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New Requirement Involving Professional Practice Entities

On Behalf of | Dec 23, 2019 | Articles, Business Law, Healthcare Law, Publications

By Alan Sonnenklar, Esq. & Stacey Lipitz Marder, Esq.Email Alan Email Stacey

As of October 1,
2019, the New York State Education Department is requiring that professional
practice entities (PCs or PLLCs) submit an affidavit when forming a new entity,
filing to do business in New York, or changing the name of the entity. If the
affidavit is not filed, the request will be rejected.

Among other things,
the affidavit requires that an owner of the professional practice entity, or
shareholder or member authorized to make such disclosure, attest on behalf of
the entity as to whether it has “any relationship, ownership interest,
affiliation or association with any other business and/or professional practice
entity.” Furthermore, the professional practice entity must now attest whether
it has chosen a name for the purpose of suggesting a relationship, ownership
interest, affiliation or association with another business and/or professional
practice entity.

If such a
relationship does exist, the name of the affiliated/associated entity and the
nature of the relationship must be disclosed, and a certification must be made
that the relationship is fully compliant with all applicable rules and
regulations as per the New York Education Law and Business Corporation Law.

There is currently
no guidance or instructions from the New York State Education Department with
respect to how to complete the affidavit or determine which relationships need
to be disclosed. New York State has also not provided any guidance with respect
to penalties that may be associated with filing false affidavits, of course any
false statement in a affidavit could be deemed perjury. We are currently
awaiting further guidance from New York State.

Although it is
unclear how this information will be used, providers need to be cognizant that
New York State will now have access to this information, which can potentially
be used to analyze whether the professional practice entity has relationships
which may run afoul of applicable rules and regulations, including, for
instance, those governing kickbacks, fee splitting and the corporate practice
of medicine, as well as state requirements regarding practice management

In view of this new
New York State requirement, providers will need to conduct an analysis of
potential risks, including potentially problematic business relationships,
prior to forming a new professional entity or changing the name of an existing
professional entity.

Should you have any
questions or concerns regarding this new procedural requirement, please contact
us at 516-627-7000.

Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing
a wide array of legal services to the members of the health care industry,
including corporate and transactional matters, civil and administrative
litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and
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