Here’s What You Need to Know About CPOM Laws

If you're a healthcare practitioner considering partnering with a non-physician or seeking investment backing, it’s essential to understand Corporate Practice of Medicine (CPOM) laws. These regulations are in place to ensure that medical decisions remain under the control of licensed professionals, free from influence by business interests.

What Are CPOM Laws?

CPOM laws prevent non-physicians from owning or controlling medical practices, leaving medical decision-making solely in the hands of healthcare professionals. The specifics of these laws vary from state to state, so it’s important to know how they could affect your business, especially if you are planning to operate in multiple states.

• Strict CPOM States: States like Texas, California, and New York have strict CPOM laws, meaning non-physicians cannot own or control medical practices.

• Flexible States: States like Florida are more lenient, allowing non-physicians to own or have financial interest in practices, as long as licensed physicians control medical decisions.

Why CPOM Matters for Multi-State Practices and Healthcare Platforms

If you're thinking of expanding your practice into other states or launching a healthcare platform, understanding CPOM laws is crucial. Failure to comply in strict CPOM states can lead to fines, penalties, and closing of the practice.

Common Scenarios

• Non-Physician Investors: In strict CPOM states, non-physician investors cannot own medical practices. However, they can still be involved through a Management Services Organization (MSO), which manages the non-clinical, business operations such as staffing, billing, and marketing, while licensed physicians retain full control over medical decisions.

This arrangement operates through a contract between the MSO and the medical practice, typically called a Management Services Agreement (MSA). The MSA outlines the specific services the MSO will provide, such as handling day-to-day operations, and establishes the payment framework for the MSO’s services. Importantly, the payment arrangement must be based on fair market value to avoid violations of anti-kickback statutes and Stark Law, ensuring the arrangement is compliant with federal and state regulations.

This structure is commonly used to comply with CPOM laws, allowing non-physicians to invest in healthcare practices.

• Multi-State Practices: If you intend to expand across state lines, CPOM laws can vary dramatically. What works in Florida may pose legal risks in California.  As such, if your business structure involves non-healthcare professionals, you  will need to adapt accordingly.

Action Steps for Partnering with Non-Physicians or Expanding to Other States

• Know Your State’s Laws: Research the CPOM laws in every state where you intend to operate.

• Use an MSO Model: In strict CPOM states, structure your practice using an MSO.

• Consult an Experienced Healthcare Lawyer: This is one area you don’t want to skimp on. It’s essential to consult a lawyer with specific experience in setting up MSOs and structuring partnerships to comply with CPOM laws in the states where you intend to practice. This is not an area where you want to cut corners.  

To Wrap Up

If you plan on partnering with a non-physician, CPOM laws can have a major impact on how you structure your practice. Getting the right legal advice from an attorney experienced in setting up MSOs and navigating CPOM laws is key to protecting your business and ensuring compliance.