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Healthcare technology offers boundless business opportunities, but laws like CPOM can quickly complicate things. Discover the pitfalls and learn strategies for staying legal.
If you’re looking to innovate in the healthcare space, a telehealth platform might seem like a safe bet. During the pandemic, many healthcare professionals adopted some form of remote patient care. Both patients and clinicians have indicated that there’s no going back—the intersection between healthcare and technology is here to stay.
However, before developing a telehealth platform or other technology for delivering healthcare services to patients, you must understand how the Corporate Practice of Medicine Doctrine (CPOM) applies to your business.
What Is CPOM and Why Does It Matter?
CPOM restrictions prohibit those who are not properly licensed health care professionals or who are not operating under a professional corporation (PC) or professional limited liability company (PLLC) from directly owning or operating a practice. CPOM aims to stop non-physicians from exercising judgment or control over a physician’s independent medical judgment in patient care. Essentially, it prevents unlicensed businesses from “practicing medicine.”
You might assume that simply owning and operating a telehealth platform wouldn’t be considered practicing medicine. However, how you contract with physicians and other providers on your platform is crucial—it can determine whether you comply with CPOM.
For example, if an unlicensed person owns the business and hires physicians to deliver services, this structure can violate CPOM. Why? If an unlicensed person is the “employer” of a physician and directly profits from the medical services, the physician’s independent medical judgment could be compromised. CPOM seeks to prevent unlicensed parties from having a direct financial interest in the revenue generated from patient care.
See our related video, “The Corporate Practice of Medicine in Illinois.”
Common Payment Models That May Violate CPOM
If you look around, you’ll likely find telehealth and healthcare technology platform operators who violate CPOM. However, claiming that “everyone else is doing it!” will not protect you from consequences. Here are two common payment schemes that you may want to avoid:
Payment Scheme #1: Charging Physicians a Portion of Practice Revenue
Depending on your business, it might seem logical to generate income by charging physicians a percentage of the revenue they collect from services delivered through the platform. However, if you’re unlicensed, this approach may violate CPOM in some states because your compensation derives from the value of patient care.
Payment Scheme #2: Charging Physicians Per-Use Fees
You might consider charging a fee each time a physician uses the platform, reasoning that it’s not tied to the physician’s patient revenue. However, per-use fees still base compensation on patient volume, which can implicate CPOM in many states.
It’s important to note that states differ significantly in which compensation arrangements violate CPOM. The above examples reflect general trends, but the specific rules can vary. Note also that in some states, CPOM principles extend to other professions beyond medicine.
Compliant Payment Options for Telehealth Platforms
How can you get paid if you provide telehealth or technology services to physicians? In many states, flat-fee payments made on a regular basis are compliant. For example, charging a physician a fixed monthly “user fee” shows that the payments aren’t tied to the volume or value of healthcare a physician delivers. For a telehealth or technology platform, membership dues or other recurring flat fees paid by the physician can help generate revenue that isn’t linked to patient dollars.
The Role of MSAs in Telehealth Compliance
If your company provides administrative services for the physician, consider entering into a management services arrangement. Technology platforms offering HR, billing, marketing, and other administrative support can function as a management services organization (MSO). MSOs and licensed practice owners can enter into management services agreements (MSAs), contracts that allow the MSO to manage the practice in exchange for a management fee. While MSOs often charge a flat rate to avoid CPOM concerns, other fee structures may be available.
See our related video, “Setting Management Fees in Healthcare.”
MSAs can also clarify each party’s responsibilities and help limit liability for matters like clinical decision-making that might arise through your telehealth or technology platform. However, MSO/MSA relationships are complex, so it’s wise to talk to an experienced healthcare attorney about your options.
Get Legal Support.
Launching a telehealth or technology platform for healthcare providers involves navigating a web of complex laws and regulations. You might think, “It shouldn’t be this hard.” However, the reality is that working with healthcare providers as an unlicensed individual brings compliance challenges.
An experienced healthcare attorney can guide you through the legal landscape, facilitate compliance, and help you achieve your business goals. If you operate in one of the states where we have licensed attorneys, consider setting up a phone consultation to discuss how we can help you succeed.
This article is made for educational purposes and is not intended to be specific legal advice to any particular person. It does not create an attorney-client relationship between our firm and the reader. It should not be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction.
