Corporate Practice of Medicine (CPOM) laws can determine whether an NP or PA may own a medical practice outright. In stricter states, non-physician ownership may be limited or prohibited for entities that provide medical services. In those states, the practice may need a different structure, such as a physician-owned professional entity paired with a Management Services Organization (MSO).
Key Takeaways
- CPOM laws control who may own or control a medical practice, and they are separate from NP or PA scope-of-practice rules. (Jump to Section)
- An NP or PA may have broad clinical authority but still face ownership restrictions under state corporate practice laws. (Jump to Section)
- Strict CPOM states may require a physician-owned professional entity for the medical side of the practice. (Jump to Section)
- An MSO-PC structure can separate business operations from clinical control when direct non-physician ownership is restricted. (Jump to Section)
- State rules should be reviewed before forming the entity, signing a lease, or opening the practice. (Jump to Section)
How CPOM Laws Affect NP and PA Practice Ownership
The Corporate Practice of Medicine doctrine limits who may own, employ, or control the delivery of medical services. The purpose is to prevent business interests from interfering with independent clinical judgment.
The exact rule differs by state. Some states have explicit statutes. Others rely on medical practice acts, court decisions, attorney general opinions, or licensing-board interpretations. The American Medical Association notes that CPOM restrictions vary widely and often include exceptions for professional corporations, hospitals, and other licensed healthcare entities.
For an NP or PA owner, CPOM affects questions such as:
- Can the clinician own the medical entity directly?
- Must a physician own or control the professional entity?
- Can a general LLC employ physicians?
- Who controls medical records and clinical policies?
- Who may hire or terminate clinical staff?
- Can the owner collect medical fees directly?
- Is an MSO structure needed?
These questions should be answered before the business entity is formed.
A practice can be clinically compliant and still have an ownership structure that violates state law.
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Clinical Practice Authority and Business Ownership Are Different
One of the most common mistakes is assuming that independent clinical practice authority also gives an NP or PA unrestricted ownership rights.
It does not necessarily work that way.
Practice authority determines what the clinician may do clinically. This can include diagnosing patients, prescribing medications, ordering treatment, or practicing without physician supervision.
CPOM rules address who may own and control the entity providing medical services.
For example, California expanded independent practice pathways for qualifying NPs through AB 890. However, California’s CPOM doctrine still applies separately to medical-practice ownership. Medical Director Co. notes that an NP may qualify for independent practice and still face restrictions on how an aesthetic medical practice is owned.
That distinction matters for both NPs and PAs.
Before opening a practice, ask two separate questions:
- What am I legally allowed to do as a clinician?
- What am I legally allowed to own or control as a business owner?
A favorable answer to the first question does not guarantee the same answer to the second.
States With Stricter CPOM Restrictions
There is no single nationwide CPOM rule. States also change their statutes, exceptions, and enforcement positions over time.
The examples below are directional, not exhaustive.
California
California has one of the strongest CPOM frameworks. Business and Professions Code Section 2400 limits corporations and other artificial entities from exercising professional medical rights.
The Medical Board of California also identifies several decisions that should remain under physician control. These include patient-care decisions, clinical staffing, medical records, and certain billing or equipment decisions.
For many non-physician-owned med spas, a professional medical entity is separated from the management business.
Texas
Texas also recognizes the Corporate Practice of Medicine doctrine. The Texas Medical Board states that the doctrine generally prohibits non-physicians and unlicensed entities from practicing medicine. Texas law contains specific exceptions for certain authorized entities.
A non-physician owner should not assume that forming a standard LLC is enough to operate a medical practice.
New York
New York restricts the unauthorized corporate practice of licensed professions. New York Department of Health guidance states that private physician practices must use authorized professional structures, such as a professional corporation or professional limited liability company, where applicable.
Ownership and entity requirements can differ based on the profession and services involved.
States With More Flexible CPOM Rules
Some states take a more permissive approach to medical practice ownership and do not apply a broad CPOM prohibition in the same way as stricter states. In those states, an NP or PA may have more options for owning or controlling the practice entity. That does not mean the ownership structure is unrestricted.
The practice may still need to review:
- Professional entity laws: The state may require a specific entity type, such as a professional corporation, PLLC, or professional association.
- Fee-splitting restrictions: Management fees, revenue-sharing arrangements, and percentage-based payments may still be limited.
- Facility licensing: The business may need a separate clinic, facility, or service-specific license before treating patients.
- NP or PA ownership rules: State law may allow ownership only under certain professional or percentage-based requirements.
- Medical director requirements: Some services may still require a medical director even when direct ownership is allowed.
- Prescribing and delegation rules: Clinical authority remains subject to the state’s scope-of-practice and prescribing requirements.
- Clinical control: Non-clinical owners may still be restricted from controlling medical decisions, treatment protocols, or other professional judgment.
