Can a Non-Physician Own a Medical Practice? Understanding the CPOM Doctrine and Strategic Workarounds

Let’s say you’re a healthcare entrepreneur. You see a chance to acquire a growing physician group. The numbers are promising, the community impact is meaningful and the potential to scale is obvious. But then your legal team hits pause:

You’re not a licensed physician. Can you even own this practice?

It’s a common question with a complicated answer. In many states, the corporate practice of medicine (CPOM) doctrine places strict limits on non-physician ownership of medical practices. That means investors, private equity firms and even established healthcare organizations must walk a fine line between opportunity and compliance.

Understanding CPOM isn’t just about knowing what’s legal. It’s about protecting the clinical integrity of care while building scalable, profitable partnerships. And if you’re not careful, one wrong move could lead to significant penalties or the unraveling of your business structure.

So can a non-physician own a medical practice? The short answer is not directly (in most states). But there are compliant, strategic ways to get involved if you know how to structure it right.

 

 

The Corporate Practice of Medicine (CPOM) doctrine explained

The CPOM doctrine is rooted in the belief that medical decisions should always be made by licensed professionals and free from business or financial pressure. That’s why many states have laws preventing non-physicians from owning or controlling a medical practice.

In CPOM states, non-physicians are generally prohibited from:

• Employing physicians to provide clinical services
• Influencing or controlling clinical decision-making
• Sharing in the profits of a medical practice that arise from clinical care

The idea is to safeguard the patient-physician relationship. When ownership and profit motives enter the clinical sphere, states worry that care could suffer. So they draw a firm line between administrative control and clinical autonomy.

But here’s where it gets tricky: not all states enforce CPOM laws. Some states, like Florida and Alabama, allow more flexibility in ownership structures. Others, like California, New York and Texas, apply CPOM principles more strictly.

There’s no single federal standard. That means your ability to own or invest in a medical practice depends almost entirely on the laws of the state in which the practice operates.

States that enforce CPOM doctrines tend to look beyond surface ownership. They evaluate who controls the decisions, who holds the contracts and how compensation is structured. Even if you avoid equity on paper, a management agreement that crosses the line into clinical influence can still trigger enforcement.

CPOM vs Non-CPOM states: Where ownership is (and isn’t) allowed

If you operate in healthcare, one of the first questions you should ask before investing in or acquiring a practice is this: Does my state prohibit non-physician ownership?

States fall into two broad categories when it comes to CPOM enforcement:

1. CPOM states: These states actively restrict or prohibit non-physicians from owning or controlling medical practices. This includes states like California, New York, Texas and New Jersey. In these jurisdictions, only licensed physicians (or groups of physicians) can legally own the entity that employs other doctors or provides clinical services.
2. Non-CPOM states: These states take a more permissive approach. Florida, for example, does not have strict CPOM laws on the books. In these states, it may be possible for a non-physician (including a corporate entity) to own a medical practice outright or with fewer restrictions. That said, non-physician owners still cannot interfere with clinical decision-making, which remains the domain of licensed professionals.

The complexity lies in how states interpret “ownership.” Many CPOM states go beyond shareholder status. They consider who holds decision-making power, who controls bank accounts, who signs off on staffing and even who owns the patient records. A non-physician with too much influence, even without equity, may still be in violation of CPOM restrictions.

For instance, California courts have ruled that non-physician involvement in pricing strategies or compensation structures can cross the line. New York applies a similar stance, often focusing on functional control rather than just legal documents.

Meanwhile, in states like Florida, the line is softer. A non-physician there can have a more active role, especially if they operate through a separate legal entity and allow physicians to retain control over clinical care.

Still, the boundaries aren’t always black and white. Even in more permissive states, regulatory agencies often step in if patient care appears influenced by business motives. That’s why the right structure matters. And in CPOM states, the most commonly used model is the MSO-PC structure.

What non-physicians can do: MSOs and the PC model

Even in states with CPOM laws, non-physicians aren’t locked out of healthcare ownership entirely. They simply need to take a different path. The most effective approach is the management services organization (MSO) model, paired with a physician-owned professional corporation (PC).

Here’s how it works:

• The PC is owned and operated by licensed physicians. This entity is responsible for delivering medical services and employing clinicians. All clinical decisions, patient care and medical protocols fall under its control.
• The MSO is a separate entity owned by non-physicians. It provides administrative and business support services to the PC. This can include billing, IT, marketing, office space, human resources, equipment leasing and more.

The MSO enters into a management agreement with the PC. In exchange for a fixed fee or percentage of revenue, it handles the day-to-day operations that don’t involve clinical decision-making. This structure allows non-physician investors to participate in the business side of healthcare without violating CPOM laws.

The key is separation. Clinical decisions must remain entirely under the control of the PC and its licensed physicians. Any hint of influence from the MSO on diagnosis, treatment plans or physician compensation tied to patient outcomes can result in noncompliance.

