CPOM Compliance for Telemedicine: How to Scale Virtual Care Legally 

Key Takeaways

• Telemedicine is not exempt from CPOM—state-specific CPOM laws apply in every state where patients receive care.
• Regulators are increasingly scrutinizing telehealth companies to ensure physicians, not investors or MSOs, control clinical decisions.
• Multi-state telemedicine expansion without proper structure increases the risk of enforcement actions, fee-splitting violations, and stalled growth.
• A PC/MSO model keeps clinical authority and patient revenue within physician-owned entities while allowing MSOs to manage non-clinical operations.
• Clean, well-documented PC/MSO structures reduce regulatory risk, support 50-state scalability, and make telehealth companies more attractive to investors.

Why Telemedicine Is Under CPOM Scrutiny 

Telemedicine has transformed healthcare giving patients faster, easier access to care and opening new opportunities for providers. But while virtual care feels “borderless,” the laws that govern it are anything but. 

Every telemedicine visit is still subject to state-specific rules, and one of the most important is the Corporate Practice of Medicine (CPOM) doctrine. Regulators have become increasingly vigilant about how telehealth companies are structured, ensuring that physicians, not business owners or investors, make clinical decisions. 

For telemedicine startups, nurse practitioner-led clinics, and investors, understanding CPOM is critical to building a compliant and scalable business. 

To see how CPOM laws vary by state and how they directly affect virtual care compliance, explore our 50-state CPOM laws guide. 

How CPOM Applies to Telemedicine 

At its core, CPOM prevents non-physicians from owning or controlling medical practices. In telemedicine, this means: 

• Clinical decisions (diagnosis, prescriptions, treatment plans) must remain with licensed providers. 
• Patient revenue must flow into physician-owned entities first. 
• Management companies can only provide non-clinical services (billing, technology, marketing). 

Even if your business is 100% virtual, CPOM applies in every state where you see patients. 

Example: A telehealth company based in Florida wants to treat patients in California. Florida doesn’t enforce CPOM, but California does — meaning the company must set up a physician-owned PC in CA, with an MSO handling the business side. 

Challenges of Multi-State Operations 

Telemedicine providers face compliance headaches because: 

• Each state has its own CPOM rules. Strict states require PCs, MSOs, and carefully drafted contracts. Permissive states may not, but fee-splitting laws still apply. 
• Licensing requirements differ. Providers must hold licenses in each state they serve, creating multiple PC entities. 
• Revenue flow becomes complex. Patient money must go into the correct state-specific PC before being distributed to the MSO. 
• Board scrutiny is rising. Telemedicine companies have been investigated for improper revenue sharing and strawman structures. 

Without a scalable model, expansion can stall under regulatory burden. 

The PC/MSO Model for Telehealth 

The Professional Corporation / Management Services Organization (PC/MSO) model is the proven solution for multi-state telehealth compliance. 

• PC (Professional Corporation): Physician-owned, state-specific entity. Responsible for employing providers and controlling medical decisions. 
• MSO (Management Services Organization): Non-physician-owned entity that provides centralized business support: technology, scheduling, billing, HR, marketing. 
• MSA (Management Services Agreement): Contract between the PC and MSO that defines roles and establishes a fee structure (ideally fixed or cost-plus). 

This model allows telemedicine companies to: 

• Scale across all 50 states with a consistent structure. 
• Ensure physicians retain medical authority. 
• Offer investors a clear, compliant path to growth. 

State-by-State Examples 

New York 

• One of the strictest CPOM states. 
• Only physicians may own PCs. 
• MSO contracts must use fixed or cost-plus fees (percentage-based fees are considered unlawful fee-splitting). 

California 

• Strict CPOM enforcement. 
• Physician majority ownership required. 
• Percentage-based MSO fees may be allowed if “commercially reasonable,” but still scrutinized. 

Texas 

• Explicitly prohibits non-physician ownership. 
• Regulators penalize strawman setups where MSOs exert too much control. 

Florida 

• Permissive CPOM environment (no formal doctrine). 
• Still enforces fee-splitting and anti-kickback laws. 
• Many operators still use PC/MSO to prepare for expansion. 

Avoiding Strawman Risks in Virtual Care 

One of the biggest risks in telemedicine is creating a “strawman” setup, where the physician is a figurehead and the MSO controls clinical operations. 

Red flags in telehealth include: 

• All patient revenue flows directly to the MSO. 
• Physicians have little involvement in chart review or protocol development. 
• The MSO hires or fires providers without physician input. 

Compliant structures include: 

• Separate bank accounts and governance for each PC. 
• Clear documentation of physician oversight (chart reviews, treatment protocols). 
• MSO fees tied to FMV, not patient revenue. 

Our MSO model aligns with CPOM requirements by separating non-clinical operations from physician-owned professional corporations — a proven structure for compliant growth. 

Building Investor-Ready Telehealth Structures 

For startups, compliance isn’t just about avoiding fines — it’s about attracting investment. 

Private equity firms, venture capitalists, and strategic buyers evaluate telemedicine companies on their regulatory risk profile. Businesses with messy CPOM setups often struggle to raise capital or command strong valuations. 

An MSO-based structure makes companies more attractive to investors because: 

• PCs can be replicated state by state. 
• The MSO can be sold or acquired independently. 
• Compliance risks are reduced, lowering liability exposure. 

Simply put: a clean PC/MSO structure signals to investors that the business is built for scale and resilience. 

Why Oversight Matters More in Telemedicine 

Telemedicine has reshaped healthcare delivery, but it hasn’t changed the rules: CPOM still applies. 

Multi-state providers must design their businesses carefully, using PC/MSO structures that respect state laws while enabling growth. By separating clinical authority from business operations — and avoiding strawman pitfalls — telehealth companies can scale with confidence, pass board scrutiny, and attract serious investment. 

At GuardianMD, we help telemedicine operators build and maintain compliant CPOM structures across all 50 states — so you can focus on patient care while we handle the legal and compliance backbone. 

Frequently Asked Questions