Read this first. This page describes legal concepts in general terms so that a physician-owner can follow a conversation with counsel. It is not legal advice, it is not specific to any state, and requirements change. Nothing here should be relied on in structuring a transaction. Informational only; not legal, tax, or investment advice. Every transaction is unique — consult qualified advisors.
The short answer
Corporate practice of medicine doctrine restricts non-physician ownership of medical practices in many US states, which shapes how concierge and direct primary care practices can be sold to non-physician buyers. Management services organization structures are commonly used to separate clinical ownership from business operations. Direct primary care statutes, which vary by state, govern whether DPC agreements are regulated as insurance.
Quick answers
Can a company that is not owned by physicians buy my practice? In many states not directly — which is why acquirers commonly use a structure that separates clinical ownership from business operations.
What does an MSO actually do? An MSO provides management, administration, staffing and infrastructure to a medical practice under a services agreement, without owning the clinical entity.
Is a direct primary care agreement a form of insurance? Many states have enacted statutes stating it is not, provided defined conditions are met — but the position depends on the state and on how the agreement is drafted.
Does Medicare opt-out affect whether I can sell? It does not prevent a sale, but it is a status the buyer must understand and plan for, because it affects how the practice may bill and contract.
Do corporate practice of medicine issues actually stop deals? Rarely outright — more often they change the structure, the timeline, or the price after diligence uncovers something unaddressed.
Who checks all of this in a transaction? The buyer’s healthcare counsel during due diligence, which is why a seller benefits from their own counsel looking first.
Does any of this vary by state? Almost all of it — corporate practice doctrine, fee-splitting rules and DPC statutes differ substantially between states.
Key takeaways
- Corporate practice of medicine doctrine restricts non-physician ownership of medical practices in many US states, and it is the reason most institutional acquisitions of medical practices are structured rather than simple.
- A management services organization separates the clinical entity, which remains physician-owned, from the business operations, which the acquirer controls through a services agreement.
- Direct primary care statutes exist to clarify that DPC agreements are not insurance products, and their conditions vary between states.
- Regulatory problems rarely stop a concierge transaction outright, but they frequently change its structure, its timeline, or its price.
- A physician-owner who understands these concepts before diligence begins is in a materially better position than one who first encounters them in a buyer’s information request.
Why does the corporate practice of medicine shape the deal at all?
Because the corporate practice of medicine decides who is permitted to own the practice at all. In most industries a buyer with capital can simply buy the company. In healthcare, several bodies of law limit who may own a medical practice, who may employ physicians, and how professional fees may be shared — and those limits determine the shape of the transaction before anyone discusses price.
This is the least discussed part of a practice sale and one of the most consequential. A physician-owner who understands why the buyer is proposing an unfamiliar structure can evaluate it. One who does not is left agreeing to something they cannot assess.
What is the corporate practice of medicine doctrine?
The corporate practice of medicine doctrine — usually shortened to CPOM — is a body of state law restricting the ownership of medical practices and the employment of physicians by non-physicians and corporations. Its stated purpose is to protect clinical judgement from commercial influence. Its practical effect is that a private equity firm or a corporate buyer generally cannot simply purchase a medical practice outright in states where it applies.
Where the corporate practice of medicine doctrine comes from
CPOM is not federal law and there is no single national rule. It arises from a mixture of state medical practice acts, professional licensing statutes, case law, and medical board opinions, which is why it varies so widely. Some states enforce it strictly. Others have limited or effectively no restriction. Several apply it through related rules — fee-splitting prohibitions, licensing requirements, or restrictions on who may hold shares in a professional entity — rather than under the corporate practice of medicine label itself.
The doctrine’s stated rationale is that a physician’s clinical decisions should not be directed by an entity whose obligation is to shareholders. Whether the structures built around it achieve that in practice is a live and legitimate debate, and one worth being honest about rather than tidy.
Which states apply corporate practice of medicine most restrictively
This is the question every owner asks, and the answer depends entirely on your state — including on how your state’s medical board has interpreted rules that may not have been updated in years.
What is an MSO, and why does the corporate practice of medicine require one?
A management services organization is a business entity that provides management, administrative and operational services to a medical practice under a contract, without owning the clinical practice itself. It is the structure most commonly used to allow non-physician capital to invest in medical practices in states where direct ownership is restricted.
Management services organization (MSO) A non-clinical entity providing administration, staffing, billing, technology, real estate and other operational services to a medical practice under a management services agreement. The MSO may be owned by non-physicians. Professional entity (PC or PLLC) The clinical entity that employs the physicians, holds the clinical relationships, and remains owned by a licensed physician. Sometimes called the “friendly PC.” Management services agreement (MSA) The contract between the two, setting out which services the MSO provides and what it is paid.
