In the majority of U.S. states, a medical practice must be owned by a licensed physician. This requirement is not a bureaucratic formality. It is rooted in the Corporate Practice of Medicine (CPOM) doctrine, which exists to ensure that business interests never override clinical judgment. For healthcare entrepreneurs who are not physicians, understanding this requirement and structuring around it properly is the difference between a compliant business and a ticking regulatory time bomb.
The CPOM Doctrine Explained
The Corporate Practice of Medicine doctrine holds that only licensed physicians may own, operate, or control a medical practice. The rationale is straightforward: when unlicensed individuals or corporations control a medical practice, there is an inherent risk that business considerations such as profit maximization, cost reduction, and patient volume will compromise the quality and integrity of patient care.
CPOM is not a federal law. It is a patchwork of state statutes, regulations, attorney general opinions, and case law. Some states enforce it aggressively through their medical boards and attorneys general, while others have relaxed or eliminated the restriction entirely. As of 2025, roughly 30 states maintain some form of CPOM enforcement.
CPOM is not about preventing non-physicians from participating in healthcare. It is about ensuring that the person making clinical decisions is always a licensed professional who answers to a medical board, not a corporate board.
How the Friendly PC Model Works
The friendly PC model is the most common compliant structure for non-physician healthcare entrepreneurs. In this model, a licensed physician serves as the owner of the Professional Corporation, while the entrepreneur operates a separate Management Services Organization (MSO) that handles all non-clinical business functions.
The term "friendly" refers to the fact that the physician owner is aligned with the entrepreneur's business objectives while maintaining genuine clinical authority. This is not a figurehead arrangement. A properly structured friendly PC requires the physician to actively participate in clinical governance.
Key elements of a compliant friendly PC arrangement include:
- The physician holds 100% ownership of the PC's shares (or the required percentage under state law)
- The physician has genuine authority over clinical hiring, termination, protocols, and quality standards
- The MSA compensates the MSO at fair market value, not as a percentage of medical revenue
- The physician can terminate the MSA if clinical independence is compromised
- Corporate records, bank accounts, and tax filings for the PC are maintained separately from the MSO
Protecting Physician Autonomy
The entire structure fails if the physician owner is a figurehead who rubber-stamps decisions made by the MSO. Regulators look at the substance of the arrangement, not just the paperwork. If the MSO is effectively controlling clinical operations, the PC's physician ownership becomes a sham, and the entire structure can be unwound.
Practical steps to protect physician autonomy include:
- Regular clinical governance meetings where the physician reviews and updates clinical protocols, staffing decisions, and quality metrics
- Independent credentialing authority ensuring the physician, not the MSO, makes final decisions on hiring and privileging clinicians
- Clinical documentation showing that the physician owner actively participates in setting standards of care
- Separate communication channels so that clinical staff report to the physician on clinical matters, not to MSO management
State Variations You Need to Know
CPOM enforcement varies dramatically by state. California has one of the most restrictive CPOM regimes, enforced through the Medical Board and Business and Professions Code. New York enforces CPOM through Education Law and has specific rules about professional corporations. Texas has strong CPOM protections rooted in its Medical Practice Act.
On the other end of the spectrum, states like Arizona, Colorado, and Florida have weaker or no CPOM restrictions, allowing non-physicians to own medical practices in certain circumstances. However, even in these states, other regulations such as anti-kickback statutes and fee-splitting prohibitions still apply.
For multi-state operations, this creates a complex compliance landscape. A structure that works in one state may violate the law in another. Each state where you operate needs its own analysis, and in many cases, its own PC with a locally licensed physician owner.
Finding the Right Physician Partner
Selecting a friendly physician owner is one of the most consequential decisions in building a healthcare business. The ideal candidate is a licensed physician who understands the compliance requirements, is genuinely engaged in clinical oversight, and is philosophically aligned with the business mission.
At Foundry PC, we maintain a vetted network of collaborating physicians across all 50 states who understand the friendly PC model and are prepared to serve as compliant physician owners. We handle the vetting, onboarding, and ongoing compliance monitoring so that your structure remains solid as you grow.