Corporate practice of medicine (CPOM)
The corporate practice of medicine (CPOM) doctrine is a set of state laws prohibiting corporations and non-physicians from practicing medicine or employing physicians to provide care, which is why most telehealth companies operate through a separate physician-owned medical group.
- Roughly 30 states apply some form of the doctrine
- California, Texas, New York, and New Jersey are among the strictest
- Care is legally delivered where the patient is located
- The MSO / friendly-PC structure is the standard answer
What CPOM prohibits
CPOM states — California, Texas, and New York among the strictest — bar general business corporations from employing physicians, directing clinical judgment, or splitting professional fees. The doctrine exists to keep medical decisions with licensed clinicians rather than shareholders. Enforcement intensity varies widely by state, but the structural rules shape how every serious telehealth company is organized.
How telehealth companies structure around CPOM
The standard answer is the MSO / friendly-PC model: care is delivered by a professional corporation (PC) owned by licensed physicians, while the business company acts as a management services organization (MSO) providing everything non-clinical — technology, marketing, billing, administration — under a management services agreement at fair-market-value terms.
The line that matters is clinical independence: the PC’s clinicians must control diagnosis, treatment, and prescribing without interference from the MSO. Agreements that give the business side control over clinical protocols or per-prescription incentives are where CPOM (and kickback) problems start.
Warning signs a structure has a CPOM problem
The recurring red flags: management fees calculated as a percentage of clinical revenue in fee-splitting states, the business side writing clinical protocols or hiring clinicians directly, incentives tied to prescription volume or approval rates, and MSAs that let the MSO overrule a clinician. Any of these can turn a routine structure into an enforcement target — and they are exactly what state boards and plaintiff’s lawyers now look for in telehealth.
Regulators are paying attention again: several states have proposed or passed laws scrutinizing MSO arrangements and investor control of medical practices. A structure that was “fine because everyone does it” deserves fresh legal review on a regular cadence.
Compliance handled, so you can build
Lithos runs the clinicians, pharmacies, and 50-state rules behind your care program — one API.
Frequently asked questions
Which states enforce CPOM?
Roughly thirty states have some form of the doctrine; California, Texas, New York, and New Jersey are commonly cited as the strictest. A 50-state structure should be designed for the strictest states it operates in.
Can my startup just employ doctors?
In CPOM states, generally no — physicians must be employed or engaged by a physician-owned entity. That is what the friendly-PC structure exists to solve.
Does CPOM apply to telehealth?
Yes. The care is deemed delivered where the patient is located, so a telehealth program must satisfy the CPOM rules of every state its patients are in.