CPOM Compliance for Alabama Healthcare Startups
Alabama is more flexible than California on classic CPOM, but Ala. Code § 10A-4-3.01 still limits who may hold professional-corporation shares, and Ala. Admin. Code r. 540-X-9-.06 still bars unlicensed control of medical judgment.
Get a Free CPOM AssessmentThe law in Alabama
Key authorities (official text)
Alabama Board of Medical Examiners · Medical Licensure Commission · Ala. Code § 10A-4-3.01 · r. 540-X-9-.01 · r. 540-X-9-.06Alabama Board of Medical Examiners · Code of Alabama (legislature) · Ala. Admin. Code r. 540-X-9-.01 (medical professional corporations) · r. 540-X-9-.06 (medical LLCs) · Chapter 540-X-9 (official text).
Alabama CPOM is Limited. The state does not copy California Business & Professions Code § 2400. Official Ala. Code § 10A-4-3.01: a domestic professional corporation may issue shares, fractional shares, and rights or options to purchase shares only to qualified persons. Official § 10A-4-1.03(6) defines “qualified person” as an individual authorized to render the professional service, plus certain wholly qualified partnerships, PCs, and LLCs. Birmingham diligence still wants a physician-owned PC plus a fair-market-value MSA.
Do not cite commentator “Alabama has no CPOM” lists as permission for a lay operating company to control medicine. Official Ala. Admin. Code r. 540-X-9-.06(5): a limited liability company organized to render medical professional services, foreign or domestic, may render medical professional services in Alabama only through individuals licensed to practice medicine by the Medical Licensure Commission. A physician or osteopath employed by that LLC must exercise independent judgment in matters related to the practice of medicine, and that physician’s actions with respect to the practice of medicine shall not be subject to the control of an individual not licensed to practice medicine. That is an independent-judgment rule, not a digital-health waiver.
Do not skip the Board filing overlay. Official r. 540-X-9-.01(4) requires a medical professional corporation to file a certified copy of the articles of incorporation, the certificate of authority if applicable, a complete list of shareholders, and later amendments with the Alabama State Board of Medical Examiners, generally within 30 days. Official r. 540-X-9-.01(7)(a): all shareholders of a foreign medical professional corporation who render medical professional services in Alabama shall be physicians or osteopaths licensed to practice medicine in Alabama (with the narrow § 34-24-74 consultation / border privilege). A medical-director title on a Delaware company does not satisfy that overlay. Collaboration for NPs/PAs is a different job from owning the Professional Corporation. See collaborating physician vs physician PC owner.
Typical PC / MSO structure in Alabama
Form an Alabama professional corporation under Title 10A Chapter 4 owned by an Alabama-licensed MD or DO (a “qualified person” under § 10A-4-1.03 / § 10A-4-3.01). File articles and the shareholder list with the Board of Medical Examiners under r. 540-X-9-.01. The MSO, often the Delaware operating company, provides non-clinical services under a written MSA at fair market value. Clinical revenue lands in the PC. Foundry forms that structure ($15,000) and matches a friendly PC owner ($3,000/mo). Not a rented Super PC. Not a reading of Limited as a substitute for a named physician owner on a venture-backed file.
If you also treat Georgia, Florida, Tennessee, Mississippi, or Louisiana patients, Alabama’s Limited label does not control those states. Start with the CPOM 50-state guide and form for the footprint you actually have. Neighboring Georgia, Florida, Tennessee, and Louisiana have their own statutes.
When you still need a PC vs only an MSO
Use the table as an operator rule, not a filing opinion. Confirm with counsel.
