New Jersey Corporate Practice of Medicine (CPOM) Overview
- Does New Jersey have a Corporate Practice of Medicine (CPOM) Doctrine?: Yes.
- Summary of Current Law: New Jersey prohibits the Corporate Practice of Medicine (thus the state has a CPOM doctrine). That said, this prohibition isn’t explicitly outline in a statute. Instead, it has grown from various legal sources and case law over the past 60 years, when the Professional Service Corporation Act was first introduced. To comply with the Corporate Practice of Medicine prohibition, licensed professionals in New Jersey must form professional corporations (PCs). In New Jersey, it is not possible to form a PLLC (professional limited liability company), so the Attorney General clarified in 1996 that professionals may form an LLC, provided it is wholly-owned by licensed professionals. (Of note for multi-state practices: New Jersey is one of only a few states that requires a domestic professional corporation for medical practice. It does not permit foreign-qualified medical professional corporations that were originally formed in another state.) As for case law in New Jersey’s CPOM doctrine, the state Attorney General provided clarity in 1983 that medical practice isn't permitted within a lay business corporation. Risks for CPOM noncompliance can be significant in New Jersey, which has had more enforcement action than most other states. One major concern is the potential for health insurance payers to demand repayment of all disbursed funds along with triple damages and legal fees. According to the New Jersey Insurance Fraud Prevention Act (N.J.S.A. 17:33A-4(a) (1)), any individual or healthcare provider is in violation if they knowingly submit any misleading or false statements related to a claim for insurance pay. This was emphasized in 2017 by the New Jersey Supreme Court in Allstate Insurance Company v. Northfield Medical Center, P.C., 228 N.J. 596, 159 A.3d 412 (2017). The case clarified that insurance companies may pursue fraud claims, including against individuals, when the CPOM doctrine is violated.
- Sources: New Jersey Stat. Ann. § 14A:17-2.
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 New Jersey CPOM laws
If you're looking to start a healthcare business in New Jersey and need to comply with New Jersey CPOM laws by setting up a MSO-friendly PC structure, Permit can help—affordably and fast. Feel free to reach out.
