The MSO Tightrope: Navigating CPOM Compliance Across Diverse State Landscapes in 2025-2026

By Shannon Smith, DNP, APRN, FNP-C, PMHNP-BC, PMHNP-C · 2026-04-18

The Corporate Practice of Medicine (CPOM) doctrine remains a formidable challenge for healthcare businesses, particularly those leveraging Management Services Organizations (MSOs) for multi-state expansion. This deep dive dissects the nuanced state-specific enforcement of CPOM, offering critical insights and actionable strategies for compliance in 2025-2026.

The healthcare industry is in constant flux, driven by technological innovation and evolving patient demands. Yet, beneath the veneer of progress, a foundational regulatory principle, the Corporate Practice of Medicine (CPOM) doctrine, continues to shape and often constrain how healthcare services are delivered, particularly for multi-state operators and innovative models like telehealth and medspas. As we look to 2025-2026, navigating the CPOM landscape, especially through the lens of the Management Services Organization (MSO) model, is not just a legal formality—it's a strategic imperative for survival and growth.

> For more on this topic, see our analysis: [The Shifting Sands of Telehealth Controlled Substance Prescribing: Navigating DEA and State Requirements in 2025-2026](/blog/telehealth-controlled-substance-prescribing-2025-26).

CPOM generally prohibits corporations or other non-licensed entities from employing physicians or otherwise controlling the practice of medicine. Its intent is to safeguard clinical autonomy and prevent commercial interests from compromising patient care. However, its interpretation and enforcement vary dramatically from state to state, creating a complex patchwork that demands meticulous attention. For businesses seeking to scale nationally, understanding these nuances is paramount. The MSO model, where a non-clinical entity provides administrative support to a physician-owned professional corporation (PC), has emerged as the prevailing strategy to circumvent CPOM restrictions. Yet, the effectiveness and compliance of an MSO depend entirely on its structure and operational execution within each state's specific regulatory framework.

> For more on this topic, see our analysis: [Navigating the Minefield: Corporate Practice of Medicine and the MSO Model in 2025-2026](/blog/cpom-mso-compliance-2025-2026).

The Spectrum of CPOM Enforcement: A State-by-State Dissection

Not all CPOM states are created equal. We can broadly categorize them into three tiers based on their historical enforcement and interpretative flexibility:

Tier 1: Strict Enforcement (e.g., New York, California, Texas, Ohio)

States like New York represent the pinnacle of strict CPOM enforcement. As highlighted in recent regulatory intelligence, NY remains steadfast in its prohibition against corporate entities practicing medicine or employing licensed professionals to deliver clinical services. This necessitates a robust Physician-Controlled Management Services Organization (PC-MSO) structure, where the professional entity (PE) is truly owned and controlled by licensed New York physicians, retaining complete clinical autonomy. The MSO's role is strictly limited to providing non-clinical administrative, technical, and management services, with no perceived influence over clinical decision-making. The New York State Education Department (NYSED) Office of Professional Discipline (OPD) and the Office of the Attorney General actively scrutinize arrangements that blur these lines.

Similarly, California and Texas are known for their aggressive enforcement. In these states, even subtle indications of corporate influence over medical judgment, physician employment, or fee-splitting arrangements can trigger severe penalties. For DTC telehealth weight loss brands, for instance, the nature of physician contracts, the degree of corporate influence on treatment protocols, and how fees are structured are under intense scrutiny. Any revenue-sharing model tied to patient volume or specific treatments could be construed as illegal fee-splitting or inducements, violating both CPOM and anti-kickback statutes.

Ohio, Delaware, Illinois, Michigan, New Jersey, and Pennsylvania also fall into this category, requiring similarly stringent MSO structures and meticulous attention to the separation of clinical and administrative functions. The common thread is that the MSO must genuinely provide *services* to the PC, not *control* it.

