Scale your healthcare business across all 50 states.

The Corporate Practice of Medicine Doctrine

In the United States, most states enforce some version of the corporate practice of medicine (CPOM) doctrine. The core principle is straightforward: only a licensed physician — not a corporation, investor, or management company — can make clinical decisions, employ clinicians, and own a medical practice. The doctrine exists to protect patients by ensuring that medical judgment is never subordinated to corporate profit motives.

For traditional physician-owned practices, CPOM is rarely an issue. But for tech-enabled healthcare companies — telehealth platforms, digital health startups, virtual care providers, remote patient monitoring companies, and AI-driven clinical tools — this doctrine creates a fundamental structural challenge. The technology company cannot directly employ physicians or own the entity that bills for medical services.

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The MSO–PC Structure

The standard solution is a management services organization (MSO) paired with a professional corporation (PC) or professional limited liability company (PLLC). In this model, the technology company operates as the MSO, providing administrative services — technology, billing, marketing, scheduling, compliance infrastructure, and non-clinical staff — to a physician-owned PC that employs the clinicians and holds the medical licenses.

The MSO and PC are linked through a management services agreement (MSA) that defines what the MSO provides, how fees are structured, and how clinical independence is preserved. When structured properly, this arrangement satisfies CPOM requirements while allowing the tech company to build and scale its platform.

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What Is a Friendly PC Owner?

A friendly PC owner (sometimes called a friendly physician or nominee physician owner) is a licensed physician who agrees to own and serve as the authorized representative of a professional corporation on behalf of a tech-enabled healthcare company. The physician holds the equity in the PC, serves as its officer or director, and maintains the clinical governance authority required by state law.

The term "friendly" refers to the cooperative relationship between the physician owner and the MSO. Unlike an independent practice owner who built their own business, a friendly PC owner steps into a structure designed and managed by the technology company. The physician is typically compensated for their governance role, and their responsibilities center on clinical oversight — reviewing protocols, credentialing providers, and ensuring the practice meets the standard of care.

This model has become the dominant legal architecture for scaling healthcare technology companies. Virtually every major telehealth platform, virtual care startup, and multi-state digital health company uses some variation of the MSO–PC structure with friendly physician owners in each state where they operate.

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Regulatory Risks & Enforcement Trends

The friendly PC owner model has drawn increasing attention from state attorneys general, medical boards, and the Department of Justice. Enforcement actions have targeted arrangements where the physician owner lacks genuine clinical authority, where the MSA terms effectively give the MSO control over the practice, or where fee-splitting arrangements violate state prohibitions.

Prominent litigation — including cases involving large staffing companies and private-equity-backed physician practice management firms — has clarified that courts and regulators are willing to look past formal corporate structures to examine the economic reality of who controls the practice. A physician who has no meaningful role in governance, cannot terminate the MSA without penalty, or receives a nominal fee while the MSO captures all economic value is unlikely to satisfy the intent of CPOM laws.

Recent trends show regulators focusing on several areas: whether the MSA creates a de facto employment relationship between the MSO and clinicians; whether fee-splitting provisions constitute illegal profit-sharing with non-physicians; whether non-compete clauses in MSAs restrict the physician's ability to exercise independence; and whether the physician owner has genuine authority to direct clinical operations.

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The Multi-State Challenge

No two states handle the corporate practice of medicine identically. Some states — like California and New York — enforce CPOM aggressively and require physician ownership of medical practices. Others — like several states in the Southeast — have no explicit CPOM doctrine but impose similar restrictions through medical practice acts, licensing rules, or fee-splitting prohibitions.

For a tech-enabled healthcare company expanding across state lines, this creates a 50-state compliance puzzle. Each new market may require a separate professional corporation, a physician owner licensed in that state, a state-specific management services agreement, and compliance with unique local rules about corporate form, entity naming, and board composition. What works in Texas may be non-compliant in New Jersey.

The complexity compounds quickly. A company operating in 15 states may need 15 separate PCs, multiple physician owners, and a patchwork of MSAs — all of which must be maintained, updated as regulations evolve, and governed in a way that satisfies each state's expectations.

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Choosing the Right Advisory Partner

Most healthcare attorneys can draft an MSA. Fewer understand the operational realities of running a multi-state MSO–PC network — the governance cadence, the physician sourcing challenge, the board compliance requirements, and the day-to-day friction of keeping 20 or 30 PCs functioning across different regulatory regimes.

PCOwner.AI was founded by a practicing physician who has served as a friendly PC owner, structured multi-state healthcare operations, and advised technology companies on the regulatory risks that trip up even well-funded startups. Our advisory goes beyond legal documents — we help you design, source, and maintain the physician ownership infrastructure that makes nationwide scaling possible.

Whether you're standing up your first professional corporation or expanding an existing network into new states, we bring the clinical credibility, regulatory fluency, and operational perspective that this work demands.