The healthcare industry is experiencing unprecedented innovation, driven by telehealth, direct-to-consumer (DTC) models, and the expansion of services into new markets. Yet, beneath this dynamism lies a bedrock of regulatory complexity, none more impactful and varied than the Corporate Practice of Medicine (CPOM) doctrine. For telehealth founders, multi-state practice owners, medspa entrepreneurs, and compliance officers, understanding and meticulously navigating CPOM is not merely a best practice—it is the linchpin of sustainable operation.
For more on this topic, see our analysis: Unpacking the Corporate Practice of Medicine: A State-by-State Guide for Telehealth and Multi-State Practices in 2025-2026.
CPOM laws generally prohibit corporations or other non-physician entities from employing physicians or otherwise controlling the practice of medicine. The intent is to safeguard physician autonomy, protect the integrity of the patient-physician relationship, and prevent commercial interests from unduly influencing clinical judgment. However, the application and enforcement of CPOM vary dramatically from state to state, creating a labyrinth for businesses seeking to scale nationally.
For more on this topic, see our analysis: Unpacking the Corporate Practice of Medicine: A State-by-State Guide for Telehealth and Multi-State Practices in 2025-2026.
The Varied Landscape: Strict Prohibitions vs. Flexible Enforcement
To effectively navigate CPOM, one must first appreciate its fragmented nature. There is no federal CPOM law; rather, it is a creature of state statutes, regulations, and judicial precedent. This leads to a spectrum of enforcement, from states with strict prohibitions to those with more flexible interpretations.
New York: The Apex of Strictness
New York stands out as one of the most stringent CPOM states. As highlighted in recent regulatory intelligence, New York's doctrine "prohibits corporations from employing physicians or practicing medicine." This isn't just a theoretical stance; the New York State Education Department (NYSED) Office of Professional Discipline (OPD) and the Office of the Attorney General actively enforce these provisions. For any telehealth company, medspa, or dental practice looking to operate in New York, the implications are profound.
Key Takeaways for New York:
- No Corporate Employment of Physicians: A non-professional entity cannot directly employ licensed physicians, PAs, or NPs to deliver clinical services.
- Physician Control is Paramount: The professional entity (PE) must be truly physician-owned and physician-controlled, retaining absolute clinical autonomy over all medical decision-making, patient care, and professional employment.
- Scrutiny of Management Agreements: Management Services Agreements (MSAs) between a Management Services Organization (MSO) and the PE are heavily scrutinized. The MSO's role must be strictly limited to administrative, technical, and non-clinical support. Any perceived influence over clinical matters, hiring/firing of clinical staff, or fee structures that resemble fee-splitting will trigger red flags.
- Penalties are Severe: Non-compliance can lead to license revocation, civil monetary penalties, and even criminal charges for individuals and entities found to be illegally practicing medicine.
California & Texas: Strong, But With Nuances
California and Texas are also known for their strong CPOM doctrines. Similar to New York, they generally prohibit lay corporations from practicing medicine. However, specific carve-outs or historical enforcement patterns can introduce subtle differences.
For example, California's Medical Board is vigilant, but certain structures, particularly those involving professional medical corporations (PCs) with MSOs, are common. The key is ensuring the PC maintains complete control over clinical decisions and that the MSO provides only non-clinical services at fair market value. Texas also maintains a strong stance, with the Texas Medical Board actively policing arrangements that appear to compromise physician independence.
Nevada: Flexibility, Not Permissiveness
In contrast, Nevada is often characterized as having a "more flexible" enforcement posture regarding CPOM. While it maintains the doctrine, it has historically been more accommodating to MSO models, especially for telehealth and medspa businesses. However, this flexibility is not an invitation for lax compliance.
Key Takeaways for Nevada:
- MSO Model is Prevalent: The MSO model is widely used, where a non-physician-owned MSO provides administrative services to a physician-owned professional corporation (PC).
- Physician Autonomy is Still Critical: Even with flexibility, the PC must retain full control over medical judgments, hiring and firing of clinical staff, and setting professional fees. The MSO cannot dictate patient care or influence medical diagnoses.
- Meticulous Agreements: MSO agreements must be meticulously drafted to clearly delineate boundaries between administrative support and clinical autonomy. Any arrangement that appears to improperly share professional fees could be challenged by the Nevada State Board of Medical Examiners.
