PC/MSO structure for venture-backed telehealth: form your own or build on licensed infrastructure
Two entities, at least one physician owner and a stack of agreements sit underneath most venture-backed telehealth companies. This is how that structure works, what it takes to build it yourself, and when it makes more sense to build on a clinical layer that already has it.
Lithos StaffA PC/MSO structure lets venture-backed telehealth companies work within corporate practice of medicine rules. A professional corporation (PC) owned by a licensed physician holds the practice; a management services organization (MSO) owned by founders and investors provides everything non-clinical for a fee. Forming your own takes a physician owner, state registrations, licensure and counsel; five to six months to a five-state launch is a good outcome. It suits companies whose product is the practice. At seed and Series A, licensed infrastructure is usually faster.
Most seed-stage companies shouldn’t form their own yet
A PC/MSO structure is how a venture-backed telehealth company works within corporate practice of medicine rules. A professional corporation owned by a licensed physician holds the practice. A management services organization owned by founders and investors runs everything non-clinical for a fee.
Forming your own takes five to six months to a five-state launch, if things go well. Do it when the practice is the product. At seed and Series A, building on licensed infrastructure gets you live in weeks.
| Form your own PC/MSO | Build on Lithos | |
|---|---|---|
| Physician owner | You find and contract one | Not needed |
| Entities and agreements | Two entities, three intercompany agreements | One agreement and a BAA |
| States at launch | The ones you’ve licensed | Licensed providers and compliance in all 50 states |
| Before first patient | Counsel, licensing, salaries (one model: $142,400) | No setup, implementation or platform fee |
| Time to launch | Five to six months is a good outcome | As little as three weeks; pace varies |
| Brand, pricing, patients, revenue | Yours | Yours |
Why the structure exists
Where the doctrine applies, a corporation owned by non-physicians cannot practice medicine, employ physicians to do so, or control their clinical judgment. So a venture-backed company can’t just hire doctors and start treating patients.
The doctrine isn’t uniform. Some states enforce it strictly; others carve out exceptions or barely restrict it. Fee-splitting rules and NP and PA practice rules add more variation. A national company has to satisfy the strictest state it serves, so most build for the strict case.
How a PC plus MSO works
The PC, owned by licensed physicians, practices medicine: clinicians, protocols and the patient relationship. The MSO, owned by founders and investors, raises capital and runs technology, brand, marketing and administration for a management fee from the PC.
Three agreements hold them together:
- Management services agreement (MSA). Defines the MSO’s services and fee. Flat or cost-plus fees at fair market value are common. A percentage of the PC’s revenue can raise fee-splitting questions in some states.
- Stock transfer restriction and succession agreement. Limits what the physician owner can do with the shares and names how a replacement steps in. This is the “friendly physician” arrangement.
- Clinical independence provisions. The MSO doesn’t direct clinical decisions. Protocols, prescribing and diagnosis stay with licensed providers.
The physician owner sets your timeline
Filing the entities is the easy part. Three things take the time:
- Finding a physician owner. Many states require the owner to be licensed there. A national footprint may need a multi-state owner or several PCs. Founders underestimate this step most.
- State registration and licensing. The PC registers where it treats patients. Clinicians need licenses in each patient’s state, DEA registrations for controlled substances, and collaborating physician arrangements where NPs and PAs need them. Our 50-state compliance checklist lays out the layers.
- The operating stack. Malpractice insurance, an EHR with e-prescribing, protocols, consents, pharmacy relationships, the PC’s bank and payment accounts, and someone to keep it all current.
Our telehealth startup runway model prices one illustrative five-state build at $142,400 before the first patient, and shows the runway it costs.
When forming your own is worth it
- The practice is the product. Your edge is your own clinicians and care model, and a clinical cofounder will own the PC.
- You plan to contract with payers. Credentialing and revenue cycle under your own entities take a long time, and the PC is where that starts.
- You have volume and patience. Thousands of visits a month and the capital to carry fixed clinical costs.
- You need a setup your partner doesn’t offer in specific states.
When licensed infrastructure fits better
On a licensed clinical layer, the providers, licensure, protocols, prescribing and state compliance already exist. You build the care experience on top: brand, product, pricing and the patient relationship.
That fits when speed decides the round, when national campaigns need every state to convert, and while you’re still finding product-market fit. It also gives investors fewer moving parts. Have counsel review how responsibilities and payments flow in that agreement too.
| Diligence area | Your own PC/MSO | Built on licensed infrastructure |
|---|---|---|
| Structure | Formation documents, MSA, stock restriction | Your formation documents and the infrastructure agreement |
| Key-person risk | The physician owner; succession plan | Vendor concentration; termination and transition terms |
| Regulatory | State-by-state memo, licensure matrix, supervision agreements | The provider’s compliance posture, through the agreement |
| Fees | Fair market value support for the management fee | Vendor pricing and how it scales |
| Data | Ownership split between PC and MSO | Data ownership and export rights in the contract |
Bring your launch states and your counsel’s open questions to a call, and we’ll walk through how responsibilities and data ownership split when you build on Lithos. Book a call.
Many companies do both, in order: launch on infrastructure, learn which categories and states work, then form their own practice at Series B. If that’s your plan, secure your patient data and a workable transition in the agreement now. Our guide to switching telehealth infrastructure covers what to negotiate.
Questions to bring to healthcare counsel
- Which of our launch states enforce corporate practice of medicine strictly?
- Do we need one PC or several?
- How should the management fee be set to hold up in every state?
- What do NP and PA rules mean for our staffing model?
- If we build on licensed infrastructure, what should we check in that agreement?
- If we form our own practice later, what should we negotiate now?
An hour of counsel now costs far less than restructuring mid-round.
Lithos is the licensed clinical infrastructure underneath your own care experience: licensed providers (MDs, DOs, NPs, PAs and RDs), protocols, prescribing and pharmacy routing, and state-by-state compliance in all 50 states, behind one API. You own the brand, pricing, patients and revenue. If you’re weighing a PC/MSO, we’ll run your launch plan and timeline with you, and accelerator companies can claim up to $2,500 in credits through the Lithos Startup Program. Book a call.
Frequently asked questions
What is a PC/MSO structure in telehealth?
A two-entity model. A professional corporation owned by licensed physicians holds the practice of medicine and employs or contracts the clinicians. A management services organization, which founders and investors can own, provides technology, marketing and administration to the PC for a fee under a management services agreement.
Do all states have corporate practice of medicine rules?
No. Some states enforce the doctrine strictly, some have narrower prohibitions or exceptions, and some barely restrict it. A company serving many states has to satisfy the strictest among them, so counsel reviews the structure state by state.
How long does it take to set up a PC and MSO for telehealth?
Filing the entities takes weeks once you have a physician owner. Finding that owner, negotiating the agreements, registering in each state and licensing clinicians takes months; five to six months to a five-state launch is a good outcome.
How do investors look at a PC/MSO structure in diligence?
Investors buy into the MSO and read the agreements connecting it to the PC: the management services agreement, the fee method, the stock transfer restriction and counsel’s state-by-state analysis. They look for concentration risk in one physician owner and fee structures that could raise fee-splitting questions.
Can a telehealth startup launch without forming its own PC?
Yes. Many companies build their care experience on a licensed clinical infrastructure provider whose licensed providers deliver the care, while the company owns the brand, product and patient relationship. Have healthcare counsel review that agreement for the states you serve.
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