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The healthcare industry is full of entrepreneurs, investors, and founders who are not physicians. Many of them want to build medical businesses — med spas, telehealth platforms, GLP-1 clinics, IV hydration brands, hormone therapy practices. And in most of the country, they run into the same legal reality almost immediately:
In many states, a non-physician cannot directly own or control a medical practice.
This is not a technicality or an obscure regulatory footnote. It is a foundational legal doctrine called the Corporate Practice of Medicine (CPOM), and it shapes how almost every healthcare business in the country must be structured. Understanding it — and understanding the compliant structure that works around it — is the difference between a business built on solid ground and one that creates liability for every physician who touches it.
CPOM laws stop corporations and non-physicians from controlling medical decisions. The fundamental principle is that individuals or entities who are not licensed physicians should not engage in the practice of medicine, employ physicians, or control clinical decision-making. This protects patients by ensuring that medical decisions remain in the hands of licensed professionals rather than being influenced by business or financial pressure.
Most states have CPOM laws or regulations in some form. Enforcement varies significantly:
Strict CPOM states: California, New York, Texas, New Jersey, Illinois — these states actively monitor corporate structures and prohibit non-physician ownership of medical practices with no exceptions. Only physicians or physician-owned entities may own the clinical operations.
Moderate CPOM states: Colorado, Washington — rules exist but there may be carve-outs for certain practice types or credentials.
Permissive states: Florida, South Dakota — no explicit CPOM doctrine, but related regulations (fee-splitting prohibitions, fraud statutes) still apply. Even in permissive states, non-physician influence over clinical decisions can trigger enforcement.
The important point: even in states without formal CPOM laws, non-physicians who attempt to direct clinical care, set treatment protocols, or tie physician compensation to prescribing volume face regulatory risk. The doctrine may not exist by name, but its spirit is enforced through medical board authority everywhere.
A physician-owned entity — formally a Professional Corporation (PC) or Professional Limited Liability Company (PLLC) in most states — is a specific type of legal entity that can only be owned by licensed physicians. This is not a regular LLC or S-Corp. It is a specialized structure that holds prescriptive authority, employs clinical staff, and makes medical decisions.
For an entity to comply with CPOM laws and practice medicine, it typically must be 100% (or majority) owned by a physician or physicians licensed to practice medicine in that state, and formed as a physician-owned professional legal entity.
A critical point that is frequently missed: a physician licensed elsewhere is not sufficient. To own a state's PC, the physician must be licensed to practice medicine in that specific state. A California PC requires a California-licensed physician as owner. A Texas PC requires a Texas-licensed physician. This is why multi-state businesses need a physician network with active licensure in each operating state — not a single physician with a home-state license.
If a non-physician cannot own the clinical entity, does that mean they cannot build a healthcare business at all?
No. It means they need to structure their business correctly. The standard compliant structure is the PC/MSO model:
Professional Corporation (PC) — the physician-owned entity
The PC is owned and operated by a licensed physician. It holds prescriptive authority, employs clinical staff, and makes all medical decisions. This is the entity that treats patients, bills for clinical services, and is subject to medical board oversight. Think of the PC as the pilot — it is the only entity that can fly the plane.
Management Services Organization (MSO) — the non-physician-owned entity
The MSO is a separate business entity that can be owned by anyone — an entrepreneur, an investor, a private equity firm. It handles all non-clinical operations: marketing, billing, HR, payroll, technology, scheduling, and facilities management. The MSO does not treat patients, employ physicians, or make clinical decisions. Think of the MSO as the ground crew — essential to operations, but not authorized to fly.
Management Services Agreement (MSA) — the contract connecting them
The MSA defines what the MSO provides, how it is compensated, and where the boundary between clinical and business decisions sits. The MSA is not just a business contract — it is a compliance safeguard evidencing that each party operates within its proper legal boundaries.
The "Friendly PC" is the informal term for a physician-owned entity whose physician owner is aligned with the non-physician business owner's goals. The physician owns the PC (because they must, legally), while the non-physician owns the MSO and controls the business layer.
