Medical practices of all types are subjected to various regulations from business formation to HIPAA compliance, and everything in between. Depending on the circumstances, these rulings may come at a state or federal level.
It is important that practices are informed of these regulations from the start of their business operations to ensure they are not engaging in fraud or other illegal activities. Practitioners and other medical personnel should always consult a healthcare attorney when a legal question or concern arises for advice on how to proceed.
With the rise of private equity investments, medical practices should be mindful of their business structure and the role those without a medical license are playing in it. The corporate practice of medicine doctrine (CPOM) is a complex ruling that can easily result in legal problems if not followed accordingly.
The corporate practice of medicine doctrine is a medical practice act aimed at protecting patients from deceptive behavior that might come with the private ownership of medical corporations by non-licensed individuals including:
● The commercialization of the practice of medicine
● The imbalance between patient obligations and stakeholder obligations
● Interference of a physician’s medical judgment due to outside influences
Typically, a corporation or business’ main goal is to make a profit. On the other hand, the practice of medicine prioritizes patient care. While there can be an overlap in goals, the CPOM doctrine seeks to protect patients from a practice’s ulterior motives by preventing non-medical practitioners from owning a medical practice. Thus, a medical practice is not supposed to be a business that employs medical professionals but rather owned by mostly practitioners themselves.
As a general breakdown, the following states follow the CPOM:
● New Jersey
● New York
● North Carolina
● North Dakota
● Rhode Island
● South Carolina
● South Dakota
● West Virginia
The American Health Law Association (AHLA) Corporate Practice of Medicine survey more thoroughly examines the variation of practice restrictions by each state as they relate to behavioral health providers, chiropractors, and other types of health care professionals.
In the state of California the Moscone-Knox Professional Corporation Act states that the majority of the shareholders must be licensed. This means that only 49% of those who own a practice can be non-licensed individuals. Other state regulations also determine the composition of ownership in medical organizations such as medical spas.
Since California is a state that follows the corporate practice of medicine doctrine, those thinking of practicing medicine or even opening their own practice must be mindful of the roles non-licensed individuals play in the corporation.
Fenton Law Group has a practice focused on the transactional legal issues that arise in the medical industry including, the CPOM doctrine. The team of experienced and proactive healthcare attorneys will work with your practice to make sure it can receive the funding needed without jeopardizing the organization.