Allstate Indemnity Company, et al., Appellants,

STATE OF MINNESOTA
IN COURT OF APPEALS
A21-1116

Allstate Indemnity Company, et al.,
Appellants,

vs.

Twin Cities Diagnostic Center, L.L.C., et al.,
Respondents.

Filed May 23, 2022
Reversed and remanded
Connolly, Judge

Hennepin County District Court
File No. 27-CV-18-18730

Richard S. Stempel, Kevin C. Beach, Stempel & Associates, PLC, Excelsior, Minnesota
(for appellants)

Bryan R. Battina, Anna M. Koch, Trepanier Macgillis Battina P.A., Minneapolis,
Minnesota (for respondents)

Considered and decided by Connolly, Presiding Judge; Reilly, Judge; and Tracy
Smith, Judge.
SYLLABUS
Because the medical director of an accredited magnetic resonance imaging ( MRI)
facility, who is responsible for clinical MRI services and for selecting, approving, and
supervising the work of medical staff members, is engaged in the “practice of healing,” the
facility is subject to the Corporate Practice of Medicine Doctrine (CPMD), and lay
ownership of such a facility is prohibited.

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OPINION
CONNOLLY, Judge
Appellants-insurers refused to pay respondents, the entity and its lay owners, that
took MRI scans of appellants’ insureds for the MRI scans. In this declaratory -judgment
action, t he parties filed cross -motions for summary judgment; appellants argued that
respondents’ lay ownership of the entity violated the CPMD; respondents argued that the
CPMD did not apply and, even if it did, any violation was not knowing and intentional.
The district court denied appellants’ motion, granted respondents’ motion, and awarded
judgment for respondents against appellants. Because we conclude as a matter of law that
the CPMD appl ies to respondents, we reverse the grant of summary judgment; beca use
further discovery is needed as to whether respondents knowingly and intentionally violated
the CPMD, we remand the matter to the district court.
FACTS
In 2013, three Florida attorneys, respondents Carlos Fleites, Katiana Fleites, and
Peter DePrimo (the individual respondents) incorporated to form respondent Twin Cities
Diagnostic Corporation (TCDC), an entity in the business of taking MRI scans . Because
Minn. Stat. § 144.1225, subd. 2 (2012), required TCDC to be accredited to be compensated
for the s cans, it obtained accreditation from the Intersocietal Accreditation Commission
(IAC).
IAC accreditation required TCDC to have a medical director who was a licensed
physician and who was responsible for “all clinical MRI services” and for “selecting and
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approving medical staff members and supervising their work.” It is undisputed that TCDC
met these requirements at all relevant times.
Appellants Allstate Indemnity Company and Allstate Insurance Company
(collectively, appellants) insured several claimants who received diagnostic imaging
services from TCDC. TCDC then billed appellants for the scans . Appellants sought a
declaratory judgm ent that the bills were noncompensable , claiming that TCDC’s lay
ownership structure was in violation of both the Minnesota CPMD and the accreditation
standards set out in Minn. Stat. § 144.1225, subd. 2(a)(2) (2020). The district court granted
respondents’ motion to dismiss both claims. Appellants challenged the dismissal . In
Allstate Indemnity Co. v. Twin Cities Diagnostic C tr., LLC, No. A20-0097 (Minn. App.
July 27, 2020), this court affirmed the dismissal of the statutory claim and reversed and
remanded the issue of whether respondents were subject to the CPMD for further
discovery.
On remand, the district court concluded that because the medical directors of TCDC
were “not employed to practice medicine or other healing arts, TCDC did not violate t he
CPMD,” that, even if TCDC did violate the CPMD, appellants were liable for the charges
for the scans because “the undisputed evidence establishes that [respondents] did not
knowingly or intentionally violate the CPMD,” and that TCDC is therefore entitle d to
recover from appellants. Appellants challenge these conclusions.
ISSUE
Does the medical director of an accredited MRI facility engage in the practice of
healing by fulfilling the responsibilities of that office?
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ANALYSIS
“We review the grant of summary judgment de novo to determine whether there are
genuine issues of material fact and whether the district court erred in its application of the
law.” Montemayor v. Sebright Prods., Inc., 898 N.W.2d 623, 628 (Minn. 2017) (quotation
omitted).
Minn. Stat. § 144.1225, subd. 2 (2020) provides that MRI facilities must be
accredited and that IAC is an accreditor. IAC’s accreditation requirements state that an
MRI facility medical director must be a licensed physician whose responsibilities include,
but are not limited to:
[1.] all clinical MRI services provided and for the
determination of the quality of imaging provided related
to the MRI services;
[2.] supervising the entire operation of the facility or
delegating specific operations to facility staff members;
[3.] selecting and approving medical staff members and
supervising their work; and
[4.] assuring compliance of the medical and technical staff
to the Standards outlined within this document.

