Indiana Corporate Practice of Medicine: What Healthcare Startups Need to Know

Indiana occupies a unique position in the American healthcare landscape. As the home of Eli Lilly, one of the world's largest pharmaceutical companies, and as the headquarters for several major national health systems, Indianapolis has developed into a genuine healthcare industry capital. The city's mix of payer, pharma, and provider density has given rise to a growing digital health startup ecosystem that is now attracting attention from coastal venture capital and strategic corporate investors.

For founders entering Indiana, the state's healthcare concentration is a significant draw. But operating clinical services in Indiana requires understanding and complying with the state's corporate practice of medicine (CPOM) framework — a statute-based prohibition that is explicit, consistently applied, and directly targeted at the kind of non-physician control over clinical judgment that many early-stage digital health business models inadvertently create. This guide explains Indiana's CPOM law, how it is enforced, and what structure digital health companies must have in place before treating Indiana patients.

Indiana CPOM: Statute-Based and Explicit

One of Indiana's distinctive features as a CPOM state is that its prohibition is codified directly in Indiana Code rather than derived primarily from common law or AG opinion letters. Indiana Code Title 25, which governs regulated occupations and professions, together with the provisions establishing the Indiana Medical Licensing Board, creates a clear statutory foundation: only licensed physicians may practice medicine in Indiana, and the practice of medicine cannot be delegated to or exercised by a non-physician corporate entity.

Indiana Code's CPOM provisions were developed with a specific legislative intent: preventing non-medical entities from influencing or controlling clinical judgment. Indiana's legislature recognized that when a corporation employs physicians and controls their working conditions, compensation, and patient volume decisions, the corporation acquires indirect power over clinical decision-making — power that the licensing framework is designed to reserve to trained, accountable physicians. The statute codifies this concern explicitly, making Indiana's CPOM rules more predictable than states where the doctrine derives from judicial interpretation.

The Indiana Medical Licensing Board, operating under the Indiana Professional Licensing Agency, is the primary body responsible for enforcing physician conduct and investigating CPOM-related complaints. The Board has the authority to investigate practice structures, discipline physicians for participating in non-compliant arrangements, and refer matters to the Attorney General for potential prosecution of unlicensed practice of medicine.

Indiana's statute-based CPOM prohibition means there is less interpretive ambiguity than in common-law states. For founders, this is actually helpful: the rules are clear, and compliance with the rules is achievable through well-established structures.

What Indiana's CPOM Prohibition Covers

Indiana's CPOM framework prohibits non-physician entities from taking the following actions in connection with clinical services rendered to Indiana patients:

• Directly employing physicians as W-2 employees for the purpose of rendering medical care to patients
• Owning or controlling a professional entity licensed to practice medicine
• Establishing or enforcing clinical treatment protocols that override or substitute for physician professional judgment
• Making compensation and incentive decisions that are designed to influence clinical decision-making in the interest of the corporate entity rather than the patient
• Controlling patient intake, triage, or clinical assignment decisions that constitute clinical acts
• Branding clinical services as the non-physician entity's services rather than the physician's professional services

Indiana Code includes limited institutional exceptions. Licensed hospitals may employ physicians under Indiana law. Certain healthcare facilities and government entities have specific employment authority. Academic medical centers affiliated with universities have employment relationships that are governed differently. But these exceptions do not extend to commercial digital health companies. A venture-backed platform building a clinical service in Indiana cannot rely on these institutional carve-outs.

The MSO-PC Framework for Indiana Operations

The Management Services Organization (MSO) and physician-owned Professional Corporation (PC) model is the accepted compliant structure for non-physician-owned clinical businesses in Indiana. Indiana's statute-based CPOM framework actually makes structuring somewhat more predictable than in common-law states — the rules are clearer, and a well-constructed MSO-PC has a defined compliance profile.

Forming an Indiana Professional Corporation

Indiana recognizes professional corporations under Indiana Code § 23-1.5, the Professional Corporation Act. A professional corporation providing medical services must have all shareholders be licensed physicians. The PC must be formed specifically to render medical professional services, and its governing documents must reflect appropriate clinical governance — meaning the physician shareholders must have real authority over clinical operations.

The formation process in Indiana is handled through the Indiana Secretary of State, and timelines are typically straightforward. When forming the PC, founders should work with healthcare counsel to ensure the articles of incorporation, bylaws, and any shareholder agreements are drafted in a way that satisfies CPOM requirements while permitting the operational integration with the MSO that makes the business model function.

Structuring the MSA for Indiana

The Management Services Agreement is the contractual bridge between the MSO and the PC. In Indiana, the MSA must cleanly segregate administrative services — which the MSO provides — from clinical services — which the PC controls. Key provisions to get right in an Indiana MSA include the following:

The service description must enumerate specific, non-clinical services the MSO provides. Generic language describing "operational support" is less defensible than specific descriptions of billing, technology, marketing, HR, and facility services. The management fee provisions must reflect fair market value, with documentation supporting that the fee is commensurate with the services provided — not simply a mechanism for extracting professional revenue. The clinical independence provisions must clearly reserve to the PC physician all decisions related to patient care, clinical hiring, and professional conduct.

Indiana regulators examining a challenged MSO-PC arrangement will look at the operational reality of the relationship, not just the contractual language. Even a well-drafted MSA can be ineffective if the day-to-day operation of the business places the MSO in clinical decision-making roles. Training your management team on the CPOM boundary — particularly in fast-growing companies where roles blur quickly — is as important as the legal documents themselves.

