CPOM Compliance for Illinois Healthcare Startups
Illinois is a classic CPOM state. United Medical Service still frames the doctrine. Berlin lets licensed hospitals employ physicians; it does not let a Delaware LLC practice medicine on Illinois patients.
Get a Free CPOM AssessmentThe law in Illinois
Key authorities (official text)
IDFPR · Medical Practice Act of 1987 · Medical Corporation ActIllinois Department of Financial and Professional Regulation · 225 ILCS 60 (Medical Practice Act) · 805 ILCS 15 (Medical Corporation Act) · 805 ILCS 10 (Professional Service Corporation Act).
Illinois CPOM is a strict, case-and-statute doctrine. People ex rel. State Board of Health v. United Medical Service, 362 Ill. 442 (1936), is the classic bar on a corporation practicing medicine. The Medical Practice Act of 1987 (225 ILCS 60) still licenses physicians, not lay companies. Berlin v. Sarah Bush Lincoln Health Center, 179 Ill. 2d 1 (1997), carved a licensed-hospital employment exception, not a general MSO exception. Fee-splitting sits in 225 ILCS 60/22.2. A physician-owned PC plus a fair-market-value MSA is the structure Illinois diligence still expects.
Founders quote Berlin as if every operating company may employ physicians. Read the case. The employer was a licensed hospital. IDFPR does not treat a venture-backed Delaware LLC, a PE roll-up MSO, or a cash-pay telehealth brand as that hospital. If you treat Illinois patients, put clinical ownership in a physician-owned professional entity formed under the Medical Corporation Act or the Professional Service Corporation Act.
Behavioral health, telehealth, and NP-led clinics serving Illinois patients sit under the same ownership logic. Collaboration agreements do not replace PC ownership. See collaborating physician vs physician PC owner.
Typical PC / MSO structure in Illinois
Form an Illinois medical corporation or professional corporation owned by an Illinois-licensed MD or DO. The MSO provides non-clinical services under a written MSA at fair market value. Clinical revenue lands in the PC. Clinician contracts and medical records sit with the PC. Foundry forms that structure ($15,000) and matches a friendly PC owner ($3,000/mo). Not a rented Super PC.
Chicago PE diligence is unforgiving on de facto control: if the MSO can fire the physician for clinical reasons, set coding templates, or sweep collections, buyers treat the split as cosmetic. See the operational checklist on CPOM compliance.
Fee-splitting note
225 ILCS 60/22.2 addresses fee-splitting by physicians. A management fee that tracks clinical collections looks like a share of professional fees. Prefer a fixed or FMV-supported admin fee. Do not pay the physician owner a volume-tied stipend. Keep NP/PA collaboration fees honest and separate from ownership compensation.
| Illinois pattern | Risk | Safer pattern |
|---|---|---|
| Relying on Berlin for a startup LLC | High: exception is licensed hospitals | Physician-owned medical corporation + MSA |
| MSO paid % of professional collections | High: 225 ILCS 60/22.2 overlay | Fixed FMV admin fee with a memo |
| Physician PC + separate EIN/bank + FMV MSA | Base case | Revisit FMV when volume changes |
What Illinois founders need to know
- Illinois prohibits lay corporations from practicing medicine. United Medical Service remains the starting cite.
- Berlin is a hospital-employment exception. Quote it only if you are actually that kind of licensed facility.
- IDFPR licenses and disciplines physicians. Ownership form and fee-splitting both show up in reviews.
- Telehealth companies serving Illinois patients still need a physician-owned clinical entity, not a plug-in Super PC.
- Foundry scopes formation to Illinois plus the other states you treat. Multi-state needs a 50-state licensed physician, not a rented national PC.
Operational checklist: CPOM compliance. Setup path: MSO-PC structure. Full map: CPOM 50-state guide.
Illinois CPOM FAQ
Does Illinois have strict CPOM?
Yes. Illinois is a classic CPOM state. United Medical Service (1936) and the Medical Practice Act of 1987 still expect licensed physicians, not lay corporations, to practice medicine. Berlin (1997) is a licensed-hospital employment exception, not a startup loophole.
Does Berlin mean my Delaware LLC can employ Illinois physicians?
No. Berlin allowed a licensed hospital to employ physicians. A venture-backed operating company is not that hospital. Digital-health companies still use a physician-owned PC plus FMV MSA.
How does Illinois treat fee-splitting?
225 ILCS 60/22.2 restricts fee-splitting. A percentage-of-collections MSA is the high-risk pattern. Prefer a fixed FMV admin fee and keep clinical collections in the PC.
How does Foundry help with Illinois CPOM?
MSO-PC formation is $15,000 one-time. An Illinois-licensed physician PC owner is $3,000/mo. Foundry is not a law firm.