A state with no broad CPOM prohibition should therefore not be treated as a state with no ownership rules. The entity structure, clinical services, ownership percentages, and physician requirements still need to be reviewed separately.
How an MSO-PC Structure Works
In stricter CPOM states, the business and clinical sides of a medical practice are often separated into two entities. This is commonly called an MSO-PC structure.
The goal is to let a non-physician owner manage the business operations without controlling decisions that state law reserves for licensed clinicians.
Professional corporation or professional entity
The professional corporation, or other permitted professional entity, provides the medical services. Depending on state law, it may need to be owned or controlled by a physician or another authorized licensed professional.
The professional entity usually retains control over clinical matters, including:
- Medical decision-making: Clinical judgments about diagnosis, treatment, and patient care stay with licensed providers.
- Treatment protocols: The professional entity controls the clinical standards and protocols used in the practice.
- Prescribing: Prescribing decisions remain with clinicians who are legally authorized to prescribe.
- Clinical staffing: Hiring, supervising, and terminating licensed clinical staff may need to remain under professional control.
- Chart review: Required physician review and other clinical oversight responsibilities stay within the professional side of the practice.
- Patient-care standards: The professional entity is responsible for the quality and delivery of medical care.
This separation is important because a non-physician business owner may be restricted from directing these decisions, even if they manage the rest of the company.
Management Services Organization
The Management Services Organization, or MSO, handles the non-clinical side of the business. It typically operates under a management agreement with the professional entity.
Depending on state law and the agreement, the MSO may handle:
- Marketing and branding: Advertising, website management, and non-clinical brand strategy.
- Office space and equipment: Leasing space, purchasing equipment, and managing facilities.
- Payroll administration: Processing payroll and handling administrative employment functions.
- Non-clinical staffing: Hiring and managing reception, billing, marketing, and other administrative staff.
- Accounting and bookkeeping: Managing financial records and routine business administration.
- Business operations: Scheduling systems, vendor relationships, technology, and other non-clinical functions.
The MSO does not replace the professional medical entity. It also should not control clinical decisions simply because it manages the business operations.
The management agreement defines how the two entities work together. It should clearly separate business control from clinical control and address fees, responsibilities, services, and decision-making authority.
For NP and PA owners, the key point is that an MSO-PC structure can create a path to business ownership in states where direct ownership of the medical entity is restricted. It does not remove CPOM rules. The structure must still comply with state ownership, fee-splitting, and clinical-control requirements.
Need physician support for an MSO-PC practice structure?
Medical Director Co. helps practices secure physician coverage.
What NP and PA Owners Should Verify Before Launch
Before forming the business, an NP or PA owner should confirm how state law affects ownership, entity structure, physician involvement, and clinical control. These rules can affect how the company is formed and who may own the professional entity. They can also affect how revenue is handled and which responsibilities must stay with a licensed physician or professional entity.
Reviewing these issues before launch is easier than restructuring the practice after contracts, leases, payroll, or patient care are already in place.
Start with these checks:
- Ownership eligibility: Confirm whether an NP or PA may own all or part of the professional entity.
- Entity type: Determine whether the practice needs a PC, PLLC, professional association, or another authorized structure.
- Physician ownership: Check whether a physician must hold ownership or control of the medical entity.
- Clinical control: Identify which decisions must remain with the physician or professional entity.
- Fee arrangements: Review management fees and payment structures for possible fee-splitting restrictions.
- Practice authority: Confirm what the NP or PA may do clinically under state law.
- Physician involvement: Determine whether collaboration, supervision, delegation, or medical-director coverage is required.
- Facility requirements: Check whether the practice itself requires a separate clinic, facility, or service-specific license.
Do not copy an ownership structure from another state. A model that works in Florida may not work in California, Texas, or New York.
The structure also needs to reflect the services being provided. A general wellness business may face a different analysis from a med spa offering prescription drugs, injectables, or other medical procedures.
How Medical Director Co. Supports Practice Owners
Medical Director Co. helps NPs, PAs, and other practice owners address the physician side of their compliance structure.
The company provides physician placement, collaboration support, and state-specific documentation. It also offers MSO-related agreements and compliance support for practices that need to separate management operations from the professional medical entity.
For owners in strict CPOM states, this can help establish the physician relationship required by the chosen structure.
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FAQs
Can an NP own a medical practice outright?
It depends on the state and the type of entity being formed. Some states allow broader NP ownership, while stricter CPOM states may limit ownership of entities that provide medical services. NP practice authority and ownership rights should be reviewed separately.
Can a PA own a medical practice?
PA ownership rules vary by state. Some states permit PA ownership or partial ownership under specific professional-entity rules. Others place stronger restrictions on who may own or control the medical entity.
