Illinois Corporate Practice of Medicine (CPOM) Overview
- Does Illinois have a Corporate Practice of Medicine (CPOM) Doctrine?: Yes.
- Summary of Current Law: Illinois courts have consistently upheld the restrictions against the corporate practice of medicine (CPOM) and other Illinois licensed healthcare professions since 1935, specifically in Dr. Allison, Dentist, Inc. v. Allison, 360 Ill. 638 (1935) and People v. United Medical Service , 362 Ill. 442 (1936). With this case law, the state has a longstanding Corporate Practice of Medicine prohibition. The rule against corporate practice of medicine has gained attention following a significant appellate court ruling. This court upheld a lower court's decision that hospitals are prohibited from directly employing physicians, as seen in the case of Berlin v. Sarah Bush Lincoln Heath Center. This ruling has implications for the structure of hospital-physician employment relationships in Illinois. The core of the issue stemmed from a contract dispute between Dr. Berlin and the Sarah Bush Lincoln Health Center. Dr. Berlin, having resigned to join a competitor, contended that the non-compete clause and the entire employment contract were invalid due to the Illinois prohibition against corporate practice of medicine (CPOM). Analyzing the Illinois Medical Practice Act, which requires a valid license for medical practice, and considering Illinois Supreme Court decisions stating that corporations cannot practice medicine or dentistry, the courts determined that hospitals, especially non-profit ones, do not fit the exemptions allowed for HMOs and professional medical corporations (commonly called PCs). Therefore, the direct employment of physicians by these hospitals was seen as an unlicensed practice of medicine, rendering such employment contracts unenforceable. The IDFPR (Illinois Department of Financial & Professional Regulation) regulates the medical profession in Illinois, and a letter from the department confirming an individual physician owner's Illinois licensure status is needed before qualifying a foreign professional corporation (PC) in the state. The Illinois Medical Practice Act also restricts fee-splitting in the state, be it indirect or direct.
- Sources: 225 ILCS 60/22; Carter-Shields v. Alton Health Inst. 777 N.E.2d 948 (Illinois 2002).
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 Illinois CPOM laws
If you're looking to start a healthcare business in Illinois and need to comply with Illinois CPOM laws by setting up a MSO-friendly PC structure, Permit can help—affordably and fast. Feel free to reach out.
