Corporate Practice of Medicine, or CPOM for short, is a legal doctrine that refers to who is authorized to own and operate a medical practice and, specifically, to employ physicians. Most states regulate CPOM in one way or another, on the rationale that physicians should be able to practice medicine free of influence that may be wielded by an employer who is not licensed. As a practical matter, CPOM regulations also usually increase the importance and bargaining power of physicians in business arrangements.
Every state sets its own policy and rules regarding CPOM, but they fall into three broad categories. First, some states have very strict CPOM rules and only allow physicians to be employed by entities that are 100% owned and controlled by other licensed physicians. Second, some states have few or no CPOM restrictions and any entity can employ physicians, regardless of the licensure of ownership or management. Third, most states fall somewhere in the middle. They may require that the entity that employs physicians have a certain percentage of physician ownership, say 51%, while the remainder can be owned by nonphysicians. They may allow multiple types of licensed practitioners to join together in one practice, for example, physicians and podiatrists owning a practice that practices both medicine and podiatry. They may have exceptions that allow certain types of licensed healthcare facilities to employ physicians.
These complex regulations can create a need for complex business arrangements to maintain compliance. One of the most common is the management services organization (MSO) model. Under an MSO model, the medical practice is owned by licensed practitioners as required by the CPOM rules in the particular state. The medical practice then contracts with the MSO, which is generally owned by un-licensed investors, to provide certain management, administrative, and other services in exchange for a management fee. In addition to the complex business concerns, these arrangements can raise numerous legal and regulatory compliance concerns, including control over the practice and medical decision making, influence of non-licensed investors, control over personnel decisions, fee-splitting concerns, fraud waste and abuse concerns regarding how the management fee is calculated and any other revenue streams or referrals between the entities, and many more. The MSO model, especially variations backed by private equity, has recently come under scrutiny by professional groups and government entities raising these and other issues. Physician practices contemplating such an arrangement should be mindful of both the reasons for such an arrangement and the compliance concerns, CPOM and otherwise, regarding how the arrangement is structured.
For over 35 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters, and our attorneys can assist providers and suppliers in understanding new developments in healthcare law and regulation. If you or your healthcare entity has any questions pertaining to the corporate practice of medicine or healthcare compliance, please contact an experienced healthcare attorney at 248-544-0888 or wapc@wachler.com.