What is the difference between CPOM and scope of practice?
CPOM governs who may own or control a medical practice. Scope-of-practice rules determine what an NP or PA may do clinically. A clinician can have broad practice authority and still face restrictions on business ownership.
What is an MSO-PC structure?
An MSO-PC structure separates business management from the delivery of medical care. The MSO handles non-clinical operations, while the professional entity retains control over clinical services. This structure is commonly used in states with stricter CPOM laws.
Do states without CPOM laws allow unrestricted NP or PA ownership?
Not necessarily. Other rules may still restrict professional entity ownership, fee splitting, clinic licensing, physician involvement, or clinical control. Ownership should still be reviewed under the specific state’s healthcare and professional-entity laws.
Does hiring a medical director solve a CPOM ownership problem?
Not by itself. A medical director can provide clinical oversight, but the underlying entity and ownership structure must still comply with state law. In some states, a separate professional entity or MSO-PC structure may also be required.
Build the Ownership Structure Before Opening the Practice
CPOM compliance starts with understanding the difference between clinical authority and ownership authority. NPs and PAs should confirm their state’s entity, ownership, physician-control, and fee rules before forming the business or treating patients. Medical Director Co. can help with physician placement and compliance support when the practice structure requires physician involvement.
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Bolton M. Harris, J.D., is a seasoned attorney with a formidable background in criminal law and a focus on healthcare law and compliance. As the in-house legal counsel at Medical Director Co., Harris brings a unique blend of prosecutorial experience and regulatory expertise to support healthcare professionals across Texas. Her career spans roles as a prosecutor in multiple counties and now as a trusted advisor on the legal intricacies of medical practice operations.
Education & Early Career
Bolton Harris completed her undergraduate studies at Southern Methodist University (SMU) in 2013. During her time at SMU, she was not only a dedicated student but also a competitive athlete on the university’s women’s swimming team. She went on to earn her Juris Doctor from Texas A&M University School of Law in 2016 and became a member of the Texas Bar that same year. Armed with a strong academic foundation and discipline honed as a student-athlete, Harris embarked on a career in criminal law immediately after law school.
Prosecutorial Experience in Texas
Bolton Harris began her legal career in public service as a criminal prosecutor. She served as an Assistant District Attorney in multiple jurisdictions, where she quickly rose through the ranks and handled a broad spectrum of cases. Some highlights of her prosecutorial career include:
- Assistant District Attorney, Dallas County, Texas: Prosecuted a high volume of criminal cases in one of the state’s busiest DA offices, gaining extensive trial experience in both misdemeanor and felony courts.
- Assistant District Attorney, Ellis County, Texas: Continued to hone her courtroom advocacy skills, known for meticulous case preparation and a tenacious pursuit of justice on behalf of the community.
- Assistant District Attorney, Navarro County, Texas: Broadened her legal expertise by handling diverse criminal matters in a smaller county, working closely with law enforcement and community leaders to uphold the law.
Through these roles, Harris built a reputation for being a tough but fair advocate. She brought numerous cases to trial and developed an in-depth understanding of the criminal justice system. This distinguished prosecutorial background laid a strong foundation for the next phase of her career in the private sector.
Healthcare Law & Compliance at Medical Director Co.
After her tenure as a prosecutor, Harris shifted her focus to healthcare law, applying her legal acumen to the medical field. She recognized that the same attention to detail and tenacity that served her in criminal law could benefit healthcare providers navigating complex regulations. Embracing this new direction, Harris became well-versed in the intricate laws governing medical practices – from licensing requirements to patient safety and privacy standards – and is passionate about helping practitioners stay compliant.
In her current role as the in-house attorney for Medical Director Co., Bolton Harris oversees all legal and compliance matters for the organization and its clients. Medical Director Co. is a nurse-owned firm that connects nurse practitioners (NPs), physician assistants (PAs), and registered nurses with qualified medical directors and collaborating physicians, offering fast placements and comprehensive compliance support for healthcare practices. Harris ensures that each of these partnerships and clinical ventures adheres to all applicable state and federal laws. She is responsible for drafting and reviewing collaborative practice agreements, advising on regulatory requirements, and providing ongoing legal counsel as clients establish and grow their clinics. Drawing on her prosecutorial eye for risk management, Harris proactively identifies potential legal issues and addresses them before they escalate, giving healthcare professionals peace of mind.
Bolton M. Harris’s multifaceted expertise – spanning high-stakes courtroom litigation to detailed healthcare compliance – makes her a formidable legal ally. Whether advocating in front of a jury or guiding a medical practice through regulatory hurdles, she remains committed to the highest standards of the legal profession. Her blend of courtroom-tested skill and healthcare law knowledge ensures that clients of Medical Director Co. receive elite-level counsel and steadfast protection in an ever-evolving legal landscape.
