How to Open a Clinic Without Being a Doctor: A Guide for Healthcare Investors

Clinic ownership is no longer just for physicians. A growing number of investors and entrepreneurs are recognizing the consistent demand and high margins found in healthcare services. With primary care clinics often generating high revenues, the sector has attracted serious interest from non-medical professionals looking to enter the space.

That interest comes with a catch. Owning and profiting from a healthcare operation without holding a medical license requires careful planning and strict adherence to state laws. You cannot simply buy into a practice and start collecting checks. This guide breaks down how to legally open and operate a clinic as an investor, while ensuring you stay on the right side of regulatory rules and benefit from a proven business model.

Understanding physician ownership laws

Most states prohibit non-physicians from owning or controlling entities that practice medicine. The corporate practice of medicine (CPOM) doctrine protects clinical independence by ensuring that only licensed professionals make medical decisions.

These laws are designed to protect patients by keeping medical judgment in the hands of qualified professionals. For investors, this means you cannot own the clinic entity directly, influence patient care decisions or control clinical staff. Violating these rules can trigger state investigations, fines and forced dissolution of the business arrangement.

Even indirect ownership is restricted. If a non-physician investor is making decisions about hiring clinical staff, setting medical protocols, or influencing treatment plans, regulators may determine that the business is illegally practicing medicine and may be subject to disciplinary action.

Some states apply CPOM rigorously, while others allow limited non‑physician participation. Wherever you operate, assume:

• Clinical decisions must remain 100 % under licensed providers.
• Non‑physicians cannot directly employ or supervise clinicians.
• Fee‑splitting, kickbacks, and self‑referrals are closely scrutinized under federal statutes (Anti‑Kickback Statute, Stark Law) and comparable state laws.

Retain healthcare counsel admitted in every state where you plan to open clinics, and obtain written opinions on CPOM, professional‑entity requirements and ownership caps.

If you want to build a successful healthcare investment model, your first step is understanding that medical decision-making must stay entirely within the licensed practice entity. Your opportunity as an investor lies in how you structure and manage the business support systems around that clinical core.

Structuring a two-entity model: How investors participate legally

If you are not a licensed medical provider, the most effective and legally compliant way to participate in a clinic’s operations is through a two-entity structure. This setup is commonly used in states that enforce corporate practice of medicine rules. It also allows investors to benefit financially from clinic operations without violating ownership restrictions.

Here’s how it works. The first entity is a professional corporation (PC) or professional limited liability company (PLLC) that is owned and operated by a licensed physician. This entity is the one that provides clinical services and bills patients or insurance companies. Because it’s owned entirely by a medical professional, it complies with state laws regarding medical practice ownership.

The second entity is a management services organization (MSO), which is owned by the investor or investment group. This company does not provide any medical services. Instead, it contracts with the physician-owned clinic to provide non-clinical support services such as billing, human resources, marketing, IT and administrative operations.

By separating clinical care from business operations, the two-entity model respects regulatory boundaries while still creating financial value. The MSO can earn revenue by charging a fee for its services under a legally binding agreement. This structure is commonly used by private equity firms and business-minded investors entering healthcare.

To make this model work, the separation of duties must be clear. The physician must retain full control over medical decisions, clinical protocols and all licensed care. Meanwhile, the MSO must focus strictly on the business side of the clinic. If those roles are blurred, it can trigger legal scrutiny or disqualify the arrangement under state law.

Management Services Agreements (MSA): Structuring the revenue stream

The legal and financial connection between the physician-owned entity and the investor’s MSO is the management services agreement (MSA). This contract outlines the terms under which the MSO provides operational support to the clinic. It also serves as the mechanism for transferring revenue from the clinic to the MSO, which is how the investor is compensated.

An MSA can include services such as payroll management, staffing, accounting, IT infrastructure, facility leasing, compliance support and marketing. In exchange, the clinic pays the MSO a management fee. This fee may be based on a fixed amount, a percentage of revenue, or a hybrid model. Regardless of the approach, the agreement must be structured carefully to avoid any implication of fee-splitting or kickbacks, which could violate healthcare fraud and abuse laws.

For instance, the Office of Inspector General (OIG) and the Centers for Medicare & Medicaid Services (CMS) provide guidance on arrangements that could violate the Anti-Kickback Statute or Stark Law. A poorly written MSA that ties fees directly to clinic revenue or profit may be flagged as improper. Investors must ensure that the compensation terms are fair market value for the services provided and are not tied to patient volume or referrals.

