CPOM Compliance for Colorado Healthcare Startups
Colorado is more flexible than California on classic CPOM, but C.R.S. § 12-240-138 still limits who may own a medical professional entity, and § 25-3-103.7 is a hospital employment exception, not a Denver startup waiver.
Get a Free CPOM AssessmentThe law in Colorado
Key authorities (official text)
Colorado Medical Board · DPO · C.R.S. Title 12 Article 240 · C.R.S. § 25-3-103.7Colorado Medical Board (DPO) · C.R.S. Title 12 (2024 official PDF) · 2025 Sunset Review, Medical Practice Act · SB 20-136 (amends § 25-3-103.7) · Colorado Secretary of State.
Colorado CPOM is Moderate. The state does not copy California Business & Professions Code § 2400. Official heading of C.R.S. § 12-240-138: Professional service corporations, limited liability companies, and registered limited liability partnerships for the practice of medicine - exceptions - definitions. Current session-law text (quoted in HB26-1249 as the statute being amended) says persons licensed to practice medicine by the board may form professional service corporations under the Colorado Business Corporation Act, articles 101 to 117 of title 7, if the corporations are organized and operated in accordance with § 12-240-138. Denver and Boulder digital-health diligence still wants a physician-owned PC plus a fair-market-value MSA.
Do not cite C.R.S. § 12-240-138 as permission for a lay operating company to practice medicine. Official amendatory text of § 12-240-138(1)(d)(I) (as printed in HB26-1249) says that except as specified in the other (1)(d) subsections, all shareholders of the corporation are individuals licensed by the board to practice medicine in Colorado who at all times own their shares in their own right, except that one or more individuals licensed by the board as a physician assistant may be a shareholder so long as the physician shareholders maintain majority ownership. Shareholders, except for illness, armed-service time, vacation, and leave not to exceed one year, must be actively engaged in the practice of medicine or as a physician assistant in the offices of the corporation. That is a licensed-owner rule, not a California-style blanket ban, and not a digital-health waiver.
HB26-1249 is a 2026 proposal that would add a medical-aesthetic shareholder exception. Treat it as a bill, not current law, until counsel confirms enactment. The corporation still may not do what a licensee could not do under the Medical Practice Act. The 2025 sunset review places the Act at C.R.S. § 12-240-101 et seq. and assigns licensing and enforcement to the Colorado Medical Board inside the Division of Professions and Occupations.
Hospital employment sits in a different statute. Official session-law heading of C.R.S. § 25-3-103.7 is Employment of physicians - when permissible - conditions - definitions. That is a listed-facility employment path. A medical-director title on a Delaware company does not satisfy it. 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 Colorado
Form a Colorado professional service corporation (or the LLC / registered LLP form § 12-240-138 allows) owned by a Colorado-licensed MD or DO, with any PA shares staying minority. 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 § 25-3-103.7 as a substitute for a named physician owner on a venture-backed file.
If you also treat Utah, New Mexico, Wyoming, Kansas, Nebraska, or Arizona patients, Colorado’s Moderate label does not control those states. Start with the CPOM 50-state guide and form for the footprint you actually have. Neighboring Utah, Arizona, and Nevada 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.
| Colorado fact pattern | Typical entity | Why |
|---|---|---|
| Colorado-only, cash-pay, physician already owns the practice | May stay on the existing professional entity | Still document clinical control and FMV admin if an MSO is in the picture |
| Venture-backed or multi-state telehealth that includes Denver / Boulder / Colorado Springs | Colorado professional entity + FMV MSA | Buyers and payers test CPOM compliance the same way they do in strict states |
| Licensed hospital or listed facility employing physicians | May sit inside § 25-3-103.7 | A startup MSO is not that facility. Confirm the statutory list with counsel |
| Colorado plus Utah, Arizona, New Mexico, Wyoming, or Kansas | Form for the neighboring states you treat, then qualify Colorado | Colorado’s Moderate label does not soften Utah Code § 58-67-301 or Arizona CPOM |
Fee-splitting and funds-flow risk
The Medical Practice Act still disciplines licensees for conduct that would be unprofessional if done by the physician in person. A percentage-of-collections management fee is the pattern that looks most like a split of professional fees and like de facto control. Prefer a fixed or FMV-supported admin fee. Pair Colorado CPOM with the fee-risk table on CPOM compliance.
| Colorado pattern | Risk | Safer pattern |
|---|---|---|
| Lay LLC holds itself out as practicing medicine | High: § 12-240-138 ownership overlay | Board-licensed physician (majority) ownership of the professional entity |
| MSO paid % of professional collections | High: diligence + fee-split overlay | Fixed FMV admin fee with a memo |
| Cite § 25-3-103.7 as a startup CPOM waiver | Wrong read: hospital / listed-facility employment | Physician PC + FMV MSA for venture-backed and multi-state files |
| Lay majority equity in the professional entity | High: § 12-240-138(1)(d) | Physician majority; PA shares only as the statute allows |
| Physician PC + FMV MSA + separate books | Base case | Revisit FMV when volume changes |
Board vs buyer / payer checks
The Colorado Medical Board disciplines 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 | Colorado fail signal |
|---|---|---|
| Colorado Medical Board / DPO | Unlicensed practice; professional-entity share ledger vs § 12-240-138 | Figurehead PC owner; MSO writing protocols; lay majority |
| Buyer diligence | Shareholder ledger vs Secretary of State; one claim from payer to PC bank to MSA invoice | MSO lockbox; percentage MSA; no Colorado-licensed owner |
| Payer / credentialing | Claim TIN and group NPI on the physician-owned PC | Marketing MSO TIN on the claim |
What Colorado founders need to know
- Colorado is Moderate, not “no CPOM.” § 12-240-138 is the professional-entity rule; § 25-3-103.7 is the hospital-employment rule.
- Physician assistants may hold shares only while physician shareholders keep majority ownership.
- § 25-3-103.7 does not let a lay company practice medicine or employ physicians as a generic startup path.
- Denver / Boulder 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.
Colorado CPOM FAQ
Does Colorado have CPOM?
Colorado is Moderate / more flexible than California or New York. There is no B&P § 2400 analogue. C.R.S. § 12-240-138 and § 25-3-103.7 still expect licensed control of medicine and clean professional-entity shares. Foundry keeps Colorado as Moderate on the CPOM 50-state guide.
Do I still need an MSO-PC in Colorado?
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 C.R.S. § 25-3-103.7 let a startup MSO employ physicians?
No. § 25-3-103.7 is a listed-facility employment statute. A startup MSO is not that facility.
Can a physician assistant own a Colorado medical PC?
Only as a minority shareholder while physicians keep majority ownership under § 12-240-138(1)(d). It is not a path for lay equity.
How does Foundry help with Colorado CPOM?
MSO-PC formation is $15,000 one-time. A Colorado-licensed physician PC owner is $3,000/mo. Foundry is not a law firm.