Key Takeaways
- Non-physician ownership requires the right structure.
In many states, non-physicians cannot directly own a medical practice. The MSO-PC model allows entrepreneurs and investors to participate in healthcare businesses while preserving physician control over clinical care.
- Corporate practice of medicine (CPOM) rules vary by state.
Corporate practice of medicine laws differ significantly across the country. Understanding your state’s ownership restrictions is one of the first steps when evaluating a healthcare business opportunity.
- Compliance extends beyond formation.
Creating an MSO is only part of the process. Management fees, operational control, fee-splitting laws, and Anti-Kickback Statute requirements must be addressed to maintain compliance.
Why Healthcare Ownership Is Different From Other Businesses
Healthcare remains one of the most attractive industries for entrepreneurs and investors. Demand for medical services continues to grow, private equity firms continue to make investments, and many healthcare businesses offer opportunities for long-term expansion. However, healthcare is also one of the most heavily regulated industries in the country, and ownership rules often create confusion for non-clinical business owners.
The good news is that a non-physician owned medical practice is possible in many situations, although the business must be structured correctly. Anyone entering the healthcare market should first understand the corporate practice of medicine (CPOM) doctrine, Management Services Organizations (MSOs), and other compliance requirements.
Can a Non-Physician Own a Medical Practice?
One of the most common questions entrepreneurs ask is: “Can a non-physician own a medical practice?”
The answer depends largely on the applicable state laws. In many states, non-physicians cannot directly own the entity that provides medical services or employs physicians. Instead, ownership is divided between a physician-owned clinical entity and a separate business entity that handles administrative operations.
This distinction is important because healthcare laws generally separate clinical decision-making from business management. As a result, whether a non-physician owned practice is permitted depends on how the organization is structured and where it operates.
What Is the Corporate Practice of Medicine (CPOM)?
The corporate practice of medicine (CPOM) doctrine is a legal principle found in many states that restricts non-physicians from owning or controlling entities that practice medicine. The purpose of CPOM laws is to preserve physician independence and protect patient care from inappropriate business influence.
CPOM is not a federal law. Instead, it exists at the state level, and enforcement varies significantly across jurisdictions. Approximately 33 states maintain some form of CPOM restriction, ranging from strict prohibitions to more limited oversight. This means that most people starting a healthcare business must understand the applicable legal considerations for CPOM.
CPOM States vs. Non-CPOM States: What’s the Difference?
The practical impact of CPOM depends on where a medical practice operates. Some states impose strict ownership restrictions, while others provide greater flexibility.
Strict CPOM States (such as California, New York, Texas, and Illinois)
- Non-physicians generally cannot own entities that provide medical services.
- Physicians must own the professional entity delivering clinical care.
- An MSO-PC structure is typically required for investors and entrepreneurs.
Permissive or Non-CPOM States (such as Florida)
- Non-physicians may have greater ownership opportunities.
- Fee-splitting, self-referral, and anti-kickback laws still apply.
- Many practices continue using the MSO structure because it supports growth, investment, and operational scalability.
The MSO-PC Model: The Compliant Path for Non-Physician Owners
For entrepreneurs exploring non-doctor healthcare ownership, the MSO-PC model has become a widely used structure in CPOM states. Under this arrangement, two separate entities work together while maintaining distinct responsibilities. They include the following:
Professional Corporation (PC) or Professional Limited Liability Company (PLLC)
- Physician-owned entity
- Provides medical services
- Employs or contracts with clinical providers
- Maintains authority over patient care and clinical decisions
MSO and MSAs
- Non-physician-owned business entity
- Provides administrative and operational services
- Operates under a Management Services Agreement (MSA)
- Receives compensation for services provided to the PC
The MSO can typically:
- Manage billing and collections
- Handle HR for non-clinical staff
- Provide marketing support
- Manage IT systems
- Lease equipment
- Oversee facilities
- Develop branding initiatives
The MSO generally cannot:
- Hire or terminate physicians based on clinical considerations
- Establish treatment protocols
- Control medical decision-making
- Direct patient care
- Structure physician compensation based on patient volume where prohibited
The MSO charges the PC a management fee for these services. That fee must generally reflect fair market value (FMV) for legitimate administrative services rather than serving as a disguised share of clinical revenue.