Legal counsel experienced in healthcare structuring is essential when drafting these agreements. This is not an area for templates or boilerplate language. A compliant MSA protects both parties and ensures the arrangement withstands regulatory review. (For more insight on building compliant business frameworks, visit our Business Advisory services page.)

The concierge model: A direct-pay option for investor ownership

One way to possibly avoid the corporate practice of medicine barrier is by opening a clinic that operates under a concierge or direct-pay model. This type of clinic does not accept insurance or bill Medicare or Medicaid. Instead, patients pay directly for services, either per visit or through a monthly membership.

Because concierge clinics are not engaged in third-party billing or reimbursed by government programs, they are not always subject to the same strict physician ownership laws. In some states, this model allows non-physician investors to own the clinic outright as long as licensed professionals still handle all clinical care.

This option is appealing for investors who want a simpler ownership model and more direct control over operations. It also offers predictable revenue streams and can foster a high-touch, personalized care experience that appeals to patients. Common concierge services include primary care, wellness consultations, diagnostic testing and chronic care management.

However, even in direct-pay models, it is essential to separate clinical duties from administrative functions. Non-physicians should not be involved in diagnosing patients, supervising clinical staff or making medical decisions. Your role as an investor remains on the business side of the equation.

This model also requires careful financial planning. Without insurance reimbursements, your revenue depends entirely on patient acquisition and retention. That means strong branding, efficient operations and quality service are critical to profitability. For investors considering this route, it is wise to partner with experienced healthcare advisors who understand the direct-pay landscape and compliance standards.

Why private equity firms use the two-entity structure

The two-entity model is not just a workaround for individual investors. It is the go-to structure for private equity firms acquiring medical and dental practices across the country. By creating a management company that supports multiple physician-owned clinics, these firms can scale operations while remaining compliant with state and federal regulations.

Private equity firms bring in capital, technology and operational expertise that can improve clinic performance. The MSO provides centralized services such as billing systems, marketing strategy, hiring and staff management, and real estate operations. This allows physicians to focus solely on patient care, while the business side gains the efficiency and scale benefits of a larger enterprise.

This model also provides an exit strategy for physicians. In many transactions, the investor purchases the non-clinical assets of the practice and enters into an MSA. The physician retains ownership of the clinic but receives compensation for transferring operations, with potential for ongoing earnings based on performance.

Private equity investment in healthcare has surged in recent years, particularly in dental, dermatology and primary care sectors. These firms are drawn to the stability of healthcare demand and the fragmented nature of the market, which creates acquisition opportunities.

However, the legal structure must be precise. Any overreach into clinical decision-making can invalidate the arrangement and trigger regulatory action. That is why these firms rely on legal and accounting advisors with deep healthcare experience. Our Healthcare Advisory Team works with clients to ensure every aspect of their structure complies with state and federal requirements.

Legal structuring is everything: Avoid costly mistakes

When it comes to clinic ownership for non-physicians, proper legal structuring is a requirement. Without the correct setup investors can face severe consequences, including regulatory fines, enforcement actions or complete loss of investment if a state determines that the arrangement violates its corporate practice laws.

The most common mistake is failing to maintain a clear separation between the physician-owned entity and the investor-owned management company. If clinical decisions appear to be influenced by the MSO, or if the compensation arrangement raises concerns under federal fraud and abuse laws, the entire business can be at risk.

For example, an investor may be tempted to base management fees on a percentage of clinic revenue. While this is common in other industries, it can raise serious red flags in healthcare, especially if the payments are tied to patient volume or referrals. Such arrangements may violate the Anti-Kickback Statute or the Stark Law, both of which carry substantial penalties for non-compliance.

To ensure your structure holds up under scrutiny, work with professionals who understand the unique rules of healthcare business models. This includes legal counsel for regulatory compliance, CPAs familiar with healthcare taxation and advisors who have experience with MSOs and physician contracts.

The James Moore team of healthcare-focused professionals helps clients build business models that are legally sound and financially sustainable. We guide you through every step of the process, from initial planning to ongoing compliance.

Investor-owned clinics: Legal structures that work

Opening a clinic without being a doctor is entirely possible, but only if you do it the right way. Understanding state-specific rules, creating a compliant two-entity model and implementing a carefully structured management agreement are key to building a sustainable and legal investment.

Whether you’re considering a direct-pay concierge model or building an MSO to support multiple clinics, you’ll need the right advisors at your side.

Contact a James Moore professional to find out how we help investors build high-performing, fully compliant clinic operations. We’ll make sure your investment delivers results without crossing legal lines.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.