*These statements have not been evaluated by the Food and Drug Administration. These products are not intended to diagnose, treat, cure, or prevent any disease.
This article is intended for general educational purposes only and does not constitute legal or medical advice. Readers should consult with qualified healthcare attorneys or regulatory experts before making decisions related to medical practice ownership or business structuring. The information provided herein reflects general principles and may not apply to all jurisdictions or individual circumstances.
The healthcare industry has seen a significant rise in interest from entrepreneurs and investors who are not physicians.
As wellness businesses, telemedicine platforms, and medical spas grow in popularity, non-physicians are increasingly looking for ways to participate in this lucrative market.
Although non-physicians cannot legally practice medicine or make clinical decisions, there are structural models that, when properly implemented, may allow participation in practice operations.
These structures, particularly Management Services Organizations (MSOs), have become popular solutions that separate clinical responsibilities from business operations.
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The concept of healthcare ownership encompasses several dimensions critical to understanding how non-physicians can legally participate in medical practices.
Definition of ownership in healthcare
In healthcare, “ownership” can refer to different types of control.
Clinical ownership involves making medical decisions and providing patient care, which legally requires a medical license.
Financial ownership refers to those who receive profits from the practice and make investment decisions.
Operational ownership involves managing day-to-day business functions like staffing, billing, and marketing.
The opportunity lies primarily in financial and operational ownership for non-physicians, while clinical decisions must remain with licensed medical professionals. This separation is fundamental to compliant practice structures in many states.
Non-physicians are increasingly exploring legal business structures, such as MSOs, to participate in healthcare practice operations without engaging in clinical decision-making.
Types of medical practices
Medical practices come in various organizational forms, each with different implications for non-physician involvement.
Solo practices involve a single physician provider, while group practices include multiple providers who share resources and expenses.
Partnerships may involve physicians collaborating or, in some cases, with non-physician partners in states where this is permitted.
Direct primary care represents a membership-based model where patients pay a monthly fee for access to services.
Employment models also vary within these practice types. Some physicians work as employees with guaranteed salaries, while others operate as independent contractors who are paid based on productivity.
These distinctions affect how non-physicians can structure their involvement and compensation arrangements.
Legal frameworks across the United States
Several key legal principles govern medical practice ownership, and the way these rules are applied in different jurisdictions is significantly varied.
Overview of corporate practice of medicine (CPOM)
The Corporate Practice of Medicine (CPOM) doctrine is a legal principle that bars companies and unlicensed individuals from practicing medicine or hiring physicians to deliver medical care.
This doctrine was established to protect the physician-patient relationship and ensure that clinical decisions are based on medical expertise rather than business interests.
The CPOM doctrine aims to prevent interference with a physician’s independent medical judgment, maintain patient trust, and ensure profit motives don’t compromise healthcare quality.
This helps to keep clinical decisions separate from business pressures and maintain ethical standards in healthcare delivery.
State-by-state differences
The application of CPOM varies dramatically across states, creating a complex regulatory landscape for non-physician entrepreneurs. Some states enforce strict CPOM laws, while others have more flexible approaches or no specific restrictions.
States with strict CPOM laws, including California, Texas, and New York, generally prohibit non-physicians from having any ownership interest in medical practices.
These states often require licensed physicians to own professional corporations or professional limited liability companies.
In contrast, states with more flexible or no CPOM laws, such as Florida, New Mexico, and Alabama, may allow non-physicians to own practices directly or have a more significant role in practice management.
However, clinical decisions must remain with licensed medical professionals even in these states.
Federal and state Anti-Kickback and self-referral laws
Beyond state-level regulations, federal laws play a significant role in governing healthcare business arrangements.
The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving anything of value to induce or reward referrals for services reimbursed by federal healthcare programs, such as Medicare and Medicaid.
The Stark Law (also known as the Physician Self-Referral Law) prohibits physicians from referring Medicare or Medicaid patients to an entity with which they—or an immediate family member—have a financial relationship, unless an exception applies.