The criteria for deciding whether a facility is subject to the CPMD are whether its
employees (1) are engaged in the practice of healing, (2) are members of a state -licensed
profession, (3) underwent significant training and education, and (4) enjoy independent
professional judgment. Isles Wellness, Inc. v. Progressive N. Ins. Co ., 703 N.W.2d 513,
522 (Minn. 2005) (Isles Wellness I).
The term “practice of healing” is defined in Minn. Stat. § 146.01 (2020) to include
any person who shall in any manner for any fee, gift,
compensation, or reward, or in expectation thereof, engage in,
or hold out to the public as being engaged in, the practice o f
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medicine or surgery . . . or the diagnos is, analysis, treatment,
correction or cure of any disease, injury, defect, deformity,
infirmity, ailment, or affliction of human beings, . . . also any
person . . . who attaches the title of doctor, physician, surgeon,
specialist, M.D., . . . or any other word, abbreviation, or title to
the person’s name indic ating, or designed to indicate, th at the
person is engaged in the practice of healing.

We conclude that medical director s of MRI facilities accredited by IAC , being licensed
physicians, having the responsibilities set out by IAC, and using the title “doctor ” and the
designation “radiologist,” are engaged in the practice of healing.
We hold as a matter of law that the medical director s of MRI facilities are engaged
in the practice of h ealing. As licensed physicians, they are members of a state -licensed
profession who underwent significant training and education, and they enjoy independent
professional judgment : therefore, they meet the four criteria for employees of facilities
subject to the CPMD. Under the CPMD, “it is improper and contrary to statute and public
policy for a corporation or layman to practice medicine indirectly by hiring a licensed
doctor to practice medicine for the benefit or profit of the hirer.” Isle Wellness I, 703
N.W.2d at 519 (quot ation omitted) ; see also Minn. Stat. § 319B.07, subd. 1 (1) (2020)
(restricting ownership interests in professional firms to “professionals who, with respect to
at least one category of the pertinent professional services, are license d and not
disqualified”). We agree with appellants that “TCDC necessarily violated the CPMD by
engaging a licensed physician to act as its medical director as required by statute and IAC
accreditation.”
The district court adopted the view that MRI practice is bifurcated into a te chnical
component, which is not subject to the CPMD, and a professional component, which is
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subject to the C PMD. But the statute governing advanced diagnostic imaging services,
Minn. Stat. § 144.1225 (2020), makes no such bifurcation in its analysis of the practice: it
imposes requirements on “advanced diagnostic imaging services” and “all facilities that
provide advanced diagnostic imaging services” without recognizing any distinction or
bifurcation. We cannot read such a bifurcation into the statute. “[T]his court is prohibited
from adding words to a statute and cannot supply what the legislature either purposely
omitted or inadvertently overlooked.” Isse v. Alamo Rent -A-Car, 590 N.W.2d 137, 140
(Minn. App. 1999) (quotation omitted), rev. denied (Minn. Apr. 20, 1999).
By meeting the criteria for accreditation by having a medical director , TCDC
became subject to and violated the CPMD. We conclude that the district court erred in
granting summary judgment to respondents on the basis that TCDC did not v iolate the
CPMD. We therefore reverse the summary judgment granted to respondents and address
whether that violation was knowing and intentional. See Isles Wellness, Inc. v. Progressive
N. Ins. Co., 725 N.W.2d 90, 95 (Minn. 2006) (holding that a court will not take action on
a violation unless “the corporation’s actions show a knowing and intentional failure to
abide by state and local law”) (Isles Wellness II).
The district court concluded that the undisputed evidence established that
respondents did not knowingly or intentionally violate the CPMD. The district court
focused on the medical directors’ limited role in the daily operation of the facility and noted
that “[t]here is no evidence . . . regarding the specific duties of TCDC’s medical director”
and “no evidence ” as to what this supervision of the technical director by the medical
director and the individual respondents entailed. Throughout its operation from 2013 to
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2019, TCDC had as a medical director a licensed radiologist who , according to the
deposition testimony of the individual respondents, was not at TCDC on a daily or monthly
basis, had no office at TCDC, performed no MRI scans at TCDC, and never saw patients
at TCDC. The respondents testified that there were two or three medical directors, to whom
they did not recall paying anything except travel expenses.
But the issue is not the medical directors’ specific responsibilities: it is whether
TCDC’s lay owners knowingly and intentionally failed to abide by the CPMD. T he
individual respondents claim to have done research prior to incorporating and obtaining
accreditation. It is possible that they would have known that the responsibilities of a
medical director included selecting and approving medical staff members, supervising their
work, and assuring their compliance with IAC standards . We conclude that w hether the
individual respondents committed “a knowing and intentional failure to abide by state and
local law ,” id., requires further development of the record and may require further
discovery.
We therefore reverse the grant of summary judgment to respondents and remand to
the district court to determine whether there is a genuine issue of material fact as to whether
respondents’ violation of the CPMD was knowing and intentional and, because appellants’
obligation to pay for the scans is contingent on the absence of respondents’ knowing and
intentional violation, we reverse and remand the ju dgment awarded to them. On remand,
the district court shall further develop the record on the issue of whether the violation was
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intentional and, if the district court believes that it is necessary for that determination, it
may order additional discovery on that issue.
Reversed and remanded.