California Corporate Practice of Medicine (CPOM) Overview
- Does California have a Corporate Practice of Medicine (CPOM) Doctrine?: Yes.
- Summary of Current Law: California has one of the strongest prohibitions on the Corporate Practice of Medicine (CPOM), with more active enforcement than most other states with a CPOM doctrine. Corporations may not practice medicine nor facilitate the practice of medicine (e.g. engage with contractor physicians). The California ban on the corporate practice of medicine extends to other licensed clinical professions, including the work of dentists, chiropractors, psychologists, therapists, optometrists, speech therapists, occupational therapists, speech therapists and others. Corporations may not “indirectly” practice medicine by unduly controlling a physician’s work. Over the years, several attorney general opinions have upheld this CPOM doctrine, which is defined by both case law (developed over the last century) as well as laws on medical licensure. The Medical Practice Act, especially Section 2052, prohibits entities without a valid licensure from practicing, attempting to practice, or advertising medical practice. The term “person” here is restricted to natural individuals, denying corporations the right to practice medicine. It is a criminal violation for an entity to market itself as offering medical care when it is not properly physician-owned and organized to do so. What are the consequences for CPOM violations? In California, these can include criminal sentencing, exposure to lawsuits, and risk of insurance clawbacks or claims denials. However, exceptions exist. California law allows certain entities, like professional medical corporations (PCs), partnerships, HMOs, and nonprofit organizations, to practice medicine.
- Sources: California Bus. & Prof. Code § 2400.
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 California CPOM laws
If you're looking to start a healthcare business in California and need to comply with California CPOM laws by setting up a MSO-friendly PC structure, Permit can help—affordably and fast. Feel free to reach out.