These federal regulations create additional compliance considerations for any business structure involving non-physicians, particularly when financial incentives or referral arrangements are involved.
Many states also have their own versions of anti-kickback and self-referral laws that apply regardless of the payer source. These state-level statutes may mirror federal laws or impose even stricter standards, often extending to commercial insurance or cash-pay arrangements. Organizations must consider both federal and state requirements when evaluating healthcare partnerships and referral arrangements.
These summaries are not exhaustive and do not substitute for legal consultation. Carefully structured arrangements are necessary to avoid violating these laws, which can result in significant penalties, exclusion from federal healthcare programs, and, in some cases, criminal prosecution.
Pathways for non-physician ownership
Several structural options exist for non-physicians interested in the healthcare industry. These options allow participation while respecting regulatory boundaries.
Management services organization (MSO) structure
A management services organization (MSO) has become one of the most popular structures for non-physician involvement in medical practices.
An MSO is a separate legal entity that provides administrative and management services to one or more medical practices while leaving clinical decisions to the physician-owned entity.
MSOs typically handle non-clinical functions such as billing, collections, human resources, facility management, equipment leasing, marketing, and technology support.
The physician-owned entity maintains control over all clinical aspects of the practice, including hiring and supervising clinical staff, determining treatment protocols, and making medical decisions.
This separation creates a clear distinction between the business of medicine (handled by the MSO) and the practice of medicine (performed by the physician-owned entity).
Legal documents and relationships
A management services agreement (MSA) typically governs the relationship between an MSO and a physician-owned practice. This critical document outlines the MSO’s services, compensation arrangements, term length, termination provisions, and compliance safeguards.
Fee structures for MSO services can take several forms.
Flat-rate arrangements involve a fixed monthly fee regardless of practice volume.
Cost-plus models include reimbursement for MSO expenses plus a management fee.
Percentage-based arrangements, where allowed, involve the MSO receiving a percentage of practice revenue or profits.
Each model has different regulatory implications that must be carefully considered with legal counsel.
Joint ventures with licensed physicians
In some states, non-physicians may participate in joint ventures with licensed physicians. These arrangements typically involve a physician-owned professional entity that provides clinical services, partnered with a non-physician entity that provides management services or owns assets used by the practice.
Joint venture structures may include limited liability companies with different membership classes, friendly professional corporations where permitted, or contractual joint ventures without a separate legal entity.
The specific structure must comply with state CPOM laws and federal regulations while establishing clear boundaries between clinical and non-clinical functions.
The legality of such arrangements is highly contingent on their specific terms and should be thoroughly reviewed by legal counsel to ensure compliance.
Starting a non-physician-owned medical practice
Establishing a compliant medical practice with non-physician involvement requires careful attention to both legal requirements and practical business considerations.
Legal and regulatory considerations
The first and most crucial step for any non-physician looking to participate in a medical practice is consulting with a healthcare attorney specializing in these complex arrangements.
An experienced attorney can help navigate state-specific regulations, structure compliant business relationships, and develop appropriate legal documentation.
Forming the right business entity is another key consideration. In states with strict CPOM laws, this typically involves establishing both a physician-owned professional corporation (PC) or professional limited liability company (PLLC) for clinical services and a separate management entity (often an LLC) for non-clinical functions.
The specific structure must align with state requirements and federal healthcare regulations.
Operational steps
After establishing the legal framework, several operational steps are necessary to launch the business.
Financing the venture may involve seeking investors, securing loans, or self-funding. Finding appropriate space for the practice requires consideration of size, location, accessibility, and compliance with healthcare facility requirements.
Licensure and credentialing are critical aspects that must be addressed before opening. While the physician entity handles provider credentialing, the MSO may need various business licenses and permits depending on state requirements and the services offered.
Staffing considerations are also important, as there are apparent limitations on who the MSO can hire. Generally, the MSO may employ administrative staff, while the physician-owned entity must employ clinical staff to maintain appropriate clinical supervision and avoid CPOM violations.
