South Dakota Corporate Practice of Medicine (CPOM) Overview
- Does South Dakota have a Corporate Practice of Medicine (CPOM) Doctrine?: Yes.
- Summary of Current Law: South Dakota enforces a Corporate Practice of Medicine (CPOM) Doctrine, as established by SDCL 36-4-8.1. The state's statute firmly dictates that it is against public policy for a corporation to engage in the practice of medicine or osteopathy. While a corporation can enter into an employment agreement with a physician licensed in accordance with state laws, certain conditions must be met to ensure compliance with this statute. The employment agreement or relationship it establishes must not interfere with the physician's independent judgment regarding medical practice, the diagnosis, and treatment of patients. Additionally, the corporation should not derive direct profit from the practice of medicine itself, meaning it cannot charge higher fees for the physician's services than those reasonable for an independent practitioner, although reasonable additional charges for related services are permissible. Furthermore, such agreements must not have a duration exceeding three years without the option of annual renewal by mutual consent. South Dakota's regulatory landscape reinforces the prohibition against corporate entities directly practicing medicine. Healthcare organizations in the state are structured diversely, including freestanding multispecialty and single-specialty practices, rural health clinics employing physicians, Independent Practice Associations (I.P.A.'s), tax-exempt foundations employing physicians, and hospital clinic divisions, all within the framework of the CPOM Doctrine.
- Sources: South Dakota Codified Laws § 36-4-24.
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 South Dakota CPOM laws
If you're looking to start a healthcare business in South Dakota and need to comply with South Dakota CPOM laws by setting up a MSO-friendly PC structure, Permit can help—affordably and fast. Feel free to reach out.
