This is not legal advice. Foundry PC is not a law firm.

Digital health financings die in regulatory diligence more often than founders expect. Not because the structure is fatally flawed, but because the founder can't produce the documents or answer the questions quickly, and the round loses momentum. Here's the list.

The 12 questions

1. Which entity delivers care, and who owns it?

Clean answer: a professional corporation owned 100 percent by Dr. X, a physician licensed in every state where the PC practices. Cap table of the PC attached.

2. What is the relationship between the company and the PC?

Clean answer: a management services agreement, attached, under which the company's MSO provides non-clinical services at a fair-market fee. The company owns the MSO. The company does not own the PC.

3. What happens if the physician owner leaves?

Clean answer: a stock transfer restriction agreement, attached, with defined transfer events and successor mechanics. Investors will read this one closely. "At MSO's discretion" language will draw a comment in California and a problem in Oregon.

4. How was the management fee set, and is it fair market value?

Clean answer: a memo or analysis from counsel, the fee methodology, and the most recent annual review.

5. Who employs the clinicians?

Clean answer: the PC. Employment and contractor agreements attached. If any practicing clinician is on the MSO's payroll in a CPOM state, expect this to become a closing condition.

6. In which states does the PC operate, and is it properly registered in each?

Clean answer: a state matrix showing entity type (domestic vs. foreign-qualified), formation date, registered agent, good standing certificate, and any state regulatory approvals (NYSED, etc.).

7. Is the physician owner licensed in every state on that matrix?

Clean answer: license list with expiration dates. Gaps here are common and fixable but need a plan.

8. What physician collaboration or supervision arrangements are in place for NPs and PAs?

Clean answer: collaborative practice agreements by state, with the required chart review or meeting documentation.

9. Is there a BAA between the MSO and the PC?

Clean answer: yes, attached. Missing BAAs are one of the most frequent findings.

10. Have any transaction notices been required or filed?

Clean answer: analysis of whether the financing or any prior transaction triggered notice requirements in California, Massachusetts, Indiana, Connecticut, New Mexico, Colorado, Illinois, or Oregon. Increasingly relevant for later-stage rounds.

11. Does the structure comply with the 2025 to 2026 changes in Oregon, California, and Vermont?

Clean answer: a memo from counsel addressing each state you operate in, dated after the effective dates.

12. Does the physician owner have any equity or other economic interest in the MSO?

Clean answer: no, or a clear description of any interest and a counsel analysis of why it's permissible in your states.

What a clean data room looks like

If you can produce this in a day, regulatory diligence takes a week. If you're assembling it from email threads, it takes a month and everyone gets nervous.

The three findings that actually delay closings

  1. Clinicians employed by the MSO. Requires moving employment to the PC, which touches payroll, benefits, and every contract.
  2. No or defective succession agreement. Requires the physician's cooperation to fix, which takes negotiation.
  3. Management fee with no documented basis. Requires a valuation or counsel memo, which takes time.

Fix these before you start the raise.

How Foundry PC handles it

Every Foundry engagement produces the data room above as a byproduct: entity documents, the full suite, a state matrix, and a fee analysis, with a counsel sign-off. Clients who raised after a Foundry build have gone through regulatory diligence in days rather than weeks.

If you're six months from a raise, book a 20-minute call and we'll walk through what's missing.