Steps to Understanding Corporate Practice of Medicine Laws
Overview
The Corporate Practice of Medicine (CPOM) doctrine is a critical legal consideration for clinicians opening or operating a healthcare practice. CPOM laws protect patient care by ensuring that licensed medical professionals—not corporations or business partners—have control over clinical decisions. For clinicians aiming to open or manage a practice, understanding and adhering to CPOM laws is essential to prevent regulatory risks and safeguard patient trust. This guide provides a practical, nuanced approach to CPOM compliance and explains what clinicians, especially non-physician clinicians, need to know.
Disclaimer: This is for educational purposes only and does not constitute legal advice. For personalized guidance on CPOM compliance, consult with a qualified attorney familiar with healthcare law and regulations in your state.
Key Terms and Concepts
1. Corporate Practice of Medicine (CPOM): CPOM laws restrict non-licensed individuals and corporations from owning or controlling medical practices to ensure that only licensed healthcare providers can make medical decisions.
2. Management Services Organization (MSO): An MSO is a separate business entity that handles non-clinical tasks (e.g., billing, HR, marketing) for a medical practice. It allows clinicians to focus on patient care while MSOs handle the business side without influencing clinical decisions.
3. Clinical vs. Non-Clinical Decisions: Clinical decisions directly relate to patient treatment and outcomes and should be made solely by licensed providers. Non-clinical decisions involve administrative tasks like marketing, scheduling, and finances.
4. Ownership Structure: The legal structure of a practice—often requiring that licensed physicians are the primary owners to comply with CPOM.
5. Practice Authority Laws: These state-specific laws determine whether non-physician clinicians, like Nurse Practitioners (NPs) or Physician Assistants (PAs), can own a practice or must operate under a physician’s supervision.
How CPOM Applies to Nurses and Practices
For clinicians—whether you’re a physician, NP, or PA—CPOM compliance shapes how you structure, own, and operate your practice. Compliance requirements vary by state but generally focus on:
- Who Can Own a Practice: In strict CPOM states, only licensed physicians may own or control a practice. Some states allow non-physician clinicians to own practices under certain conditions, like collaborative agreements with physicians.
- Division of Responsibilities: MSOs can handle the business side of your clinic, such as billing and scheduling, while you retain sole control over clinical decisions. This setup can help achieve compliance in CPOM states.
- Collaborative Agreements for Non-Physician Clinicians: Many states require non-physician clinicians to partner with a physician. This agreement allows you to operate a clinic while the physician provides clinical oversight, meeting the state’s CPOM standards.
Understanding these requirements—and ensuring that your practice is set up accordingly—can protect your license, maintain patient trust, and prevent costly legal consequences.
A Checklist for CPOM
This compliance checklist guides clinicians through the essential steps to achieve and maintain CPOM compliance. Each step is designed to help you avoid common pitfalls and establish a legally sound practice.
1. Check State CPOM and Practice Authority Laws
- Research CPOM requirements in each state where you practice, especially if you operate in multiple locations. Start with state medical board resources or CPOM guides that summarize state-specific laws.
2. Verify Your Practice’s Ownership Structure
- In strict CPOM states, confirm that your practice is majority-owned by a licensed physician. If you’re a non-physician clinician, investigate whether your state allows any form of independent ownership or requires physician oversight.
3. Consider Using an MSO for Non-Clinical Tasks
- An MSO can help your practice handle business tasks (billing, marketing, etc.) while keeping clinical decisions under your control. This setup is particularly useful for meeting CPOM requirements in strict states.
4. Set Up Clear Boundaries Between Clinical and Non-Clinical Tasks
- Document and communicate roles to ensure non-physician staff handle only non-clinical tasks. Having clear job descriptions can prevent accidental CPOM violations.
5. Structure Your MSA for Compliance
- If you use a Management Services Agreement (MSA), ensure it specifies that the MSO handles non-clinical tasks only. Avoid terms that could imply MSO control over medical decisions.
6. Separate Financial and Clinical Authority
- Avoid financial agreements that could pressure providers to make decisions based on profitability. Financial partners should have no say in clinical aspects of patient care.
7. Create Defined, Non-Clinical Roles for Administrative Staff
- Define and document each non-clinical role’s responsibilities to prevent overlaps into clinical decision-making. For example, billing staff handle payment processing but not patient treatment plans.
8. Retain Physician Oversight in All Agreements
- Agreements with MSOs, contractors, or non-physician clinicians should explicitly state that physicians control clinical care. Legal language should prevent any ambiguity about who makes medical decisions.
9. Keep Thorough Documentation of Compliance Steps
- Document every compliance effort—agreements, audits, and protocols. This record can provide protection if your practice is audited by regulatory authorities.