Regulatory Risks Non-Physician Owners Must Understand
Owning an MSO does not eliminate regulatory risk. Instead, it creates a framework that defines which activities are permissible and which are restricted. Entrepreneurs and investors should understand three major legal considerations:
The Corporate Practice of Medicine
Even when an MSO-PC structure exists on paper, regulators may look beyond organizational charts and examine actual operations.
If the MSO exercises de facto control over clinical decisions, physician hiring, treatment protocols, or patient care, regulators may conclude that the arrangement violates CPOM requirements. Potential consequences may include contract invalidation, physician disciplinary actions, licensure issues, civil penalties, and, in some circumstances, criminal liability.
Fee-Splitting Laws
Most states prohibit fee-splitting arrangements between licensed professionals and unlicensed individuals or entities.
Management fees are commonly structured as fixed fees or cost-based arrangements to reduce compliance concerns. Some states explicitly prohibit percentage-based management fees, while others closely scrutinize them.
Improper fee structures can create state law issues and may also raise concerns under federal healthcare regulations.
The Federal Anti-Kickback Statute
The Federal Anti-Kickback Statute (AKS) prohibits offering, paying, soliciting, or receiving remuneration to generate referrals for federally reimbursable healthcare services.
For MSOs, problems can arise when management fees are tied to patient volume, referral activity, or revenue generated from healthcare services rather than the fair market value of legitimate administrative support.
Violations can result in substantial civil and criminal penalties, exclusion from federal healthcare programs, and other enforcement actions based on the applicable federal and state AKS laws.
Steps to Take If You’re a Non-Physician Exploring Medical Practice Ownership
Entrepreneurs interested in creating an investor owned practice or healthcare platform should take a structured approach before launching operations.
- Determine whether your target state has CPOM restrictions. Ownership rules vary significantly by jurisdiction.
- Identify the right clinical partner. A physician owner is often required in strict CPOM states.
- Form the PC first. Establish the clinical entity responsible for patient care.
- Form the MSO. Create the administrative company that will support operations.
- Draft a compliant MSA. Clearly define services, responsibilities, and compensation.
- Document FMV for the management fee. Support compliance with fee-splitting and AKS requirements.
- Align operations with the structure. Day-to-day practices must match legal documentation.
- Obtain ongoing legal counsel. Healthcare regulations evolve, and compliance requires continuous oversight.
Taking these steps early can reduce risk and position the organization for future growth, investment, and expansion.
How Jackson LLP Helps Non-Physician Healthcare Entrepreneurs
Healthcare entrepreneurs, investors, and business owners frequently explore opportunities involving a non-physician owned medical practice, but success depends on building a structure that complies with both state and federal law.
Jackson LLP works with clients nationwide to develop compliant healthcare ownership models, including MSO arrangements. We have attorneys licensed to serve you in Illinois and New York, two states known for strict CPOM enforcement.
Our legal services include:
- MSO structuring
- PC formation
- MSA drafting and review
- CPOM compliance review
- AKS and fee-splitting risk assessment
- Ongoing healthcare business counsel
Whether you are evaluating your first healthcare venture or expanding an existing platform, Jackson LLP provides guidance designed to support compliant and sustainable growth. To discuss your goals, book a free consultation.
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Frequently Asked Questions About Non-Physician Practice Owners
Can a non-physician own a medical practice?
No. In most states, non-physicians cannot directly own the entity that practices medicine. However, they may own an MSO that provides administrative services to a physician-owned clinical entity.
What is the Corporate Practice of Medicine doctrine (CPOM)?
CPOM is a state-law doctrine that restricts non-physicians from owning or controlling entities that provide medical services. The scope and enforcement of CPOM vary by state.
What happens if you violate CPOM laws?
Potential consequences include regulatory investigations, contract invalidation, physician disciplinary actions, civil penalties, and, in some cases, criminal liability depending on the jurisdiction and severity of the violation.
What is a Management Services Organization (MSO), and how does it help non-physician owners?
An MSO is a business entity that handles non-clinical functions such as billing, marketing, staffing, technology, and facility management. It allows entrepreneurs and investors to participate in healthcare operations while preserving physician control over clinical care.
Does the Anti-Kickback Statute apply to MSO management fees?
Yes. Management fees that are tied to patient referrals, patient volume, or healthcare revenue rather than fair market value services may trigger scrutiny under the Federal Anti-Kickback Statute and expose both the MSO owner and physician to liability.