What sits on each side of the corporate practice of medicine line
The division is between clinical and non-clinical, and it is a real division rather than a formality — the whole structure depends on it being maintained in practice, not merely on paper.
| The typical division of responsibility in an MSO structure. The precise boundary is a matter of state law and must be drawn by counsel for the specific state. Usually the professional entity | Usually the MSO |
|---|---|
| Clinical decisions and treatment | Billing and collections administration |
| Physician hiring, credentialing and supervision | Non-clinical staffing and human resources |
| Medical records ownership | Technology, systems and infrastructure |
| The patient or member relationship | Real estate, equipment and facilities |
| Clinical protocols and quality | Marketing, purchasing and finance |
How the management fee is set, and why it matters
The MSA has to specify what the MSO is paid, and this is where structures most often come under scrutiny. Many states prohibit fee-splitting — the sharing of professional fees with non-physicians — which constrains how a management fee may be calculated. A fee that is simply a percentage of professional revenue can attract challenge in some states, while a fee representing fair market value for services actually provided is generally more defensible.
The point for a physician-owner is narrower than the technical detail: if a buyer proposes an MSO structure, the management fee is not an administrative afterthought. It determines how much of the practice’s earnings leave the clinical entity, and it is one of the terms your own counsel should examine most closely.
There is no national rule. Almost every question on this page resolves differently depending on the state.
How do DPC statutes affect a practice sale?
Direct primary care statutes are state laws that clarify DPC agreements are not insurance products, provided defined conditions are met. They matter in a transaction because if a membership agreement were treated as insurance, the practice would be operating in a regulated activity without authorisation — a problem a buyer’s counsel will look for and will not overlook.
The insurance question, in plain terms
The concern arises from a structural similarity. A member pays a recurring fee in advance in exchange for services that may or may not be needed later. That resembles the risk-transfer arrangement at the heart of insurance regulation.
DPC statutes generally address this by setting conditions under which an agreement is deemed not to be insurance — commonly touching on matters such as written agreement requirements, disclosure that the arrangement is not insurance, terms permitting cancellation, and limits on what the fee may cover. The specific conditions differ by state, and an agreement drafted to satisfy one state’s statute does not automatically satisfy another’s.
Why corporate practice of medicine reaches concierge practices too
DPC statutes are written for direct primary care, but the question they address applies to membership medicine generally. A concierge practice charging a periodic fee for enhanced access is in adjacent territory, and how a particular state’s law treats that arrangement is a matter for counsel in that state. Practices that also bill insurance for covered services are in a more complicated position again, not a simpler one.
What does Medicare opt-out mean for a buyer?
Medicare opt-out is a formal status in which a physician elects not to participate in Medicare and instead contracts privately with Medicare-eligible patients. Many concierge physicians opt out. It does not prevent a sale, but it is a material fact about the practice that a buyer must understand and plan around.
It matters in a transaction for several reasons. It affects how the practice may charge Medicare-eligible members and what the private contracts with those members must contain. It affects a buyer whose wider organization participates in Medicare, since combining opted-out and participating practices raises questions the buyer’s counsel will need to work through. And the status attaches in ways that require careful handling when ownership or the employing entity changes.
Separately, and importantly for concierge practices: there are longstanding restrictions on charging Medicare beneficiaries additional fees for services Medicare already covers. How a membership fee is described, and what it is stated to cover, is not a marketing question in this context. It is a compliance question, and it is one buyers examine.
What does corporate practice of medicine due diligence examine?
A buyer’s healthcare counsel will typically review the practice’s corporate and licensing position, its contracts, and its compliance posture. In a concierge or DPC practice, the recurring areas are:
- Corporate structure and ownership — whether the entity form and ownership comply with state requirements, and whether any existing management arrangement is properly documented
- Physician licensure and credentialing — current, in good standing, and complete
- Membership agreements — whether they satisfy any applicable state statute, and whether the executed versions match the template
- Medicare and payer status — participation, opt-out, enrolment records, and any payer contracts
- Referral and financial relationships — arrangements with laboratories, imaging providers, pharmacies or other physicians, which are subject to federal and state rules that a buyer will not treat lightly
- Privacy and records — HIPAA compliance posture, breach history, business associate agreements, and how records will transfer
- Employment and contractor classification — including non-competes, which are themselves an area of shifting law
- Facilities and equipment — permits, registrations and inspections
Almost every item above is findable by a seller in advance. That is the entire practical argument of this page.
