Virginia has quietly become one of the most important states for digital health companies to get right. The Northern Virginia corridor — feeding into the DC metro — along with a growing Richmond health tech cluster, has pushed Virginia onto the radar of healthcare founders, venture firms, and private equity groups who are structuring compliant clinical businesses across the Mid-Atlantic.

Yet Virginia's corporate practice of medicine (CPOM) framework is frequently misunderstood. The state is often described as "business-friendly," which it is in many respects — but that business-friendliness does not extend to non-physician ownership of clinical practices. Virginia enforces CPOM consistently through the Virginia Board of Medicine, and the statutory prohibition is unambiguous. Founders who proceed without a properly structured MSO-PC model face license jeopardy, contract voidability, and regulatory action.

This guide explains what Virginia's CPOM doctrine requires, how the Virginia Board of Medicine enforces it, how the MSO-PC model satisfies compliance, and what specific steps digital health companies should take before treating patients in the Commonwealth.

The Virginia CPOM Doctrine: Statutory Foundation

Virginia's corporate practice of medicine prohibition is rooted in Virginia Code § 54.1-2901, which governs the unlicensed practice of medicine and healing arts. The statute provides that it is unlawful for any person to practice medicine without a license issued by the Virginia Board of Medicine. The critical legal interpretation — consistently followed in Virginia — is that a "person" in this context includes corporations and other business entities.

This principle was reinforced through Board of Medicine guidance and Virginia Attorney General opinions that have long held corporations cannot hold a medical license, cannot employ physicians to practice medicine on the corporation's behalf, and cannot exercise control over clinical decision-making. The logic flows directly from the purpose of medical licensure: to ensure that clinical judgment is exercised by trained, accountable, licensed individuals — not optimized away by investors seeking profit.

The Virginia Code also provides for professional business corporations under Title 13.1. A Professional Corporation (PC) in Virginia must be organized for the specific purpose of rendering professional services — in this case, medicine — and its shareholders must be licensed professionals in that field. This is the exclusive vehicle through which a clinical practice entity can lawfully operate in Virginia.

Virginia's CPOM prohibition is not a technicality to be engineered around. It reflects a consistent policy that clinical judgment must remain under physician control — a principle the Virginia Board of Medicine takes seriously.

Virginia Board of Medicine Enforcement

The Virginia Board of Medicine is the primary enforcement body for CPOM compliance in the Commonwealth. Enforcement actions are triggered in several ways: complaints from patients or competitors, investigations initiated by the Department of Health Professions, disclosures during license renewal, and — increasingly — reviews prompted by investor transactions that put non-physician entities in operational control of clinical practices.

Virginia's enforcement posture is described by practitioners as "moderate but consistent." The Board has not pursued the same volume of high-profile CPOM enforcement actions as Texas or New York, but it has disciplined physicians who ceded inappropriate control to non-physician entities, issued cease-and-desist orders to unlicensed clinical operations, and referred matters involving fee-splitting arrangements to the Department of Health Professions for further action.

Physicians in Virginia who participate in non-compliant structures bear personal license risk. The Board can pursue disciplinary action against a physician for aiding unlicensed practice of medicine, and such findings can result in suspension, revocation, or conditions on licensure. For founders recruiting Virginia-licensed physicians into a management structure, understanding this risk is essential — it affects the physician's willingness to participate and the structure you can lawfully offer.

What CPOM Prohibits in Virginia

Under Virginia's CPOM doctrine, non-physician entities — including venture-backed corporations, PE-owned holding companies, and technology platforms — are prohibited from doing the following in connection with Virginia clinical services:

Notably, Virginia does not maintain a published list of formal exemptions from CPOM the way some states do. The doctrine applies broadly, and the absence of an explicit exemption for a given business model is not a safe harbor. Digital health companies — including telehealth platforms, remote monitoring services, asynchronous care models, and AI-augmented clinical tools — are subject to the same CPOM framework as in-person practices.

The MSO-PC Model: Virginia's Compliant Structure

The Management Services Organization (MSO) paired with a physician-owned Professional Corporation (PC) is the standard compliant structure for non-physician-owned businesses delivering clinical services in Virginia. This bifurcated model separates business operations from clinical operations in a way that satisfies CPOM requirements while permitting meaningful investor participation in the enterprise.

How the Virginia MSO-PC Works

Under the MSO-PC structure, a non-physician entity — typically the investor-backed operating company — organizes as an MSO and enters into a Management Services Agreement (MSA) with a separately formed PC. The PC is owned exclusively by a licensed Virginia physician (or multiple physicians). The PC holds the clinical contracts, employs or contracts with clinical staff, and bears responsibility for all patient care decisions.

The MSO provides everything else: technology infrastructure, billing and revenue cycle management, marketing, customer support, human resources for non-clinical staff, compliance programs, facilities, and administrative management. The MSO charges the PC a management fee for these services — typically structured as a percentage of net revenue or a flat monthly fee, calibrated to reflect fair market value for the services rendered.

The physician owner of the PC retains formal control over all clinical decisions. Critically, this must be genuine control — not a nominal arrangement in which a "friendly" physician owner has no real authority. Virginia's Board of Medicine and the Department of Health Professions will scrutinize arrangements where the physician owner is effectively a figurehead while the MSO exercises operational control over clinical matters.

