 10, 2002
Page 10

enactment of 24 Del. C. § 2616 (a) (8) may continue to accept referrals from physicians who
employ them.
If you have any further questions, please do not hesitate to contact us.

Very truly yours,

Craig R. Fitzgerald
Deputy Attorney General

Lawrence Lewis

Deputy Attorney General
APPROVED:
Malcolm Cobin

State Solicitor

cc: The Honorable M. Jane Brady, Attorney General
Mr. Philip Johnson, Opinion Coordinator