Corporate Practice of Medicine (CPOM) Compliance

California treats the practice of medicine as a professional activity that licensed physicians control. The Corporate Practice of Medicine (CPOM) doctrine is the usual name for that limit. A general corporation, an investor group, or another person without a medical license generally may not practice medicine. A lay company generally may not employ physicians to deliver medical care as a company service, or take charge of clinical decisions.

We counsel physicians, medical groups, and related businesses on how Corporate Practice of Medicine (CPOM) affects ownership, management contracts, and daily control. We look at how a practice is formed, how money moves, and which decisions stay with licensed clinicians. We draft and negotiate the agreements that sit around that structure. When a dispute arises, we handle the civil side through negotiation, mediation, or litigation as the facts require.

What Corporate Practice of Medicine Involves

Corporate Practice of Medicine (CPOM) questions appear whenever a non-physician has money, management authority, or other leverage inside a medical practice. The issue is not only whose name appears on a stock certificate. The real questions are who decides how care is delivered, who hires and fires clinicians, who sets fees for professional services, who controls medical records, and who can overrule a physician on a clinical matter.

A common California structure is a physician-owned professional entity that provides the medical care, paired with a separate management company. The management company may handle billing, scheduling, non-clinical staffing, office space, equipment, marketing, and information systems. The professional entity remains responsible for diagnosis, treatment, clinical protocols, and supervision of licensed personnel. Management services agreements, employment and independent contractor agreements, ownership documents, leases, and purchase documents all matter. Language that looks like ordinary business control in another industry can look like the unlicensed practice of medicine in a medical setting. Calling a document a management agreement does not save an arrangement if the manager directs clinical work or treats the professional entity as a shell.

Why Corporate Practice of Medicine Matters to Clients in California

California's approach to Corporate Practice of Medicine (CPOM) is stricter than the approach in many other states. That difference matters if you are a physician taking on a manager or investor, a practice considering a sale, or a company expanding into California. An arrangement that is routine somewhere else can create serious risk here. A contract that gives a lay entity too much control may be difficult to enforce. Pay terms that look like sharing professional fees can draw scrutiny. A physician can face licensing trouble if the practice is treated as a corporate product. A management company can find that it paid for a structure it cannot lawfully operate.

The same issues arise in ordinary business events, including hiring a medical director, opening another location, adding a non-physician investor, switching to a percentage-based management fee, combining a practice into a larger organization, launching a telehealth service, or using a professional corporation with ineligible owners. Each step can shift control in ways the paperwork does not admit. Market pressure to affiliate with a hospital, a private equity platform, or a regional group does not change the underlying rule.

Common Issues Clients Face

Clients reach Corporate Practice of Medicine (CPOM) from different starting points.

• A physician or group wants capital or professional management, but the term sheet is thin on clinician hiring, clinical policy, and disagreement about care or coding.
• A non-physician company wants to build a clinic, telehealth brand, or multi-site service and employ physicians directly. In California, that employment model is often the problem.
• A practice is for sale, but the buyer is not a physician-owned professional entity, and post-closing contracts would leave the seller as a figurehead.
• A management agreement ties the fee to a percentage of practice revenue, gives the manager broad termination or noncompete leverage, or lets the manager decide staffing for licensed personnel.
• Documents name a professional corporation with the wrong owners, no real board process, or no separate finances, while another company collects professional fees and directs the work.
• An out-of-state platform uses California-licensed physicians and California patients, while marketing, software, pricing, and protocols are controlled from elsewhere.
• After a breakup, one side claims the management agreement is void because it crossed into the practice of medicine. The other side wants unpaid fees, a restrictive covenant, or control of records and space.

How a Client Typically Gets from Problem to Resolution

Most Corporate Practice of Medicine (CPOM) matters begin with facts and documents, not with a filing. We learn who the parties are, who holds licenses, who owns each entity, and how money and decisions actually flow. Clinical functions are then separated from administrative functions. Hiring and firing of physicians, clinical protocols, medical record custody, coding standards, equipment that affects care, professional fee setting, and clinical patient complaints tend to sit on the clinical side. Leases, non-clinical staffing, billing operations, marketing, and office management tend to sit on the administrative side.

If you are forming a new venture, that map guides the entities and the contracts. If a structure already exists, the next step is to see where the documents and the real operation diverge. Resolution may be a revised management agreement, a change in professional-entity ownership, a different fee model, clearer reserved powers for the physicians, or a decision not to close a proposed deal. When the parties still want to work together, negotiation is the usual path. When the relationship has failed, the path may be a negotiated unwind, mediation, or a civil case over contract rights and money. David Chapman is a certified mediator, and mediation is often a practical way to resolve these disputes.

Key Legal Considerations

Ownership of the professional practice generally belongs to licensed physicians, with limited room for certain other licensed professionals and for some types of licensed healthcare organizations. A hospital, health plan, or similar licensed entity may operate under different rules than a general business corporation. Control is as important as ownership under Corporate Practice of Medicine (CPOM). A physician can hold the stock and still lose clinical independence if contracts let a manager dictate how medicine is practiced. A paper board that never meets will not carry much weight if another company makes the clinical decisions.

Management fees should be tied to identifiable non-clinical services. A fee that is simply a share of professional revenue, with no relation to the cost or value of management work, invites the argument that the manager is sharing in the practice of medicine. Employment and independent contractor labels do not settle the Corporate Practice of Medicine (CPOM) question by themselves. A professional corporation owned by physicians may employ physicians. A lay corporation that employs physicians to deliver medical care to the corporation's patients is a different situation.

Professional entities need a real existence, including separate accounts, corporate formalities, clinical policies adopted by the professional entity, and insurance in the right name. Unlicensed practice of medicine and improper sharing of professional fees can arise from the same facts. Telehealth does not create a special exemption. If the patient is in California and the care is medicine, California's ownership and control expectations still apply. The documents, the licenses, and the actual governance have to be read together.