CPOM Compliance for Tennessee Healthcare Startups
Tennessee is more flexible than California or New York on classic CPOM, but Tenn. Code Ann. § 63-6-204 still limits what an employing entity may do with diagnosis, treatment, and referral, and Title 48 chapter 101 still governs who owns the professional corporation.
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Key authorities (official text)
Tennessee Board of Medical Examiners · Tenn. Code Ann. § 63-6-204 · Title 48 ch. 101 · Rule 0880-02-.20Tennessee Board of Medical Examiners · Board of Medical Examiners rules (Secretary of State compilation) · Tenn. Comp. R. & Regs. 0880-02-.20 (Medical Professional Corporations) · Tenn. Code Ann. § 63-6-201 / § 63-6-204 · Tenn. Code Ann. Title 48, Chapter 101, Part 6 (Professional Corporation Act).
Tennessee CPOM is Moderate. The state does not copy California Business & Professions Code § 2400. Tenn. Code Ann. § 63-6-204 defines the practice of medicine and lists who may employ physicians, including a physicians’ professional corporation registered under Title 48, chapter 101. Subsection (f) limits the authority an “employing entity” may exercise over diagnosis, treatment, and referral. Board Rule 0880-02-.20 is how the Board of Medical Examiners operationalizes medical professional corporations. Nashville digital-health diligence still wants a physician-owned PC plus a fair-market-value MSA so ownership, funds flow, and the employing-entity limits have one answer.
Do not treat § 63-6-204 as a blanket “corporations cannot practice medicine” statute in the California sense, and do not treat it as permission for a lay LLC to employ clinicians. The section is a definition plus a list of who may employ. Hospitals, certain nonprofits, faculty practice plans, and physicians’ professional corporations sit on that list. A venture-backed MSO does not. Stretching the hospital or faculty-practice exception to a telehealth startup is the common overclaim. Confirm current text with counsel. The Tennessee Code Commission publishes the official statute compilation, and the Secretary of State publishes the official Board of Medical Examiners rules.
Tennessee is not permission for a lay LLC to hold the practice of medicine. Chapter 63-6 licenses people, not operating companies. A medical-director title on a Delaware company does not satisfy § 63-6-204. The Board of Medical Examiners docket is heavier on individual physician misconduct than on proactive MSO audits. That is an enforcement posture, not a structural waiver. Collaboration for NPs/PAs is a different job from owning the Professional Corporation. See collaborating physician vs physician PC owner. Longer narrative: Tennessee CPOM blog guide.
Typical PC / MSO structure in Tennessee
Form a Tennessee professional corporation under Title 48, Chapter 101, Part 6, owned by a Tennessee-licensed MD or DO. Rule 0880-02-.20 says medical professional corporations are governed by that part except as the rule provides, and it points physician owners back to the § 63-6-204(f)(1)(A)–(C) employing-entity limits on diagnosis, treatment, and referral. 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.
If you also treat California, New York, New Jersey, or Indiana patients, Tennessee’s Moderate label does not control those states. Start with the CPOM 50-state guide and form for the footprint you actually have.
When you still need a PC vs only an MSO
Use this as an operator rule, not a filing opinion. Confirm with counsel.
| Tennessee fact pattern | Typical entity | Why |
|---|---|---|
| Tennessee-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 Tennessee | Tennessee-aware physician PC + FMV MSA | Buyers and payers test CPOM compliance the same way they do in strict states |
| Tennessee plus California, New York, or New Jersey | Form for the strict states, then qualify Tennessee | Tennessee’s Moderate label does not soften B&P 2400, BCL § 1507, or N.J.A.C. 13:35-6.16 |
Fee-splitting and the employing-entity limits
§ 63-6-204(f) is Tennessee’s employing-entity overlay: diagnosis, treatment, and referral stay with the physician beyond the narrow (f)(1)(A)–(C) list. Board Rule 0880-02-.20 repeats that limit for medical professional corporations. A percentage-of-collections management fee is the pattern that looks most like a split of professional fees and like extra-statutory control of those decisions. Prefer a fixed or FMV-supported admin fee. Pair this page with the fee-risk table on CPOM compliance.
| Tennessee pattern | Risk | Safer pattern |
|---|---|---|
| Lay LLC owns the clinical practice | High for diligence even if commentators call Tennessee Moderate | Licensed-professional PC under Title 48 ch. 101 |
| MSO paid % of professional collections | High: looks like extra-statutory control of diagnosis / referral | Fixed FMV admin fee with a memo |
| Stretching the hospital / faculty-practice exception to a startup | High: § 63-6-204 lists who may employ; an MSO is not on that list | Physician PC + FMV MSA; do not analogize to a licensed hospital |
| Physician PC + FMV MSA + separate books | Base case | Revisit FMV when volume changes |
Board of Medical Examiners vs buyer / payer checks
The Board of Medical Examiners disciplines licensees (see Tenn. Code Ann. § 63-6-214 in the rule’s authority line). 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 | Tennessee fail signal |
|---|---|---|
| Tennessee Board of Medical Examiners | Employing-entity overreach under § 63-6-204(f); Rule 0880-02-.20 MPC limits | Figurehead PC owner; MSO writing protocols or referral rules |
| Buyer diligence | Shareholder ledger vs Secretary of State; one claim from payer to PC bank to MSA invoice | MSO lockbox; percentage MSA; no Tennessee-licensed owner |
| Payer / credentialing | Claim TIN and group NPI on the physician-owned PC | Marketing MSO TIN on the claim |
What Tennessee founders need to know
- Tennessee is Moderate, not “no CPOM.” Licensed physicians still control diagnosis, treatment, and referral under § 63-6-204(f).
- § 63-6-204 is a definition plus an employment list. Do not cite it as a California-style ban, and do not stretch hospital / faculty-practice exceptions to a startup MSO.
- Rule 0880-02-.20 plus Title 48 chapter 101 are the professional-corporation wiring.
- Nashville 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.
Tennessee CPOM FAQ
Does Tennessee have strict CPOM?
Tennessee is Moderate / more flexible than California or New York. There is no B&P § 2400 analogue. § 63-6-204, Title 48 chapter 101, and Rule 0880-02-.20 still expect licensed control of medicine and clean fees. Foundry keeps Tennessee as Moderate on the CPOM 50-state guide.
Do I still need an MSO-PC in Tennessee?
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. Hospital and faculty-practice exceptions do not cover a digital-health MSO.
How does Tennessee treat fee-splitting?
§ 63-6-204(f) is the employing-entity overlay. A percentage-of-collections MSA is the high-risk pattern. Prefer a fixed FMV admin fee.
How does Foundry help with Tennessee CPOM?
MSO-PC formation is $15,000 one-time. A Tennessee-licensed physician PC owner is $3,000/mo. Foundry is not a law firm.