It’s also important to structure the management fee properly. Regulators scrutinize these agreements closely. Overreaching fee percentages or profit-sharing models can be interpreted as a veiled form of ownership, which is exactly what CPOM rules are designed to prevent.

Despite the complexity, the MSO-PC model has become the go-to structure for private equity firms, health IT entrepreneurs and other non-physician investors looking to participate in healthcare delivery.

Preserving clinical control: Why physicians must stay in charge

At the heart of the CPOM doctrine is one simple principle: Medical decisions should only be made by those licensed to practice medicine. Even if a non-physician is involved through an MSO or advisory role, physicians must retain full control over anything that affects patient care.

That includes decisions about treatment protocols, prescriptions, clinical staffing and medical record handling. It also extends to how and when care is delivered. Any business structure or contract that allows a non-physician to influence these areas is likely to raise red flags with state regulators.

For example, let’s say a management agreement ties a physician’s compensation to how many patients they see or how many procedures they perform. That could be interpreted as business pressure influencing medical judgment. Similarly, if an MSO attempts to dictate work schedules, approve clinical hires or decide how services are billed, it may be overstepping into clinical territory.

This distinction matters because courts and regulatory agencies don’t just look at ownership paperwork. They examine how control works in practice. Even well-intentioned operators can face scrutiny if the structure allows for indirect influence over care.

The safest route is to clearly separate clinical and business functions. Physicians within the PC should be the only ones making patient-facing decisions. The MSO should provide support services only. Contracts should spell out these responsibilities in detail to avoid confusion and demonstrate compliance.

Preserving this boundary is not just a legal requirement. It’s also good business. Physicians are more likely to remain engaged and satisfied when they know their clinical autonomy is protected. And patients benefit when their care is based solely on medical need, not business priorities.

 

 

Risks and penalties: What happens when you get it wrong

Violating CPOM can result in serious consequences for both the non-physician investor and the licensed professionals involved.

Regulatory penalties vary by state but often include:

• Civil fines that can reach into the hundreds of thousands of dollars
• Revocation or suspension of a physician’s license
• Invalidation of business agreements or contracts
• Orders to unwind business structures or dissolve entities
• Exposure to lawsuits for unauthorized practice of medicine

In extreme cases, noncompliance can lead to criminal charges. While rare, these situations typically involve fraud, kickbacks or intentional misrepresentation of ownership or control.

Even without direct penalties, the fallout can be damaging. A practice forced to restructure may face months of operational disruption. Referral relationships can suffer. And any appearance of impropriety can undermine patient trust and damage brand reputation.

That’s why compliance cannot be an afterthought. Legal counsel should be involved from day one, and advisory teams should be familiar with the healthcare-specific regulations in each state. Tax planning, operational setup, and entity structure all need to reflect both the letter and spirit of the law.

A strategic approach to compliant investment in healthcare

For non-physicians who want to invest in or build healthcare businesses, the CPOM doctrine presents a challenge. But it doesn’t have to be a roadblock. With the right strategy, you can participate meaningfully in the industry while respecting legal boundaries and protecting clinical integrity.

The MSO-PC model offers a clear, tested path. By allowing physicians to lead the clinical side and maintaining a distinct separation between medical care and business operations, this structure has helped many private investors, technology entrepreneurs and business developers succeed in healthcare.

The key is planning. Every detail of how the entities interact matters. That includes revenue flow, hiring protocols, technology access and even branding decisions.

For example, you must ensure the physician-owned PC is the face of the practice from a regulatory standpoint. That means clinical signage, patient communication and online listings should name the PC or its physician leadership. The MSO can support these functions, but it should not present itself as the provider of care.

Financial modeling should also reflect this separation. Fee structures need to be commercially reasonable and should not be tied to clinical performance. Revenue sharing is particularly risky and often viewed as a red flag by enforcement agencies.

Can a non-physician own a medical practice? Here’s the bottom line

Non-physicians cannot own a medical practice in most states where CPOM laws apply. But that doesn’t mean they’re shut out. Through strategic use of management services organizations, professional corporations and well-structured contracts, you can build a compliant and profitable healthcare venture without crossing legal lines.

Our healthcare advisors provide tax-efficient structure planning, documentation review, and long-term strategic support tailored to practices in both CPOM and non-CPOM states. We also collaborate with legal counsel to ensure that every layer of your business aligns with state-specific healthcare laws and IRS guidelines.

If you’re considering entering the healthcare space as a non-physician, now is the time to evaluate your structure. Whether you’re launching a startup, acquiring a group or partnering with physicians in an existing operation, a carefully planned MSO-PC model can help you do it right from the beginning.

We can help you find a path that protects your interests and aligns with legal requirements. Contact a James Moore professional today to learn how we can support your goals.

 

 

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