CPOM Compliance for Kentucky Healthcare Startups
Kentucky is more flexible than California on classic CPOM, but KRS 311.560 still requires a license before anyone practices medicine or occupies an office for practice, and Chapter 274 still restricts who may own the professional service corporation.
Get a Free CPOM AssessmentThe law in Kentucky
Key authorities (official text)
Kentucky Board of Medical Licensure · KRS 311.530 to 311.620 · Chapter 274Kentucky Board of Medical Licensure · Kentucky Medical Practice Act · KRS 311.560 · KRS 311.550 · KRS 311.595 · KRS 311.597 · KRS 274.005 · KRS 274.015 · KRS 274.017.
Kentucky CPOM is Nuanced. The state does not copy California Business & Professions Code § 2400. Official text of KRS 311.560(1): except as provided in subsection (2), no person shall engage or attempt to engage in the practice of medicine or osteopathy within this state, or open, maintain, or occupy an office or place of business within this state for engaging in practice, or in any manner announce or express a readiness to engage in practice within this state, unless the person holds a valid and effective license or permit issued by the board. KRS 311.550(10) defines practice of medicine or osteopathy as the diagnosis, treatment, or correction of any and all human conditions, ailments, diseases, injuries, or infirmities by any and all means, methods, devices, or instrumentalities. Louisville and Lexington digital-health diligence still wants a physician-owned PC plus a fair-market-value MSA for venture-backed and multi-state models.
Do not treat hospital employment of physicians as Kentucky’s CPOM prohibition, and do not treat it as a startup waiver. KRS 311.560 is a license-to-practice rule, including occupying an office for practice. A medical-director title on a Delaware company does not satisfy that license. The Kentucky Board of Medical Licensure sits under KRS 311.530 and disciplines licensees under KRS 311.595. KRS 311.595(9) covers dishonorable, unethical, or unprofessional conduct of a character likely to deceive, defraud, or harm the public. KRS 311.597 defines that phrase to include departures from acceptable and prevailing medical practice in Kentucky and from AMA or AOA ethics. Professional service corporations sit in KRS Chapter 274. KRS 274.015(1) lets one or more licensed individuals form a professional service corporation; the articles must state that each of the incorporators, shareholders, not less than one-half of the directors, and each of the officers other than secretary and treasurer is a qualified person. KRS 274.017(1) limits issuance and transfer of shares to licensed natural persons, certain qualified partnerships, professional LLCs, and professional service corporations. KRS 274.017(2) makes a violating issuance, transfer, or pledge void. 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 Kentucky
Form a Kentucky professional service corporation under Chapter 274 owned by a Kentucky-licensed MD or DO. 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 hospital-employment story stretched onto a venture-backed MSO.
If you also treat Ohio, Indiana, Tennessee, Virginia, or Missouri patients, Kentucky’s Nuanced label does not control those states. Start with the CPOM 50-state guide and form for the footprint you actually have. Neighboring Ohio, Indiana, Tennessee, Virginia, and Missouri 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.
| Kentucky fact pattern | Typical entity | Why |
|---|---|---|
| Kentucky-only, cash-pay, physician already owns the practice | May stay on the existing professional service corporation | Still document clinical control and FMV admin if an MSO is in the picture |
| Venture-backed or multi-state telehealth that includes Louisville / Lexington | Kentucky professional service corporation + FMV MSA | Buyers and payers test CPOM compliance the same way they do in strict states |
| Hospital-employed physicians | May sit in a hospital employment file | That is a hospital fact pattern. A startup MSO is not a hospital |
| Kentucky plus Ohio, Indiana, Tennessee, Virginia, or Missouri | Form for the strict / moderate / limited states, then qualify Kentucky | Kentucky’s Nuanced label does not soften ORC 4731, IC 25-22.5, or Tenn. Code Ann. § 63-6-204 |
Fee-splitting and funds-flow risk
KRS 311.595(9) and KRS 311.597 are the Board of Medical Licensure overlay. 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 Kentucky CPOM with the fee-risk table on CPOM compliance.
| Kentucky pattern | Risk | Safer pattern |
|---|---|---|
| Lay LLC holds itself out as practicing medicine or occupies an office for practice | High: KRS 311.560 license overlay | Licensed-professional service corporation under Chapter 274 |
| MSO paid % of professional collections | High: KRS 311.595(9) / 311.597 + diligence overlay | Fixed FMV admin fee with a memo |
| Cite hospital employment as a startup CPOM waiver | Wrong fact pattern | Hospital facts only; otherwise physician PC + FMV MSA |
| Lay equity in the professional service corporation | High: KRS 274.017 (void shares) | Licensed-physician ownership of the PC |
| Physician PC + FMV MSA + separate books | Base case | Revisit FMV when volume changes |
Board of Medical Licensure vs buyer / payer checks
The Board of Medical Licensure 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 | Kentucky fail signal |
|---|---|---|
| KBML | Unlicensed practice (KRS 311.560); unprofessional conduct (KRS 311.595 / 311.597) | Figurehead PC owner; MSO writing protocols; unlicensed office for practice |
| Buyer diligence | Shareholder ledger vs Secretary of State; one claim from payer to PC bank to MSA invoice | MSO lockbox; percentage MSA; no Kentucky-licensed owner |
| Payer / credentialing | Claim TIN and group NPI on the physician-owned PC | Marketing MSO TIN on the claim |
What Kentucky founders need to know
- Kentucky is Nuanced, not “no CPOM.” KRS 311.560 is a license rule, including occupying an office for practice. Chapter 274 is the ownership rule.
- Hospital employment of physicians is a common Kentucky fact. It is not a digital-health waiver.
- KRS 274.017 voids professional-service-corporation shares issued or transferred outside the qualified-person limits.
- Louisville / Lexington 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.
Kentucky CPOM FAQ
Does Kentucky have strict CPOM?
Kentucky is Nuanced / more flexible than California or New York. There is no B&P § 2400 analogue. KRS 311.560, Chapter 274, and KRS 311.595(9) still expect licensed control of medicine and clean fees. Foundry keeps Kentucky as Nuanced on the CPOM 50-state guide.
Do I still need an MSO-PC in Kentucky?
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 hospital employment mean Kentucky has no CPOM?
No. KRS 311.560 licenses people. Chapter 274 still exists. A startup MSO is not a hospital.
How does Kentucky treat fee-splitting?
KRS 311.595(9) and KRS 311.597 are the disciplinary overlay. A percentage-of-collections MSA is the high-risk pattern. Prefer a fixed FMV admin fee.
How does Foundry help with Kentucky CPOM?
MSO-PC formation is $15,000 one-time. A Kentucky-licensed physician PC owner is $3,000/mo. Foundry is not a law firm.