Corporate Practice of Medicine: What to Know 

The healthcare industry in the United States is a highly regulated sector. One of the most important legal concepts in this area is the corporate practice of medicine (CPOM) doctrine, which governs who can own and operate medical practices and under what circumstances they can do so. 

Those interested in setting up a healthcare organization often ask what CPOM is and what it entails, as well as whether it requires them to establish a Management Services Organization (MSO). Although this question cannot be easily answered, the following information is available about CPOM.

About the Corporate Practice of Medicine

At its core, the CPOM doctrine reflects the principle that individuals or entities, including corporations, who are not licensed physicians should not engage in the practice of medicine. As a result, non-physicians are generally prohibited from owning or controlling medical practices. The CPOM is a legal doctrine that defines who has the authority to own and operate a medical practice and, more specifically, who can legally employ physicians. This doctrine exists to ensure that medical decisions remain in the hands of licensed healthcare professionals, rather than being controlled or unduly influenced by non-physician business owners or investors. 

Most states regulate CPOM in some form, reflecting the long-standing belief that physicians must be able to practice medicine independently and without interference from parties who do not hold medical licenses or possess clinical expertise.

State CPOM Laws

Over 50% of states have CPOM regulations in place. However, just because the rules are on the books, they are not all enforced the same. Some states are “strict” on enforcement, while other states’ CPOM enforcement is more permissive or dormant.

For example, New York requires all medical practices to be owned by physicians. There are no exceptions. This would be strict enforcement. In states such as Florida, there is no CPOM doctrine. However, these states may have certain restrictions — such as how fees are shared between physicians and non-physicians — that are inspired by CPOM.

Then, there are states that consider who is performing those medical services rather than practice ownership. Georgia is an example.

In Georgia, the formal statute prohibiting the corporate practice of medicine (former O.C.G.A. § 43-34-37) was repealed in 1982. Since then, no standalone statute explicitly bans corporations from engaging in medical practice. Instead, corporate practice of medicine principles are integrated into other sections of the code.

Under Georgia’s Professional Corporation Act, only licensed professionals actively practicing in Georgia may be shareholders of a professional corporation organized to provide medical services. Only licensed officers, employees, and agents are authorized to deliver professional services on behalf of the PC. Similarly, LLCs may employ professionals to provide medical services unless specifically prohibited by the Georgia Composite Medical Board. While restrictions exist on professionals supervising or delegating to other physicians, these rules are separate from corporate practice concerns.

It is essential to consult qualified legal counsel to determine the specific requirements of CPOM in your state, particularly if non-physicians will own all or part of a medical practice. It is also worth noting that, even in jurisdictions with stringent CPOM restrictions, compliant structures may be available to facilitate non-physician involvement while maintaining adherence to applicable laws and regulations.

Exceptions to CPOM

There are several exceptions to the corporate practice of medicine (CPOM) doctrine. Professional Corporations (PCs) and Professional Associations (PAs) allow licensed physicians to operate within a corporate structure while retaining full control over medical decisions. Management Services Organizations (MSOs) can handle the business side of a practice—such as billing, human resources, and office management—without influencing clinical care. In some states, hospitals are permitted to employ physicians directly, as long as the physicians maintain authority over all medical decisions. 

Ensuring Compliance with CPOM

Current or prospective medical practice owners must ensure that they do not violate CPOM, but doing so is not always straightforward. This is why consulting with a healthcare law attorney who understands CPOM is crucial. They may need to review state statutes, administrative rules, and guidance from the medical board.

The first question that needs to be answered is whether medicine is being practiced. This is a foundational question because, if a practice is not engaged in the practice of medicine, then CPOM does not apply. However, if a practice is determined to be practicing medicine, it must then determine how to comply with CPOM. An MSO structure could be a possible solution.

However, determining whether a particular activity constitutes the “practice of medicine” might not be easy. Each state defines the practice of medicine differently, often with significant variation in scope and application. While certain activities may clearly fall under the “practice of medicine” umbrella, others may be less clear. For instance, is a med spa that administers IV vitamin therapy engaging in the practice of medicine? Some offerings — given how new they are — may require a healthcare law lawyer to conduct extensive research and consultation to obtain the answer.

If the activity constitutes the practice of medicine, then one must determine whether there is a potential ownership issue under CPOM. If the business is engaged in the practice of medicine and all owners are licensed physicians, then there will not be many concerns regarding the ownership structure. This is because physician ownership typically reduces the risk of improper influence over the independent medical judgment of practicing physicians.

In some states, this thinking translates to mid-level practitioners having minority ownership. However, if physicians do not own the business, a healthcare law attorney should provide more guidance on CPOM in the relevant state and what it entails.

Contact a Healthcare Law Attorney 

Understanding and complying with CPOM is essential for safeguarding a medical practice and avoiding regulatory pitfalls. Because each state’s requirements differ, consulting an experienced healthcare law attorney is important. They can help with navigating ownership structures, management agreements, and compliance strategies.