Texas Corporate Practice of Medicine (CPOM) Overview
- Does Texas have a Corporate Practice of Medicine (CPOM) Doctrine?: Yes.
- Summary of Current Law: The state of Texas has had a prohibition against the corporate practice of medicine (CPOM) for well over 60 years. The Texas CPOM ban is stricter than most other states, and the Texas Medical Board (TMB) is more active in its enforcement of CPOM rules that most state medical boards. The CPOM restriction was originally put in place to protect patient welfare (with the goal of ensuring that corporate interests do not compromise medical care). This prohibition is codified in state statutes, regulations, and case law, and it can be explicitly found in the Texas Administrative Code. While Texas enforces strict limitations on corporate involvement in medical practices, it also recognizes specific exceptions and allows for flexibility in certain agreements between management entities and physician practices. Under Texas law, certain entities are explicitly permitted to directly employ physicians, including nonprofit health groups and hospitals. Furthermore, Texas laws enable physicians to participate in joint ventures with professionals from various fields, such as podiatry, optometry, and physician assistants. The Texas CPOM prohibition was also extended over time to cover other licensed healthcare professions, such as optometry, podiatry, and other fields. These provisions create a framework that balances the prohibition on corporate interference with the need for flexibility in healthcare delivery. Key CPOM cases in the state include Woodson v. Scott & White Hosp., 186 S.W.2d 720 (Tex. Civ. App.– Austin 1945) and Rockett v. Texas State Board of Medical Examiners, 287 S.W.2d 190 (Tex. Civ. App.–San Antonio 1956). Texas courts have had particularly strong enforcement when they believe an unlicensed entity or individual is influencing the actions of a licensed professional, such as in Xenon Health, LLC v. Baig, 662 Fed. Appx. 270 (5th Cir. 2016). The Texas Attorney General has further confirmed the existence of the Corporate Practice of Medicine (CPOM) ban in its opinions.
- Sources: Texas Occ. Code Ann. § 164.051; Corporate Practice of Medicine: A Fifty State Survey, Vol. 1, Rel. 2E.
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 Texas CPOM laws
If you're looking to start a healthcare business in Texas and need to comply with Texas CPOM laws by setting up a MSO-friendly PC structure, Permit can help—affordably and fast. Feel free to reach out.