10. Secure HIPAA-Compliant Data Storage for Patient Records
- CPOM compliance includes patient data privacy. Ensure all patient records are securely stored according to HIPAA standards, and audit storage practices regularly.
11. Define Clinical vs. Non-Clinical Decision-Making Protocols
- Establish protocols that clarify which decisions are clinical vs. non-clinical. For example, treatment plans fall under clinical decisions, while marketing campaigns are non-clinical.
12. Keep Business Interests Separate from Patient Care
- Avoid arrangements where financial backers could influence care decisions. Keep clinical and business roles distinct to protect patient interests.
13. Use Transparent Management Agreements
- Clearly outline the MSO’s role in management agreements, ensuring it covers only non-clinical tasks. Transparency helps prevent misunderstandings about the MSO’s involvement.
14. Regularly Update Your CPOM Compliance Policies
- Stay up-to-date on changes in CPOM laws and update your practice’s policies regularly. CPOM compliance is an evolving area, so periodic reviews are essential.
15. Educate Staff on CPOM Compliance
- Train all staff to understand CPOM requirements and their responsibilities. Educating non-clinical staff about CPOM can prevent accidental non-compliance.
16. Write Detailed Protocols for Staff Roles
- Written protocols help clarify responsibilities, especially when staff members have overlapping roles. Use these protocols to guide staff on compliance with CPOM laws.
17. Restrict Non-Physician Executives to Business Roles
- Non-physician executives, like business managers, should be restricted to non-clinical tasks. This separation ensures they do not influence patient care.
18. Prioritize CPOM Compliance in Your Policies
- Make CPOM compliance a key focus of your clinic’s policies. Designate a compliance officer or team if possible to ensure your practice adheres to CPOM laws.
19. Conduct Regular CPOM Audits
- Set up regular CPOM audits to identify and correct any issues before they lead to penalties. Periodic reviews help keep your practice compliant with evolving CPOM standards.
20. Maintain Physician-Led Clinical Care
- Ensure that your clinic’s structure and operations allow physicians to control all clinical care independently of business interests, protecting the focus on patient well-being.
FAQs when Navigating CPOM
1. What is the 51% rule in CPOM compliance?
The 51% rule in some CPOM states requires that a licensed physician (or group of physicians) own at least 51% of a medical practice, ensuring they hold majority control. This rule helps keep clinical decision-making in the hands of medical professionals rather than business partners or corporations.
2. Do I need an attorney to create a Professional Corporation (PC) agreement?
It’s highly recommended to consult with an attorney familiar with healthcare law and CPOM regulations to create a PC agreement. Here are some options:
- Specialized Healthcare Attorneys: These experts can help you draft an agreement that meets your state’s CPOM laws and covers clinical and non-clinical divisions.
- Legal Templates from Trusted Sources: If you prefer to start with a template, sites like LegalZoom and PandaDoc offer Professional Corporation agreement templates. However, these should still be reviewed by an attorney for CPOM compliance.
- Online Legal Services: Services like Rocket Lawyer and UpCounsel connect you with licensed attorneys who can review or customize your agreement based on CPOM requirements.
3. What’s the role of an MSO in CPOM compliance?
An MSO can handle non-clinical aspects of a practice, such as billing or HR, helping to keep clinical decisions separate from business interests. This separation supports CPOM compliance.
4. Do CPOM regulations vary by state?
Yes, CPOM regulations vary widely. Some states have strict CPOM rules, while others have more flexibility, especially for non-physician clinicians like NPs.
5. Why is documentation important for CPOM compliance?
Thorough documentation helps protect your practice by showing proof of compliance and may serve as evidence if your clinic faces an audit.
Top Questions to Ask for CPOM Compliance
To ensure your clinic remains CPOM-compliant, here are the top questions to ask yourself and your team:
- Does our clinic’s ownership structure align with state-specific CPOM requirements?
- Is the clinic majority-owned (at least 51%) by licensed physicians, if required by state law?
- Are clinical decisions made solely by licensed healthcare providers, without influence from business partners or non-clinicians?
- Do our management agreements (like MSAs) clearly limit non-clinical service providers to business tasks only?
- Are financial interests separate from clinical decisions to avoid conflicts of interest?
- Is our Professional Corporation (PC) agreement reviewed by a healthcare attorney to ensure compliance?
- Do we have a clear process for updating our compliance practices with changing state CPOM regulations?
- Are all non-clinical staff roles and responsibilities clearly defined to prevent overlaps into clinical decision-making?
- Is there thorough documentation of our CPOM compliance efforts, including ownership records, agreements, and audits?
- Are we conducting regular audits to catch and correct any compliance issues?
Additional Resources
Here are more resources to help you as you learn more about CPOM.
.png)
.png){kind=small}
