Expanding a healthcare business from one state to many is one of the most complex growth challenges in any industry. Each state has its own medical practice act, CPOM doctrine, licensing requirements, and scope-of-practice rules. What works perfectly in your home state may be illegal in the next one over. This guide walks through the key considerations for scaling across state lines without creating compliance gaps that could shut down your expansion.
Multi-State Entity Strategies
The first decision in a multi-state expansion is your entity structure. There are two primary approaches, and the right choice depends on how many states you are targeting and how quickly you plan to scale.
Approach 1: State-by-State PC Formation
In this model, you form a separate Professional Corporation in each state where you deliver clinical services. Each PC is owned by a physician licensed in that state, and each has its own management services agreement with your central MSO.
- Offers the highest level of compliance certainty in strict CPOM states
- Allows you to tailor clinical governance to each state's specific requirements
- Creates administrative overhead with multiple entities, tax filings, and bank accounts
- Requires a licensed physician owner in each state
Approach 2: Single PC with Multi-State Registration
Some states allow a PC formed in one state to register as a foreign professional corporation and operate in additional states. This can simplify your entity structure, but it is only available in states that recognize foreign professional corporations and is subject to significant limitations.
- Reduces the number of entities you need to manage
- May not be accepted in strict CPOM states that require a domestically formed PC
- The physician owner must often be licensed in each state where the PC operates
- Tax and liability implications vary based on where the PC has nexus
Most multi-state healthcare businesses that scale beyond three or four states find that a state-by-state PC approach, while more complex administratively, provides the most reliable compliance protection and the greatest flexibility for state-specific customization.
Licensing in New States
Before you can see patients in a new state, every clinician providing care must hold an active license in that state. For telehealth companies, the relevant state is where the patient is located at the time of the encounter, not where the provider is sitting.
Key licensing considerations include:
- Interstate Medical Licensure Compact (IMLC): This compact allows physicians to obtain licenses in multiple member states through an expedited process. As of 2025, over 40 states participate, significantly reducing the time and cost of multi-state licensing.
- NP and PA Compacts: The APRN Compact and PA Compact are gaining adoption, though participation is not yet as widespread as the IMLC.
- Facility licenses: Some states require a separate facility or business license for healthcare operations within their borders, even for virtual-only practices.
- Telehealth registration: A growing number of states require out-of-state telehealth providers to register with the state before treating residents.
CPOM Variations Across States
CPOM is not uniform. Each state's version of the doctrine has its own nuances, exceptions, and enforcement patterns. When you expand into a new state, you need a state-specific CPOM analysis that addresses:
- Whether the state enforces CPOM at all (not all states do)
- Who is eligible to own a PC in that state (physician only, or other licensed professionals)
- Whether the state has specific fee-splitting prohibitions and how they interact with the MSO model
- How the state's medical board has interpreted CPOM in recent enforcement actions
- Whether there are carve-outs for specific practice types such as telehealth or behavioral health
Physician Coverage for Multi-State Operations
Each PC needs a physician owner, and in many states, that physician must be actively licensed in the state where the PC is formed. For a business operating in 10 or 20 states, this means maintaining relationships with 10 or 20 physician owners, each of whom must be genuinely engaged in clinical oversight.
Building a reliable physician network requires:
- Vetting and onboarding: Each physician must understand their obligations under the CPOM structure and be willing to participate actively in clinical governance
- Backup coverage: If a physician owner leaves, relocates, or loses their license, you need a succession plan that does not disrupt operations
- Fair compensation: Physician owners must be compensated at fair market value for their oversight responsibilities, separate from any clinical work they may perform
Operational Scaling Considerations
Beyond the legal structure, scaling across state lines involves operational challenges that can trip up even well-funded companies.
- Credentialing and payor enrollment: Each new state requires enrollment with insurance panels, which can take 90 to 180 days
- Compliance monitoring: Your compliance program must track regulatory changes across all states where you operate
- Employment law: Each state has different rules for employee classification, benefits, and termination
- Tax obligations: Operating in multiple states creates nexus for state taxes, requiring filings in each jurisdiction
Scaling a healthcare business across state lines is achievable, but it requires disciplined planning and execution. The companies that succeed are those that invest in a scalable compliance infrastructure early, rather than scrambling to catch up as they grow. Foundry PC specializes in helping healthcare businesses build multi-state MSO-PC structures with physician coverage in all 50 states, so you can focus on growth while we handle the compliance complexity.