Tier 2: Nuanced Enforcement with MSO Acceptance (e.g., Nevada)

Nevada offers a prime example of a state with a CPOM doctrine but a more flexible enforcement posture, particularly for telehealth and medspa businesses. While Nevada generally prohibits corporations from employing physicians, its approach often allows for MSO models, provided specific guidelines are followed to preserve physician autonomy. This means MSO agreements must be meticulously drafted to delineate clear boundaries between administrative support and clinical autonomy. Explicit provisions stating the PC retains full control over medical judgments, hiring and firing of clinical staff, and setting professional fees are critical. Any arrangement that appears to dictate patient care or improperly share professional fees could still be challenged by the Nevada State Board of Medical Examiners.

This tier requires a careful balance: understanding that while MSOs are generally accepted, the underlying principles of CPOM—preventing lay control over medical practice—are still enforced. Businesses cannot mistake flexibility for permissiveness.

Tier 3: Limited or No CPOM (e.g., Colorado, Virginia, Florida for certain professions)

Some states have either no explicit CPOM doctrine or have significantly relaxed their enforcement, often through statutory exceptions or judicial interpretations. However, even in these states, other regulations, such as anti-kickback statutes, fee-splitting prohibitions, and professional licensing board rules, can effectively impose similar restrictions. For example, while Florida may be perceived as more lenient for some medical practices, its Board of Medicine and other professional boards still scrutinize arrangements for fee-splitting or undue influence. Similarly, states like Colorado may not have a strict CPOM, but robust professional practice acts ensure that licensed practitioners maintain control over clinical decisions.

Even where CPOM is not a direct concern, the principles underlying it—maintaining professional independence and preventing commercial exploitation of patient care—are often embedded in other regulatory frameworks. Therefore, a comprehensive compliance strategy must always consider these broader implications.

The MSO Model: A Practical Framework for Compliance

The MSO model, when properly structured, serves as the primary compliant vehicle for non-clinical entities to support healthcare practices in CPOM states. Here's a breakdown of its critical components:

1. Professional Entity (PC/PE) Ownership and Control: * The PC or PE must be wholly owned by licensed physicians (or other licensed professionals, depending on the service and state, e.g., dentists for dental practices, chiropractors for chiropractic offices). Some states may permit certain non-physician ownership if explicitly allowed by statute (e.g., PAs or NPs in some jurisdictions), but this is rare in strict CPOM states. * The PC must have exclusive control over all clinical decisions, including diagnosis, treatment plans, prescribing, patient intake protocols, and professional hiring/firing. The MSO cannot dictate these aspects. * The PC must be responsible for supervision and credentialing of all clinical staff.

2. Management Services Agreement (MSA): * This is the foundational contract between the MSO and the PC. It must clearly delineate the non-clinical services provided by the MSO (e.g., billing, marketing, IT, real estate, equipment, non-clinical HR). * The MSA must explicitly state that the PC retains full clinical autonomy. * Compensation to the MSO must be at fair market value (FMV) for the services rendered. It cannot be tied to patient volume, revenue generation, or profit-sharing in a way that could be construed as illegal fee-splitting or an inducement for referrals. Common compliant structures include fixed fees, cost-plus arrangements, or percentage-based fees that are demonstrably FMV and not contingent on the volume or value of referrals.

3. Financial Arrangements: * All financial flows must be transparent and compliant. The PC typically collects all professional fees and then pays the MSO for its services. * Avoid any direct or indirect fee-splitting arrangements where the MSO receives a percentage of professional fees without providing direct, measurable services at FMV. * Be mindful of state-specific prohibitions on referrals for profit, which can extend beyond federal anti-kickback statutes.

4. Operational Separation: * While the MSO and PC may share physical space or branding, there must be a clear operational distinction. Patients should understand they are receiving medical services from the PC, not the MSO. * Marketing materials should accurately reflect the relationship, emphasizing the licensed medical professionals delivering care.

Multi-State Expansion: The Layered Complexity

For businesses operating across state lines, the MSO model becomes exponentially more complex. A single MSO structure may not be compliant in all jurisdictions. This necessitates:

State-Specific Legal Counsel: Engaging legal experts in each target state is crucial. What works in Nevada may be a direct violation in New York.
Dynamic MSO Agreements: MSAs may need to be tailored for each state or even each PC within a state to reflect local nuances.
Licensure and Credentialing: Ensure all providers are appropriately licensed in the state where the patient receives care, and that the PC is properly registered and licensed as a professional entity in each state.
Telehealth Considerations: Telehealth platforms, in particular, must navigate the CPOM implications of establishing patient-provider relationships across state lines. The location of the patient often dictates which state's CPOM rules apply.

