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Supreme Court lets stand Calif. ban on OD leases in opticals

April 26, 2013

The U.S. Supreme Court in February rejected a challenge by the National Association of Optometrists and Opticians (NAOO), a trade association, and two of the nation’s largest optical companies, Eye Care Centers of America and LensCrafters, to a California law that prohibits the leasing of space in retail eyewear stores to optometrists.

The California law, passed in 1969, is one of numerous statutes enacted across the nation over the years to protect the independent judgment of optometrists and preserve the doctor-patient relationship, according to proponents.

Optical chains often employ or lease space to optometrists in their stores as a means of providing “one-stop” services for those requiring vision correction.

However, those leases may come with provisions that can force optometrists to place more emphasis on eyewear sales than eye care. In such cases, the leases can amount to control of a licensed and regulated health professional by an entity unlicensed to provide health care, critics contend.

Optical chains argue that such lease arrangements can allow optometrists to practice in high-traffic locations they may otherwise be unable to afford.

Prohibiting such leases amounts to an unlawful disruption of federally protected interstate commerce by preventing multistate entities from entering local optical markets, critics contend.

Those arguments initially found a receptive audience as the NAOO and the optical chains launched a court challenge to the California law in the mid-2000s.

Over the objections of the California Optometric Association (COA), a federal judge in Sacramento struck down the law in 2006, saying it was a protectionist measure designed to limit competition from out-of-state optical chains.

However, the 9th U.S. Circuit Court of Appeals in San Francisco reinstated the law with two rulings in 2009 and 2012, saying it had the legitimate purpose of protecting trained optometrists from control by large businesses.

The appeals court ruling cited examples of undue influence on optometrists by business entities in other states.

The Supreme Court denied review of the case last month, thereby allowing the appellate court decisions upholding the law to remain intact.

The COA and the California Attorney General’s office submitted briefs that convinced the Supreme Court not to interfere with the prior rulings.

If opticians could lease space to eye doctors, those doctors could be “pressured by optical companies… to act in a manner that promotes the optical store’s commercial interests,” the state attorney general’s office told the court.

Prohibitions designed to restrict the influence of corporations on licensed health care providers have been upheld in a substantial body of case law over more than 60 years, according to a report by the National Health Lawyers Association and the American Academy of Healthcare Attorneys. The Illinois Supreme Court first upheld state restrictions on “corporate medicine” in 1936. The California Supreme Court ruled similarly in 1938.

The outcome of the recent California case will now effectively provide additional case law that could help to preserve similar laws in other states, some of which may have been challenged in court had the chain opticals been successful in their appeal to the Supreme Court, according to the AOA Advocacy Group.

Attorneys for the plaintiffs say the ruling could now have a profound effect on eyewear retailing, with only optometrists and ophthalmologists allowed to offer one-stop vision correction services in the Golden State.

“California has now eliminated the last available mechanism for opticians to compete with optometrists on a level field,” industry lawyers argued in their briefs for the court.
The result, they said, will now be “the closing of stores and the shifting of hundreds of millions of dollars in sales to in-state businesses.”

The California Attorney General’s office has given opticals that lease space to optometrists six months, following the resolution of the case, to bring their operations into compliance with the law.

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