| Alabama fact pattern | Typical entity | Why |
|---|---|---|
| Alabama-only, cash-pay, physician already owns the practice | May stay on the existing professional corporation | Still document clinical control and FMV admin if an MSO is in the picture; keep 540-X-9-.01 filings current |
| Venture-backed or multi-state telehealth that includes Birmingham / Huntsville / Mobile | Alabama professional corporation + FMV MSA | Buyers and payers test CPOM compliance the same way they do in strict states |
| Physician employed by a general corporation or LLC | May sit outside a PC if independent judgment is real | 540-X-9-.06(5) still bars unlicensed control of medical judgment. A startup MSO writing protocols is not that independence |
| Alabama plus Georgia, Florida, Tennessee, Mississippi, or Louisiana | Form for the neighboring states you treat, then qualify Alabama | Alabama’s Limited label does not soften O.C.G.A. § 14-7-4 or the Florida Clinic Act |
Fee-splitting and funds-flow risk
Board of Medical Examiners / Medical Licensure Commission discipline plus Ala. Code § 34-24-360 fee-splitting overlay is the enforcement path. A percentage-of-collections management fee is the pattern that looks most like a split of professional fees and like de facto control under 540-X-9-.06(5). Prefer a fixed or FMV-supported admin fee. Pair Alabama CPOM with the fee-risk table on CPOM compliance.
| Alabama pattern | Risk | Safer pattern |
|---|---|---|
| Lay LLC holds itself out as practicing medicine | High: 540-X-9-.06(5) license overlay | Licensed-physician ownership of the professional corporation |
| MSO paid % of professional collections | High: § 34-24-360 + diligence overlay | Fixed FMV admin fee with a memo |
| MSO writes protocols or vetoes clinical hiring | High: 540-X-9-.06(5) independent-judgment rule | Clinical control stays in the physician-owned PC |
| Lay equity in the professional corporation | High: § 10A-4-3.01 (shares only to qualified persons) | Qualified-person ownership with the Board filing on file |
| Physician PC + FMV MSA + separate books | Base case | Revisit FMV when volume changes |
Board vs buyer / payer checks
The Board of Medical Examiners and Medical Licensure Commission discipline licensees. Buyers and payers run a different file. Use both columns. License risk and diligence risk are not the same test. Full operating map: CPOM compliance.
| Who checks | What they sample | Alabama fail signal |
|---|---|---|
| Board of Medical Examiners / MLC | 540-X-9-.01 articles and shareholder list; independent judgment under 540-X-9-.06(5) | Figurehead PC owner; MSO writing protocols; unlicensed holding-out |
| Buyer diligence | Shareholder ledger vs Secretary of State vs BME filing; one claim from payer to PC bank to MSA invoice | MSO lockbox; percentage MSA; no Alabama-licensed owner |
| Payer / credentialing | Claim TIN and group NPI on the physician-owned PC | Marketing MSO TIN on the claim |
What Alabama founders need to know
- Alabama is Limited, not “no CPOM.” § 10A-4-3.01 is the share rule; 540-X-9-.06 is the independent-judgment rule.
- 540-X-9-.01 requires a Board filing of articles and the shareholder list. Skip that file and diligence will notice.
- Foreign medical PCs that actually treat Alabama patients still need Alabama-licensed physician shareholders under 540-X-9-.01(7)(a).
- Birmingham / Huntsville health-tech diligence still asks who owns the PC, who bills, and how the MSA is priced.
- Foundry does not drop clients into a plug-in 50-state PC. Multi-state needs a 50-state licensed physician.
Operational checklist: CPOM compliance. Setup path: MSO-PC formation ($15,000). Full map: CPOM 50-state guide. Book a call from the homepage.
Alabama CPOM FAQ
Does Alabama have CPOM?
Alabama is Limited / more flexible than California or New York. There is no B&P § 2400 analogue. Ala. Code § 10A-4-3.01 and r. 540-X-9-.06 still expect licensed control of medicine and clean PC shares. Foundry keeps Alabama as Limited on the CPOM 50-state guide.
Do I still need an MSO-PC in Alabama?
Yes for most venture-backed and multi-state models. The professional entity holds clinical care; the MSO is paid fair market value for non-clinical services.
Does 540-X-9-.06 let a lay LLC control clinical care?
No. 540-X-9-.06(5) requires independent medical judgment that is not subject to the control of an unlicensed person. A startup MSO writing protocols is that control.
Can a foreign medical PC issue shares to unlicensed owners and still practice in Alabama?
Official r. 540-X-9-.01(7)(a) says shareholders who render medical professional services in Alabama shall be Alabama-licensed physicians or osteopaths, with the narrow § 34-24-74 privilege.
How does Foundry help with Alabama CPOM?
MSO-PC formation is $15,000 one-time. An Alabama-licensed physician PC owner is $3,000/mo. Foundry is not a law firm.