Beyond CPOM: Intersecting Regulatory Challenges

While CPOM is a primary concern, it rarely exists in a vacuum. Businesses must also consider its intersection with other critical regulations:

Anti-Kickback Statute (AKS) and Stark Law: The DOJ's intensified enforcement against telehealth fraud and kickback schemes means that any financial relationship between the MSO, PC, and third-party vendors (e.g., labs, pharmacies, lead generators) must comply with AKS and Stark Law safe harbors. Compensation to the MSO, if not at FMV, could be deemed an illegal inducement.
State-Specific Telehealth Regulations: Many states have specific requirements for establishing a valid patient-provider relationship via telehealth, prescribing controlled substances, and obtaining informed consent. These often dictate how the PC operates, and thus, how the MSO can support it.
Professional Board Oversight: State medical boards, nursing boards, dental boards, and chiropractic boards have their own rules regarding professional conduct, supervision, and delegation. For example, Washington State's regulations on PA and ARNP supervision in telehealth and medspa settings directly impact the PC's clinical operations and, by extension, the MSO's support functions.
Billing and Coding Compliance: Even with a compliant MSO structure, improper billing and coding can lead to significant penalties. The PC is responsible for accurate coding, but the MSO often provides the billing services. Clear communication and robust training are essential to avoid issues like billing for services not rendered or upcoding, which can trigger False Claims Act violations.

What This Means For Your Practice

For telehealth founders, brick-and-mortar practices expanding nationally, medspa owners, and compliance officers, the evolving CPOM landscape demands a proactive and sophisticated approach. Here are actionable steps:

1. Conduct a Comprehensive Regulatory Audit: Review your current business structure, MSO agreements, and operational workflows against the CPOM and related regulations of every state where you operate or plan to operate. Pay particular attention to your physician contracts and compensation models. 2. Strengthen MSO Agreements: Ensure your Management Services Agreements (MSAs) explicitly define the non-clinical nature of MSO services, clearly delineate the PC's clinical autonomy, and establish FMV compensation structures that are not tied to patient volume or revenue-sharing in a problematic way. 3. Prioritize Clinical Autonomy: Implement robust policies and procedures that empower licensed professionals within the PC to make independent clinical decisions, free from corporate influence. This includes control over hiring/firing of clinical staff, treatment protocols, and patient care standards. 4. Invest in State-Specific Expertise: Do not rely on a one-size-fits-all legal strategy. Engage legal counsel with deep expertise in healthcare regulatory compliance in each target state. This is especially critical for states with strict CPOM enforcement like New York, California, and Texas. 5. Train and Educate: Ensure all staff, from administrative personnel to clinical providers, understand the boundaries between the MSO and PC, and the importance of maintaining clinical independence. Regular compliance training is non-negotiable. 6. Document Meticulously: Maintain thorough documentation of all agreements, operational protocols, compliance training, and audit results. In the event of an investigation, clear documentation is your strongest defense. 7. Monitor Regulatory Changes: CPOM enforcement and interpretation are dynamic. Implement a system to continuously monitor legislative changes, board guidance, and enforcement actions in all relevant states. This is crucial for adapting your compliance strategy in real-time.

Looking Ahead: The Future of CPOM and MSOs

The tension between innovation in healthcare delivery and the foundational principles of CPOM will persist. While some states may continue to adapt their regulations to accommodate new models, the core intent of CPOM—protecting patient care from undue commercial influence—is unlikely to disappear. The MSO model will remain a critical tool, but its successful implementation will increasingly rely on sophisticated legal structuring, transparent operations, and an unwavering commitment to clinical independence. Businesses that navigate this tightrope effectively will be best positioned for sustainable growth and leadership in the evolving healthcare landscape of 2025-2026 and beyond.

TrueEval stands ready to partner with you, providing the regulatory intelligence and compliance frameworks necessary to thrive in this complex environment. Our expertise ensures your business models are not just innovative, but also impeccably compliant.