What corporate practice of medicine issues change most often between the letter of intent and closing?
Regulatory findings rarely end a concierge transaction. They change it. Four patterns recur.
The structure changes. A buyer’s counsel concludes the state requires an MSO arrangement rather than a direct purchase, or that an existing arrangement needs re-papering. This adds time and legal cost, and it can change the seller’s tax position — which is a matter for the seller’s own tax counsel, not for the buyer’s.
The membership agreements are re-papered. Where agreements do not satisfy an applicable statute, or where executed copies are missing or inconsistent, members may need to sign new documents before or shortly after closing. In a membership practice this is not a clerical exercise — it is a communication event with the panel, at the least convenient possible moment.
Timelines extend. Licensing, provider enrolment and payer notifications operate on their own schedules regardless of the parties’ urgency.
Price and indemnities move. Where an issue creates quantifiable exposure, the response is usually a price adjustment, a larger escrow, or a specific indemnity carved out of the general terms.
The seller’s counter to all four is the same, and it is unglamorous: have your own counsel examine these areas before a buyer’s counsel does. Issues found early are corrected. Issues found in diligence are negotiated, and the negotiation happens while the seller is inside an exclusivity period with reduced leverage — a dynamic set out in how to sell a concierge medicine practice.
Frequently asked questions
What is the corporate practice of medicine doctrine?
The corporate practice of medicine doctrine is a body of state law restricting the ownership of medical practices and the employment of physicians by non-physicians and corporations. It is not federal law, it varies substantially between states, and it is the main reason institutional acquisitions of medical practices are structured rather than simple.
What is an MSO in healthcare?
A management services organization is a non-clinical entity that provides administration, staffing, technology, facilities and other operational services to a medical practice under a management services agreement. The MSO may be owned by non-physicians, while the clinical entity remains physician-owned.
Why do private equity buyers use MSO structures?
Because in states applying corporate practice of medicine restrictions, a non-physician entity generally cannot own the medical practice directly. The MSO structure separates clinical ownership, which remains with a licensed physician, from business operations, which the investor controls through a services agreement.
Is a direct primary care agreement considered insurance?
Many states have enacted statutes providing that a direct primary care agreement is not insurance where defined conditions are met, commonly covering matters such as written agreements, disclosure, cancellation terms and the scope of the fee. The conditions differ by state, and an agreement drafted for one state does not automatically satisfy another.
Does Medicare opt-out prevent me from selling my practice?
No. Medicare opt-out does not prevent a sale, but it is a material fact a buyer must understand and plan around. It affects how the practice may charge Medicare-eligible members, what private contracts must contain, and how a buyer whose wider organization participates in Medicare approaches the transaction.
What is fee-splitting, and why does it matter in a practice sale?
Fee-splitting is the sharing of professional fees with non-physicians, which many states prohibit. It matters because it constrains how a management fee under an MSO agreement may be calculated, and a fee structured as a straightforward percentage of professional revenue can attract scrutiny in some states.
Can corporate practice of medicine issues stop a practice sale?
Rarely outright. More commonly they change the transaction — the structure is revised, membership agreements are re-papered, timelines extend for licensing and enrolment, or price and indemnities move to reflect quantified exposure. Issues found by a seller in advance are corrected; issues found in diligence are negotiated from a weaker position.
Should I have my own healthcare counsel before selling?
Yes. The buyer’s counsel will examine corporate structure, licensure, membership agreements, Medicare status, referral relationships and privacy compliance. A seller whose own counsel has reviewed those areas first corrects problems privately rather than negotiating them inside an exclusivity period.
Corporate practice of medicine structure is decided before price is
By the time a buyer proposes a structure, the regulatory analysis behind it has already been done — by their counsel, in their interest. The owners who evaluate that proposal well are the ones who understood the landscape before it arrived.
Four questions to ask counsel early
- Is my state a strict corporate practice of medicine state? The answer changes which buyers can transact at all.
- Does my current entity already comply? Legacy ownership arrangements are a common corporate practice of medicine problem discovered late.
- How will the management fee be set? Fee formulas are where corporate practice of medicine rules and deal economics collide.
- Are my DPC agreements insurance? State statutes, not the corporate practice of medicine doctrine, decide that question.
Related reading
Corporate practice of medicine questions sit underneath every other part of a transaction, including price.
- MSO structures in concierge and DPC transactions, explained
- How to sell a concierge medicine practice: the full process
- Who buys concierge medical practices — and what each one wants
- What is a concierge medical practice worth?
- What is a quality of earnings review?
