So you’ve found a medical practice you want to buy. The numbers look good, the location is right, and the seller is motivated. There’s just one problem: you’re not a doctor.
Before you go any further, you need to understand a body of law that stops most non-physicians from simply writing a check and hanging a new sign on the door. It’s called the Corporate Practice of Medicine (CPOM) doctrine, and it affects buyers in most states across the country.
This isn’t a reason to walk away from the deal. It is, however, a reason to structure it correctly — because getting it wrong can mean fines, voided contracts, and in serious cases, criminal charges.
What Is the Corporate Practice of Medicine Doctrine?
The Corporate Practice of Medicine doctrine is a legal principle — established through a mix of state statutes, case law, and regulatory opinion — that prevents non-physicians from owning or controlling medical practices. The rationale dates back more than a century: medical decisions should be made by licensed professionals in the interest of patients, not by business owners in the interest of profits.
In practical terms, CPOM laws restrict non-physicians from:
- Directly employing physicians to provide clinical services
- Controlling clinical decision-making (treatment protocols, staffing, scheduling of care)
- Sharing in the profits that arise directly from medical services
Does CPOM Apply in Every State?
No, and this is where it gets complicated. CPOM is a state-level doctrine, not a federal one. Every state handles it differently.
Category | What It Means for Buyers |
Strict CPOM States | CA, NY, TX, NJ, NC, MA, CO. Only physicians or physician-owned entities may own the practice. A PC/MSO structure is required. |
Permissive States | FL, IL, and others. Non-physicians can own outright. Anti-kickback and fee-splitting rules still apply. |
Middle Ground | Most states. Rules exist but vary in enforcement. Always confirm with a healthcare attorney licensed in the target state. |
The landscape is also shifting. Oregon passed the nation’s strictest CPOM law in 2025. California added new private equity-specific restrictions in 2026. This is an area of law that is moving, not standing still.
Key takeaway: Before pursuing any practice acquisition, the first question your attorney should answer is how your target state treats CPOM.
The PC/MSO Model: How Non-Physicians Participate Legally
In CPOM states, a direct purchase is not possible. The standard legal framework for non-physician investment is the PC/MSO model — two entities that separate the clinical and business sides of the practice.
The Professional Corporation (PC)
Owned by a licensed physician. This entity employs clinical staff, holds the medical license, and is responsible for all patient care decisions. All revenues from medical services flow into the PC first.
The Management Services Organization (MSO)
A separate business entity that can be owned by anyone, including non-physicians or investors. The MSO provides all non-clinical services: billing, marketing, HR, IT, facility management, and equipment leasing.
The Management Services Agreement (MSA)
The contract connecting the two entities. It defines services and fees. This document will receive close regulatory scrutiny and must be drafted carefully.
What the MSO Can and Cannot Control
The separation must be real. Here is the critical line:
MSO Can Handle | Must Stay With the PC |
Billing and collections | Treatment protocols and clinical decisions |
Marketing and patient acquisition | Hiring/firing of clinical staff |
Administrative HR | Patient records and medical documentation |
IT systems and EHR infrastructure | Clinical scheduling |
Lease and equipment management | Physician compensation tied to outcomes |
Business strategy and expansion | Anything affecting patient care |
Fee Structures: How the MSO Gets Paid
How the MSO charges the PC is one of the most scrutinized parts of any CPOM-compliant structure.
Fixed Fees (Safest)
A set monthly amount regardless of revenue. As long as the fee reflects fair market value, this structure is rarely challenged. It is the recommended starting point.
Cost-Plus Models (Generally Acceptable)
The MSO bills actual costs plus a reasonable markup. Needs documentation and ideally an independent valuation.
Percentage-Based Models (Highest Risk)
Charging a percentage of revenue resembles fee-splitting. California sometimes allows it if commercially reasonable; New York explicitly prohibits it; most states discourage or ban it.
The Strawman Trap
The most common serious mistake is creating a structure where a physician appears on paper as the PC owner but has no real involvement. Regulators call this a strawman arrangement, and it is illegal in every state.
Red flags:
- Revenue flows directly to the MSO, bypassing the PC
- The physician doesn’t review charts, sign protocols, or participate meaningfully in care
- The MSO hires and fires physicians without physician input
- The physician has no actual day-to-day role in the practice
North Carolina, California, Texas, and New York medical boards have all explicitly warned against this structure. Real compliance requires real physician involvement.
What Happens If You Get It Wrong
For the non-physician owner or investor:
- Civil fines
- Invalidation of contracts, including your management agreement
- Forced restructuring or dissolution of entities
- Potential exposure to anti-kickback and fraud statutes
For the physician involved:
- License suspension or revocation
- Disciplinary action from the state medical board
- Personal liability for unauthorized practice arrangements
Beyond formal penalties: months of operational disruption, loss of referral relationships, damage to patient trust, and the cost of unwinding a structure you built from scratch.
Practical Checklist for Non-Physician Buyers
Work through these questions with a healthcare attorney before signing anything:
- Does your target state enforce CPOM? If yes, you need a PC/MSO structure.
- Who will own the PC? A licensed physician with real clinical involvement.
- How will the MSA be structured? Fixed fees, benchmarked to fair market value.
- Does your management agreement cross clinical lines? Have counsel review for CPOM compliance specifically.
- How does revenue flow? Patient → PC → MSO. Never directly to the MSO.
- Is the physician genuinely involved? Chart reviews, protocol oversight, and clinical hiring must rest with the physician.
- Planning multi-state expansion? Build a structure that works in strict states from day one.
Final Thought
The Corporate Practice of Medicine doctrine is not a bureaucratic technicality. It reflects a genuine policy choice — that patient care decisions should belong to physicians, not business owners — upheld by courts and medical boards for over a century.
It does not prevent non-physicians from building valuable healthcare businesses. It just requires doing it correctly. The PC/MSO model, properly structured, has enabled significant non-physician investment in healthcare while keeping clinical care in the hands of licensed professionals.
The key is getting the structure right before the deal closes, not after.
This article is for informational purposes only and does not constitute legal advice. Laws vary by state and are subject to change. Consult a licensed healthcare attorney before structuring any medical practice acquisition.
SellingAPractice.com is a physician-founded platform that helps medical practitioners sell their practices without a broker. Learn more at sellingapractice.com.