Thus, having clear employment relationships helps maintain compliance with healthcare regulations.
Compliance and risk mitigation
Ongoing compliance is essential for non-physician involvement in medical practices.
Compliance with federal Anti-Kickback regulations requires carefully structured financial relationships that don’t create incentives for inappropriate referrals or clinical decisions. Safe harbor provisions may protect certain arrangements if they meet specific criteria.
Maintaining clear clinical independence for physicians is a legal requirement and an important ethical consideration. Physicians must have complete control over medical decision-making without influence from non-physician owners or managers.
Documented policies and regular compliance reviews help maintain this separation in practice, not just on paper.
Benefits and risks of non-physician ownership
Before pursuing ownership opportunities in healthcare, non-physicians should carefully weigh the potential advantages against significant compliance challenges and ethical considerations.
Potential benefits
A significant advantage of non-physician involvement through MSO structures is operational efficiency. Non-physicians with business expertise can implement effective administrative systems, optimized workflows, and improved financial management.
Non-physicians may also bring valuable financial and business acumen to the practice. This can include capital for expansion, expertise in growth strategies, marketing knowledge, and experience with scaling operations.
These business skills complement physicians’ clinical expertise, potentially creating more sustainable and prosperous healthcare organizations.
Risks and ethical considerations
The primary risk of non-physician involvement comes from potential regulatory penalties.
Violations of CPOM laws, the Anti-Kickback Statute, or Stark Law can result in severe consequences, including substantial fines, loss of licensure for involved physicians, exclusion from federal healthcare programs, and criminal prosecution.
Important liability and reputation considerations also exist. While the physician entity bears primary responsibility for medical liability, improperly structured arrangements may create unexpected liability for the MSO.
Additionally, any perception that business interests influence clinical decisions can damage the practice’s reputation and erode patient trust.
Frequently asked questions (FAQs)
Here are some common questions about non-physician ownership of medical practices.
Can a non-physician legally own a medical practice?
In most states with strict laws, non-physicians cannot directly own medical practices but can own companies that handle business tasks like billing and marketing. The rules differ in each state, so always check with a healthcare lawyer before making plans.
What is an MSO, and how does it help non-physicians?
An MSO (management services organization) is a company that handles non-medical tasks like billing, marketing, hiring staff, and managing the office for medical practices.
This setup lets non-physicians earn money from the business side of healthcare while doctors remain in charge of all patient care decisions.
Which states are most restrictive about non-physician ownership?
California, Texas, New York, New Jersey, and Illinois have the strictest rules about who can own medical practices. In these states, only licensed doctors can own practices that provide medical care, though non-physicians can still own management companies.
Can a nurse or chiropractor own a practice in a CPOM state?
Nurses and chiropractors can own practices within their field but usually cannot own medical practices that offer services beyond what they’re licensed to provide.
They can, however, own management companies that support doctor-owned medical practices.
What’s the difference between a PC and an MSO?
Doctors own a PC (professional corporation) and provide medical care to patients. An MSO handles business tasks like billing and marketing, can be owned by anyone, including non-physicians, and never provides direct medical care.
Key takeaways
Management services organizations provide a compliant pathway for non-physicians to participate in the business aspects of medical practices while respecting legal boundaries.
With proper structure and ongoing attention to compliance, non-physicians can contribute valuable business expertise to healthcare organizations while ensuring that clinical decisions remain with licensed medical professionals.
If you’re considering entering the healthcare space as a non-physician, consulting with specialized healthcare legal counsel is essential to successfully navigating this complex regulatory landscape.
Ready to start delivering better patient care?
Join 100,000 healthcare providers who rely on Fullscript to dispense top-quality supplements and labs to their patients.
The information in this article is intended for healthcare practitioners for educational purposes only, and is not a substitute for informed medical, legal, or financial advice. Practitioners should rely on their own professional training and judgement, and consult appropriate legal, financial, or clinical experts when necessary.
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