Indianapolis as a Digital Health Hub: The Market Opportunity

Indianapolis's concentration of healthcare industry activity creates opportunities that are distinctive from other Midwestern markets. Eli Lilly's headquarters makes Indianapolis a natural target for digital health companies building in the pharmacy, clinical trial, and chronic disease management spaces. Major hospital systems — Indiana University Health, Ascension St. Vincent, Community Health Network — are actively seeking digital health partnerships, and their scale and sophistication create meaningful B2B pathways for founders.

The payer market is also substantial. Several national and regional payers maintain significant Indiana operations, including Anthem (now Elevance Health), MDwise, and others. For digital health companies seeking to participate in value-based care arrangements, Indiana's payer mix and the state's strong Medicaid managed care program create viable channels to population health and care management business models.

The Indiana Biosciences Research Institute and the broader life sciences ecosystem in the state also create distinctive opportunities for digital health companies operating at the intersection of clinical research and care delivery. Founders who understand how Indiana's healthcare establishment works — and who have structured their clinical operations compliantly — can access partnership opportunities that are genuinely difficult to replicate elsewhere.

Indiana Telehealth: Permissive Regulations, Growing Market

Indiana has developed a relatively permissive telehealth regulatory environment that has accelerated adoption of digital health services across the state. Indiana enacted telehealth parity legislation that requires commercial insurance coverage for telehealth services equivalent to in-person care. Indiana Medicaid has expanded telehealth coverage and maintained many of the flexibility provisions established during the COVID-19 public health emergency.

Indiana does not impose overly restrictive rules on the establishment of a patient-provider relationship via telehealth, making it a relatively accessible market for synchronous video, audio-only, and asynchronous digital health platforms. This permissiveness has driven growth in mental health telehealth, primary care telehealth, and specialty care platforms operating in Indiana.

However — as with every state covered in this guide — Indiana's permissive telehealth delivery rules do not modify CPOM compliance requirements. The ease of delivering telehealth services to Indiana patients does not reduce the obligation to route those services through a properly structured physician-owned PC. Founders who conflate "Indiana is easy on telehealth" with "Indiana doesn't care about CPOM" make a fundamental error that can expose the entire operation to regulatory risk.

Prescribing via Telehealth in Indiana

Indiana has specific rules governing telehealth prescribing, including for controlled substances. The Indiana Medical Licensing Board's rules require that a valid patient-provider relationship be established before prescribing, though the definition of "valid relationship" has been updated to accommodate telehealth modalities in many contexts. Platforms operating in the mental health, weight management, or pain management spaces should ensure their Indiana clinical protocols specifically address these prescribing requirements. The PC's physician leadership should review and approve these protocols, which serves both the clinical quality objective and the CPOM compliance objective of keeping clinical decisions with the physician.

Risk Factors Specific to Indiana

Indiana's statute-based CPOM framework creates specific risks for founders who are not familiar with the state's approach. Because the prohibition is explicit in statute, there is less room for arguing that a particular structure falls outside the doctrine's scope — the statute says what it says. Common risk patterns in Indiana include:

First, pharmaceutical and life sciences companies that expand from non-clinical health services into clinical care delivery without reforming their ownership and employment structure. Indiana's pharma ecosystem creates genuine pathways for this kind of expansion, but the move into clinical services triggers CPOM compliance obligations that are distinct from the non-clinical operations the company has been running.

Second, employer health benefit programs that move from administrative wellness services into clinical diagnosis and treatment. Many Indiana employers have invested in on-site or near-site clinics administered by third-party companies. If those services expand into clinical care, CPOM issues arise. The third-party administrator must restructure to ensure clinical services are routed through a physician-owned entity.

Third, multi-state platforms that apply a uniform national structure without state-specific analysis of Indiana requirements. A structure that is compliant in a common-law CPOM state may not satisfy Indiana's statutory requirements without modification. State-specific legal review is essential.

Indiana CPOM Compliance Checklist

• Indiana PC Formation: A Professional Corporation has been formed under Indiana Code § 23-1.5, with all shares held by licensed Indiana physicians.
• Statutory Review: Indiana Code provisions governing the Medical Licensing Board and medical professional corporation requirements have been reviewed by Indiana healthcare counsel.
• MSA Executed: A Management Services Agreement is in place with specific service descriptions, a fair market value fee structure, and clinical independence provisions.
• Clinical Governance Documented: PC bylaws and physician employment/contractor agreements clearly vest clinical decision-making authority in the physician shareholder.
• No Control Transfer: No option agreements, equity pledges, or operational side letters transfer PC control to the MSO or non-physician investors.
• Indiana Medical Licensure: All clinical staff treating Indiana patients hold current Indiana licenses; IMLC pathways used where available.
• Telehealth Patient Relationship: Clinical protocols establish a valid patient-provider relationship consistent with Indiana Medical Licensing Board requirements before prescribing.
• Prescribing Compliance: For controlled substance telehealth prescribing, Indiana-specific rules are embedded in PC clinical SOPs.
• Fair Market Value Documentation: MSO management fee is benchmarked against fair market value and documented annually.
• Operational Training: Management team members who interact with clinical operations have been trained on the CPOM boundary between MSO and PC functions.

Indiana as a Long-Term Digital Health Market

Indiana rewards founders who take the time to understand its healthcare ecosystem and build compliant structures from the outset. The state's combination of major employer healthcare activity, a sophisticated payer market, and a growing digital health community creates opportunities that extend well beyond the initial consumer or employer market entry. Companies that build correctly in Indiana — with a documented, auditable MSO-PC structure — have a foundation that supports both organic growth and the kind of institutional partnerships that the Indianapolis market uniquely enables.

CPOM compliance is not the most exciting part of launching in Indiana. But it is the part that determines whether your clinical operations survive scrutiny, close investment rounds, and support the partnership relationships that make the Indiana market worth entering in the first place.