CPOM Compliance for California Healthcare Startups
California has some of the strictest Corporate Practice of Medicine laws in the country. Get your Friendly PC structure right from day one.
Get a Free CPOM AssessmentThe Law in California
Key authorities (official text)
Business & Professions Code § 2400Medical Board of California · B&P § 650 (fee-splitting) · Moscone-Knox Professional Corporation Act (Corp. Code § 13400 et seq.) · Corp. Code § 13401.5 (who may be a shareholder of a medical corporation) · SB 351 · AB 1415.
California CPOM is a strict Corporate Practice of Medicine regime. B&P § 2400 generally bars corporations from practicing medicine. Clinical care belongs in a physician-owned professional corporation; the MSO is paid fair market value for non-clinical work. SB 351 and AB 1415 (effective 1 January 2026) raise the bar on PE/MSO control and transaction notice.
California prohibits corporations from employing physicians or controlling medical practices. The Medical Board of California enforces these rules; violations can include license discipline, civil penalties, and voided contracts. Official statute: B&P § 2400.
Business and Professions Code § 2400 is the core CPOM statute: corporations generally may not practice medicine. Professional medical corporations must be physician-owned, and clinical judgment has to stay with licensed clinicians, not with a lay-owned operating company.
Corporations Code § 13401.5 is the Moscone-Knox shareholder roster: it lists which licensed professionals may own shares of a medical corporation. A lay founder is not on that list. Pair Corp. Code § 13401.5 with B&P § 2400: ownership roster plus corporate-practice bar. Official text: California Legislature.
SB 351 (and related 2025–2026 MSO scrutiny such as AB 1415) tightens expectations around who controls hiring, coding, protocols, and clinical policies. Founders should assume regulators look past letterhead ownership to de facto control. Pair a California-licensed friendly PC owner with a clean MSA at fair market value.
What California Founders Need to Know
- Corporations cannot employ physicians to practice medicine
- Non-physician-owned entities cannot control clinical decisions
- The MSO/PC structure is the standard compliant approach
- California requires a physician to own at least 51% of any PC
- Telehealth companies operating in CA must comply even if headquartered elsewhere
How Foundry PC Helps California Startups
Foundry PC specializes in matching healthcare founders with a Friendly PC Owner, a licensed physician who can own the Professional Corporation in California, enabling your company to operate in full compliance with state CPOM laws. We handle the matching, the MSO-PC structure, and ongoing compliance so you can focus on building.
Book a Free California CPOM AssessmentHow an MSO-PC works in California
A California professional corporation must be physician-owned. Your operating company sits next to it as an MSO. The MSA has to leave clinical decisions with the PC. Stock-transfer restrictions and a successor physician keep the entity alive if the owner leaves. Formation is typically days once the physician match is done. See MSO-PC formation and friendly PC owner matching.
B&P 2400, SB 351, and AB 1415 in practice
Under B&P § 2400, California is a classic strict CPOM state. SB 351 and AB 1415-era scrutiny raise the bar on MSO arrangements: stock-transfer restrictions, succession, and management fees must leave clinical control with the PC. Do not treat a medical-director title as a substitute for physician PC ownership.
- Physician ownership of the California PC (typically majority physician ownership of a professional medical corporation)
- MSA limited to non-clinical services at fair market value
- Separate banking, EIN, and clinical policies owned by the PC
- No lay veto over clinical hiring or protocols
See also CPOM compliance, MSO-PC structure, MSO-PC formation ($15,000), and Oregon SB 951. This page is general information, not legal advice.
Fee-splitting and enforcement risk
B&P § 650 is California’s referral fee-splitting statute. It sits next to § 2400, not instead of it. A percentage-of-collections MSA is the pattern that looks most like a split of professional fees. Prefer a fixed FMV admin fee. The Medical Board can discipline the licensee; buyers treat a cosmetic PC as a rebuild. Pair this page with the fee-risk table on CPOM compliance.
| California pattern | Risk | Safer pattern |
|---|---|---|
| Lay LLC practices medicine | High: B&P § 2400 | Physician-owned PC (Moscone-Knox) |
| MSO paid % of professional collections | High: B&P § 650 overlay | Fixed FMV admin fee with a memo |
| MSO any-reason clinical termination (SB 351) | High: de facto control | Clinical hiring and protocols stay in the PC |
| Physician PC + FMV MSA + separate books | Base case | Plan AB 1415 notice before a sale |
SB 351 and AB 1415: official session bills
Read the enrolled session text, not a vendor summary: SB 351 targets private-equity / hedge-fund interference with physician or dentist professional judgment and certain control rights. AB 1415 expands healthcare transaction notice to more MSO and investor deals. Both are 2025–26 session measures with a 1 January 2026 effective date. Strip “MSO may replace the physician for any reason,” keep coding and clinical hiring in the PC, and plan notice before a sale. Foundry is not a law firm; counsel confirms how the bills apply to your facts.
California CPOM FAQ
What is California CPOM?
B&P § 2400 generally bars corporations from practicing medicine. Clinical care runs through a physician-owned professional corporation.
What do SB 351 and AB 1415 change?
SB 351 tightens PE/MSO interference with professional judgment. AB 1415 expands transaction notice. Effective 1 January 2026. Confirm with counsel.
How does Foundry help?
MSO-PC formation is $15,000 one-time. A California-licensed physician PC owner is $3,000/mo. See friendly PC healthcare.
What is the enforcement risk if California CPOM is wrong?
The Medical Board of California can discipline the licensee. Contracts that put a lay company in the practice of medicine can be treated as void. Buyers rebuild the structure before close. Papers without funds flow are not CPOM compliance.
How does California treat fee-splitting?
B&P § 650 restricts referral fee-splitting. A percentage-of-collections MSA is the high-risk pattern. Prefer a fixed FMV admin fee.