Physician Ownership Requirements

Virginia Professional Corporation statutes require that shareholders of a PC providing medical services be licensed physicians. All shares must be held by licensed Virginia physicians (or physicians licensed in another jurisdiction if they are also licensed in Virginia or exempt under reciprocity provisions). Non-physician equity ownership — directly or through nominees — violates both PC statutes and CPOM doctrine.

In practice, many digital health companies use a "friendly PC" arrangement, in which a physician affiliated with the MSO holds PC shares. This is permissible when structured correctly, but requires careful documentation: the physician must exercise genuine independent judgment, the management agreement must not transfer clinical authority to the MSO, and the physician must not have entered into any arrangement that commits their PC equity to the MSO or its investors. Any option, pledge, or side agreement that effectively transfers PC control to the MSO creates CPOM exposure.

Telehealth and Virginia CPOM

Virginia significantly expanded its telehealth framework during the COVID-19 public health emergency, and many of those expansions have been codified into permanent law. Virginia now has robust telehealth parity requirements, audio-only telehealth coverage, and relatively clear licensure rules for out-of-state practitioners serving Virginia patients. For digital health founders, Virginia is an attractive telehealth market.

However, telehealth expansion in Virginia did not change CPOM requirements. The Virginia Board of Medicine has made clear that telehealth delivery of clinical services is subject to the same licensing and ownership requirements as in-person care. A platform delivering synchronous video visits, asynchronous message-based consultations, or remote prescribing services to Virginia patients must route those services through a Virginia-licensed physician-owned PC.

Virginia also requires that telehealth practitioners treating Virginia patients hold a Virginia medical license, with limited exceptions for consultations and emergencies. This means your clinical staff — whether employed by or contracted with your PC — must be licensed in Virginia to treat Virginia-based patients. Ensure your credentialing and provider network processes account for this before launching in the Commonwealth.

Additionally, Virginia has established rules around the prescribing of controlled substances via telehealth, with requirements around establishing a valid patient-provider relationship prior to prescribing. For platforms in the weight management, mental health, or chronic pain spaces, these rules directly affect clinical protocols and must be built into your PC's standard operating procedures.

Fee-Splitting Considerations

Virginia's prohibition on fee-splitting closely tracks its CPOM doctrine. Virginia Code § 54.1-3010 and related provisions prohibit physicians from sharing professional fees with non-licensed entities in ways that amount to a kickback for patient referrals or a disguised transfer of clinical revenue. The MSO management fee paid by the PC to the MSO must reflect fair market value for legitimate services actually rendered — not a mechanism for extracting the economic value of clinical practice to a non-physician entity.

Practically, this means your MSA should be drafted and reviewed by healthcare counsel familiar with Virginia law. It should describe the management services in specific detail, include fair market value benchmarking documentation, and not use percentage-of-clinical-revenue fee structures unless carefully analyzed. Fixed or cost-plus fee arrangements are generally lower-risk from a fee-splitting perspective.

Digital Health in Virginia: The Market Context

Virginia's health tech sector has grown substantially, particularly in Northern Virginia (NoVA), where proximity to federal health agencies, defense health contracts, and the DC market creates distinctive opportunities. Companies operating in government health IT, federal telehealth programs, and civilian digital health often overlap in the NoVA corridor. Richmond has developed its own health tech ecosystem, anchored by major hospital systems including VCU Health and Bon Secours, which are increasingly partnering with digital health companies on value-based care and chronic disease management programs.

For founders, Virginia's business registration and professional corporation formation processes are relatively efficient. The State Corporation Commission (SCC) handles PC formation, and formation timelines are predictable. Virginia also has a developed legal market with healthcare counsel who are experienced in CPOM-compliant structuring, which eases the setup process compared to less-developed markets.

Virginia CPOM Compliance Checklist

Before treating patients in Virginia, digital health companies should confirm the following:

Key Risks for Virginia Digital Health Companies

The most common CPOM compliance failures among digital health companies entering Virginia involve three patterns. First, using a single national PC entity for multi-state operations without confirming that entity satisfies Virginia's specific PC requirements. A Delaware PC does not automatically satisfy Virginia's professional corporation statute. Second, over-drafting the MSA to give the MSO operational control over clinical matters — including the ability to terminate physicians — which courts and regulators can find crosses the CPOM line. Third, failing to update the ownership and governance structure when the MSO undergoes a funding event or ownership change, which may inadvertently shift control in ways that raise new CPOM concerns.

Virginia is also a state where private equity investment in healthcare is under increasing scrutiny. As PE-backed rollups have acquired physician practices across the Commonwealth, regulators have paid closer attention to whether the operational substance of physician ownership is maintained post-acquisition. Founders building for a PE exit should structure from day one in ways that will withstand that level of scrutiny.

Getting Virginia CPOM right is not a barrier to operating in the Commonwealth — it is a prerequisite for operating sustainably. With the right structure in place, Virginia offers digital health companies access to a growing, tech-sophisticated market with strong fundamentals for both B2B and direct-to-consumer clinical services.