The PC-MSO Model: Your Primary Compliance Vehicle
For most innovative healthcare businesses, particularly those operating across states with CPOM, the Professional Corporation (PC) – Management Services Organization (MSO) model is the most common and often the only compliant structure. This model separates the clinical delivery of care (performed by the PC) from the administrative and business operations (performed by the MSO).
How the PC-MSO Model Works:
- Professional Corporation (PC): This entity is owned by licensed physicians (or other licensed professionals, depending on the state and specialty). The PC employs or contracts with the clinical staff (physicians, PAs, NPs) who deliver direct patient care. The PC holds all necessary clinical licenses and permits.
- Management Services Organization (MSO): This entity is typically owned by non-physicians (e.g., investors, founders). The MSO enters into a Management Services Agreement (MSA) with the PC. Under this agreement, the MSO provides a comprehensive suite of non-clinical services, such as:
- Billing and collections
- Marketing and advertising
- IT infrastructure and support
- Real estate and facility management
- Equipment and supplies
- Human resources (for non-clinical staff)
- Administrative support
Critical Compliance Elements of the PC-MSO Model:
- Clinical Autonomy: The PC must retain absolute and undeniable control over all clinical decisions, treatment protocols, hiring and firing of clinical staff, and patient care. The MSO cannot interfere with or influence these decisions.
- Fair Market Value (FMV): All services provided by the MSO to the PC, and any fees paid by the PC to the MSO, must be at fair market value. This is crucial to avoid allegations of illegal fee-splitting or kickbacks. FMV should be determined by independent valuation experts.
- No Percentage-Based Fees on Clinical Revenue: MSO fees should generally not be directly tied to a percentage of the PC's professional revenue, as this can be construed as illegal fee-splitting. Fixed fees, cost-plus models, or revenue-based fees that are clearly for administrative services and not directly tied to patient volume or clinical services are generally safer.
- Separate Entities: The PC and MSO must operate as distinct legal entities with separate bank accounts, records, and governance structures.
- Clear Documentation: The MSA must clearly define the roles and responsibilities of both the MSO and the PC, explicitly stating the PC's clinical independence.
- No Control Over Clinical Staff: The MSO should not have the authority to hire, fire, or dictate the compensation of clinical staff. These decisions rest solely with the PC.
CPOM's Impact on Specific Business Models
Telehealth Brands (DTC Weight Loss, Mental Health, Sexual Health)
DTC telehealth brands are particularly vulnerable to CPOM scrutiny. The inherent tension between a technology-driven, often investor-backed corporate entity and the requirement for physician independence is constant. The DOJ's intensified enforcement against telehealth fraud and kickback schemes further underscores this risk. For instance, if a platform dictates specific weight loss treatments or formularies without independent physician judgment, it could be seen as exercising undue corporate control.
Actionable Steps for Telehealth Brands:
- Robust PC-MSO Structure: Implement a meticulously structured PC-MSO model in every state where you operate, ensuring the PC is genuinely physician-owned and controlled.
- Avoid Fee-Splitting: Structure MSO fees to be at FMV and avoid direct percentage-based payments on clinical revenue. Compensation arrangements with providers must be commercially reasonable and not induce referrals.
- Clinical Protocols: Ensure that clinical protocols are developed and approved by the PC's medical leadership, not the MSO. The MSO's role is to support the delivery of these protocols, not to create them.
- Licensure & Credentialing: Verify that all prescribing providers are licensed in the patient's state and are fully aware of and compliant with that state's specific telehealth and prescribing guidelines.
Medspas and Aesthetic Practices
Medspas often operate in a grey area, combining medical procedures with cosmetic services. CPOM applies equally to these entities, especially when services like injectables, laser treatments, or prescription-based skincare are offered. The Washington State Medical Commission's clarification on supervision and delegation for PAs and NPs is a prime example of how regulatory bodies are tightening oversight in this sector.
Actionable Steps for Medspas:
- Physician Oversight: Ensure a licensed physician (or ARNP/PA under appropriate supervision) is directly responsible for all medical procedures and prescribing. This physician must be employed by or contracted with a compliant PC.
- Delegation & Supervision: Adhere strictly to state-specific rules for delegation and supervision of PAs and NPs. Document training, competency, and ongoing oversight diligently.
- Informed Consent: Implement robust, state-specific informed consent processes that clearly outline the medical nature of procedures, potential risks, and the qualifications of the treating professionals.