This structure allows you to:
The key is that the non-physician should own 100% of the MSO. That way, your business — marketing systems, brand assets, and operations — remains fully yours, while the PC can be transitioned to any friendly physician as needed.
The structure fails — and becomes a CPOM violation — when:
How the MSO gets paid is one of the most significant compliance risks in the PC/MSO model. Fee structure is scrutinized heavily by regulators because it is a potential channel for fee-splitting — which is prohibited in most states.
The safest fee structures:
The most risky fee structure:
Regulators view percentage-based fees as a red flag. If your current MSA uses a revenue-sharing model, this is worth reviewing with legal counsel.
The PC/MSO structure is not just a legal requirement in strict CPOM states. It is also the right foundation for building a healthcare business that is scalable, investable, and transferable.
Private equity and acquisition readiness: Compliant PC/MSO structures make due diligence cleaner and faster. Practices that have already established the MSO model are more attractive to private equity investors because the infrastructure and reporting are already in place. Practices that did not build the structure correctly often discover this 60–90 days before a close, when their counsel flags the ownership structure as a liability. Retroactive restructuring at that stage is expensive and compresses the timeline.
Multi-state expansion: The PC/MSO model scales nationally as long as each clinical entity in each state follows that state's CPOM rules and physician ownership requirements. This means a physician network with active licensure in every operating state, not a single physician covering multiple states under one entity.
Brand protection: The physician-owned PC is the face of the practice from a regulatory standpoint. Clinical signage, patient communication, and online listings should name the PC or its physician leadership. The MSO supports these functions but should not present itself as the provider of care.
California California has some of the strictest CPOM rules in the United States — only licensed physicians can own medical practices. Private equity and corporate investment in physician practices have surged, raising concerns about physician autonomy, and California is strengthening CPOM enforcement in response. Fixed or cost-plus fee structures are safest; percentage-based fees are actively scrutinized.
New York New York requires strict separation and bans percentage-based management fees. The state has been actively enforcing physician ownership requirements against med spas in 2026. The enforcement posture is not theoretical — New York's task force has run inspections and cited clinics with penalties including fines, license suspensions, and revocation.
Texas Texas prohibits non-physician ownership outright and scrutinizes MSAs for excessive control of clinical operations. The Texas Medical Board examines whether the MSO is actually controlling clinical decisions through its management agreement.
New Jersey and Illinois Both states are classified as strict CPOM enforcement states and are tightening their scrutiny of telehealth platforms and med spas operating across state lines.
The strawman arrangement
A physician who owns the PC in name only, without exercising actual clinical authority, creates CPOM exposure for everyone involved. The physician faces board discipline for allowing clinical decisions to be made without their involvement. The non-physician faces unauthorized practice of medicine exposure. Genuine medical oversight, chart reviews, and proper governance are not optional — they are what make the structure defensible.
The 51% ownership misconception Some entrepreneurs believe that giving a physician 51% ownership of the business entity solves the CPOM problem. It does not — and it creates new ones. When a physician legally owns the business, the non-physician loses control of key business decisions. If the relationship deteriorates, the physician can block operations or even dissolve the entity. The correct structure is for the non-physician to own 100% of the MSO and for the physician to own the PC.
The single-physician multi-state structure
One physician cannot serve as the PC owner across multiple states if they do not hold active licensure in each state. A multi-state healthcare business needs a physician for each state's PC — which requires a physician network, not a single individual.
The informal MSA
A management services agreement drafted without healthcare-specific legal counsel, or one that uses a percentage-of-revenue fee structure, is a compliance risk regardless of how well the parties intend to operate. The MSA must reflect each state's specific CPOM restrictions, referencing board opinions, attorney general guidance, and medical society statements.
Access Plus Health provides physician-owned entity structures across all 50 states — built for the compliance standard that boards, medical counsel, and acquirers actually apply.
Every physician-owned entity structure includes:
Not a directory. Not a matching service. A structure that holds up.
To discuss your current business structure or plan a compliant entity for a new healthcare business, visit accessplushealth.com or call (213) 205-0946.
This article is for informational purposes only and does not constitute legal or medical advice. CPOM laws vary significantly by state and are subject to change — consult qualified healthcare legal counsel before making ownership structure decisions.
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