Arizona Corporate Practice of Medicine (CPOM) Overview
- Does Arizona have a Corporate Practice of Medicine (CPOM) Doctrine?: Yes. (And you may need an outpatient treatment center license if you have a qualifying business, but don't have an entity owned by a licensed healthcare provider.)
- Summary of Current Law: Arizona lacks explicit statutory or regulatory prohibitions on the corporate practice of medicine (CPOM). Instead, CPOM restrictions stem from two historical Arizona Supreme Court cases involving optometry: Funk Jewelry Co. v. State of Arizona (1935) and State Ex. Rel. Board of Optometry v. Sears Roebuck & Co. (1967). These cases established that corporations lack the "necessary moral and intellectual qualities" for certain healthcare practices. Under Arizona law, only individuals can hold licenses as doctors of medicine and practice medicine. However, Arizona's professional corporation statutes permit non-licensed entities to own up to 49% of shares in a professional corporation, provided it's not prohibited by profession-specific licensing laws. Non-licensed individuals can also hold positions on the corporation's board or as officers, as long as at least 50% of directors and the president are licensed to provide the specified professional services. Despite updates to professional corporation statutes in 1996, no court decisions have explicitly clarified their application to physician licensure. Arizona healthcare attorneys tread carefully. The risk of Arizona administrative agencies challenging entities employing physicians may be higher if non-physician owners are perceived as interfering with diagnosis or treatment decisions or other aspects of patient care. It’s worth noting that the Arizona Supreme Court has never overruled its prior decisions that recognized the CPOM doctrine in common law, even if it wasn’t made explicit in statutes. Note that several types of Arizona medical practice entities require separate licenses from the Arizona Department of Health Services, including Outpatient Treatment Centers—though groups that are owned by a physician may qualify for an exemption from this licensing requirement.
- Sources: Arizona Rev. Stat. § 10-3301.
What are Corporate Practice of Medicine (CPOM) Laws?
CPOM laws are regulations that prohibit standard corporations (or other non-physician entities) from practicing medicine or employing practicing physicians. The primary goal of these laws is to ensure that medical decisions are made solely based on patient care and not influenced by corporate interests. These laws vary by state, but they generally aim to protect the physician-patient relationship from commercial influence.
While the focus is often on physicians and medical care, the CPOM family of laws typically apply to a wide range of licensed healthcare providers, including psychologists, speech therapists, physical therapists, occupational therapists, mid-level providers (nurse practitioners and physician assistants), dentists, dietitians, podiatrists, chiropractors, pharmacists, optometrists, and many others. The goal of CPOM laws is shared across these professions: ensure clinical decisions aren’t influenced by corporate pressures.
Who Do These CPOM Laws Apply To?
A state’s CPOM restrictions typically apply to any standard corporate entity that seeks to provide medical or licensed healthcare services. This includes corporations, limited liability companies (LLCs), and other business entities. For an entity to comply with CPOM laws and practice medicine, it typically must be:
- 100% owned by a physician (or physicians) licensed to practice medicine in that state, and
- Formed as a special type of physician-owned legal entity: a Professional Corporation (“PC” for short). In some states, a Professional Limited Liability Company (“PLLC”) is also permitted.
Most states with CPOM laws only permit the corporate practice of medicine through these physician-owned PCs or PLLCs.
Complying with Arizona CPOM laws
If you're looking to start a healthcare business in Arizona and need to comply with Arizona CPOM laws by setting up a MSO-friendly PC structure, Permit can help—affordably and fast. Feel free to reach out.