Dental and Chiropractic Practices
While dental and chiropractic practices fall under separate licensing boards, the underlying principle of preventing unlicensed entities from controlling professional practice generally applies. MSO models are also common here, requiring the same vigilance to maintain professional independence.
Actionable Steps for Dental/Chiropractic Practices:
- Board-Specific CPOM: Understand that while medical boards govern physicians, dental and chiropractic boards have their own versions of CPOM. Consult relevant state board regulations.
- Scope of Practice: Ensure that any telehealth services offered (e.g., remote consultations, assessments) fall within the permissible scope of practice for the respective profession in that state.
- MSO Clarity: If using an MSO, ensure the MSA clearly delineates non-clinical services and preserves the clinical autonomy of the dental or chiropractic professional entity.
The Evolving Landscape: What to Expect in 2025-2026
- Increased Enforcement: As telehealth becomes more entrenched, expect state medical boards and attorneys general to increase CPOM enforcement, particularly in states with strict doctrines. The DOJ's focus on telehealth fraud will also indirectly impact CPOM, as many fraud schemes involve non-compliant corporate structures.
- Scrutiny of AI-Powered Platforms: The rise of AI in healthcare will introduce new CPOM questions. Who is ultimately responsible for clinical decisions made or influenced by AI? How does a non-physician-owned AI platform avoid practicing medicine?
- State-Specific Guidance: Expect more states to issue specific guidance or regulations clarifying CPOM application to telehealth and innovative care models, similar to Washington State's guidance for PAs/NPs. This will necessitate continuous monitoring of regulatory updates.
- Focus on Economic Inducements: Regulators will continue to scrutinize financial arrangements between MSOs and PCs, looking for disguised fee-splitting or arrangements that incentivize referrals or specific treatments.
What This Means For Your Practice: A Compliance Checklist
Navigating CPOM is a continuous process that requires proactive engagement and expert guidance. Here’s a practical checklist for your business:
- State-by-State Legal Review: Conduct a thorough legal review of CPOM laws in every state where you currently operate or plan to operate. This is non-negotiable.
- Robust PC-MSO Structure: If operating in CPOM states, ensure your PC-MSO model is meticulously structured to preserve physician autonomy and comply with all state-specific requirements. This includes the ownership of the PC, the terms of the MSA, and the operational separation of clinical and administrative functions.
- Fair Market Value (FMV) Assessments: Obtain independent FMV opinions for all services provided by your MSO to the PC and for any compensation arrangements with providers.
- Clear Documentation: Maintain comprehensive and clear documentation for all agreements (MSAs, employment contracts, independent contractor agreements) that explicitly define roles, responsibilities, and clinical independence.
- Clinical Autonomy Protocols: Implement internal policies and procedures that empower the PC's medical leadership to make all clinical decisions without MSO influence.
- No Inducements: Ensure that no financial arrangements, directly or indirectly, induce referrals or specific treatment patterns. All compensation should be for legitimate services at FMV.
- Compliance Training: Provide ongoing training to all staff (clinical and administrative) on CPOM principles, anti-kickback statutes, and ethical conduct.
- Regular Audits: Conduct periodic internal and external audits of your business structure, agreements, and operational practices to identify and mitigate CPOM risks.
- Expert Legal Counsel: Engage experienced healthcare regulatory counsel who specialize in CPOM and multi-state operations. This is an investment, not an expense.
CPOM is not a static concept; it is a dynamic regulatory challenge that demands constant vigilance. By understanding its nuances, implementing robust compliance strategies, and partnering with experienced legal counsel, healthcare businesses can build resilient, compliant, and ultimately successful models that deliver quality care while mitigating significant legal and financial risks. The unseen hand of CPOM is powerful, but with foresight and meticulous planning, it can be navigated successfully.
Further Reading
- Unpacking the Corporate Practice of Medicine: A State-by-State Guide for Telehealth and Multi-State Practices in 2025-2026
- The CPOM Gauntlet: Navigating Corporate Practice of Medicine for Multi-State Telehealth and Medspa Expansion in 2025-2026
- The CPOM Gauntlet: Navigating Corporate Practice of Medicine Across State Lines in 2025-2026
- Navigating the New Regulatory Gauntlet: CPOM, Telehealth Prescribing, and DOJ Scrutiny in 2024
