As a regulated industry, medical care practitioners and facilities are dependent on licenses, permits, and registrations controlled by the regulatory agencies. With limited exceptions under the Constitution for religious healers, no one can provide medical care services without a license from the state. Physicians also need a registration with the Drug Enforcement Administration to prescribe certain controlled substances. Hospitals will generally have a license from the state to operate as a hospital, as well a local fire- safety permit as a commercial building, and a food- handling permit to operate a cafeteria and to provide food to the patients. In many jurisdictions, private clinics must be licensed as health care facilities, and all of them must meet the standards for commercial buildings open to the public.

Permits, licenses, and registrations are not legal rights or entitlements. They are privileges awarded by the state to persons or entities who meet the applicable standards and who agree to compliance with various laws and regulations as a condition of maintaining the state-granted privilege. For example, as a condition of licensure, a medical care practitioner will agree to forgo certain behaviors, that, whereas not illegal, are considered unprofessional. A hospital agrees to allow the state hospital inspectors access to hospital facilities whenever they want, without a warrant or prior notice. An medical care practitioner or facility that accepts payment for Medicare patients agrees to abide by all the terms of the Conditions of Participation, even though many have no detailed knowledge of what they have agreed to abide by. The Conditions of Participation give the federal auditors access to the participant’s offices, medical records, and any other information related to compliance with the regulations.

Permits, licenses, and registrations give the agency tremendous power because they can be suspended if the regulated person or entity does not cooperate with the agency. If a hospital refuses access to the state inspectors, it can lose its operating license. Refusal to cooperate with federal auditors can result in termination of the provider’s right to receive federal payments, and can require that past payments be refunded. Medical care practitioners who violate the restrictions on their license can lose their license and livelihood.