How to Structure Your Business to Stay CPOM Compliant

(A practical guide for clinic owners, meds pas, and entrepreneurs building within Corporate Practice of Medicine states)

Key Takeaways – Ensuring CPOM Compliance

• Goal: Structure your clinic or med spa so that medical decisions stay with licensed providers while business operations remain separate and compliant.
• How: Use a Friendly PC + MSO model, governed by a compliant Management Services Agreement (MSA) and a proper funds flow.
• Fees: Use fixed-fee or cost-plus arrangements supported by fair market value (FMV).
• Key mistake: Having a perfect paper structure but never depositing revenue into the professional corporation (PC) account.
• Next step: Compliance doesn’t stop at structure — you must maintain ongoing clinical compliance infrastructure (protocols, oversight, quality review).

Introduction: Why Structure Matters

Understanding the Corporate Practice of Medicine (CPOM) doctrine is one thing — but building your business around it is another.

In our previous article,Overview and Guide for Corporate Practice of Medicine (CPOM) we discussed why CPOM laws exist: to keep medical judgment in the hands of licensed clinicians and prevent business owners from influencing clinical decisions.

This article takes the next step — showing you how to structure your healthcare business to stay compliant while still protecting your ownership interests and scalability.

Whether you’re launching a med spa, IV therapy clinic, telemedicine brand, or functional medicine practice, the following guide walks through the three structural pillars of CPOM compliance:

1. Setting up your entities properly (the friendly PC model)
2. Executing a compliant Management Services Agreement (MSA)
3. Establishing a compliant funds flow that regulators recognize as legitimate

We’ll close with an overview of clinical compliance infrastructure — the operational layer that ensures your compliance continues beyond legal documents.

1. Setting Up the Business Compliantly

Understanding the Friendly PC Model

In CPOM-enforced states, non-physicians can’t own medical practices. The solution is the Friendly PC (Professional Corporation) model.

In this structure:

• A physician owns the Professional Corporation (PC) or PLLC, which holds the medical license and employs or contracts the providers.
• A non-physician (entrepreneur, investor, or operator) owns a separate Management Services Organization (MSO) that provides all non-clinical business services — marketing, billing, HR, software, etc.
• The two entities are connected through a Management Services Agreement (MSA) that defines what the MSO provides and how it gets paid.

This model allows both sides to work together compliantly:

• The physician controls clinical decisions.
• The MSO runs operations.

Think of the PC as the pilot and the MSO as the ground crew. The pilot decides how to fly; the ground crew ensures the aircraft is fueled, staffed, and ready.

Avoid the “51% Ownership” Trap

Many new entrepreneurs hear that they can “solve” CPOM compliance by giving a physician 51% ownership of their clinic. While this may sound simple, it creates long-term issues:

• The physician legally owns the clinic, meaning the non-physician loses control of key business decisions.
• If the relationship sours, the physician can block operations or even dissolve the entity.
• The model ties your entire business to a single individual’s license — limiting flexibility and scalability.

Instead, structure your business so that the non-physician owns 100% of the MSO. That way, your business — marketing systems, brand assets, and operations — remains fully yours, while the PC can be transitioned to any “friendly” physician as needed.

This setup gives you the freedom to:

• Scale into multiple states with separate physician PCs.
• Transition physician owners without disrupting operations.
• Retain the full value of your business in the MSO.

Pro tip: Legal firms like ByrdAdatto and Lengea Law emphasize that the friendly PC structure is far more defensible than “majority physician ownership” models, especially when paired with a robust MSA.

2. Creating a Compliant Management Services Agreement (MSA)

The MSA is the operational bridge between your physician-owned PC and your non-physician-owned MSO. It defines the rules of engagement — who does what, for how much, and under what terms.

While a detailed breakdown of MSA drafting deserves its own article, here’s what every compliant MSA must establish:

Core Purpose of the MSA

The MSA exists to create a clear separation between clinical and business operations.

• The PC handles all clinical matters — diagnosis, treatment, supervision, protocols.
• The MSO provides administrative and business support — payroll, HR, scheduling, marketing, rent, and technology.

By delineating these duties, the MSA demonstrates to regulators that the non-physician is not influencing patient care.

State-Specific Considerations

Each state defines and enforces CPOM differently:

• California allows robust PC/MSO structures but closely monitors for undue influence.
• New York requires strict separation and bans percentage-based fees.
• Texas prohibits non-physician ownership outright and scrutinizes MSAs for excessive control.

Your MSA must reflect your state’s specific restrictions — often referencing board opinions, attorney general guidance, or medical society statements.

As McDermott Will & Emery notes, “A well-drafted MSA functions not only as a business contract, but as a compliance safeguard — evidencing that each party operates within its proper legal boundaries.”

Fee Structures and Fair Market Value

The MSA also defines how the MSO gets paid. Fee structure is one of the biggest compliance risks under CPOM because regulators view it as a potential channel for fee-splitting.

The three primary models are:

1.        Fixed Fee (Safest Option)

1. A set monthly or annual fee for services.
2. Universally accepted across states.
3. Example: The PC pays the MSO $12,000 per month for management services.

2.        Cost-Plus (Moderate Risk)

1. The MSO charges the PC for its actual operating costs (salaries, rent, software) plus a small, reasonable profit margin.
2. Requires documentation and periodic valuation.

3.        Percentage-Based (High Risk)

1. The MSO takes a percentage of the PC’s revenue (e.g., 6%).
2. Viewed as fee-splitting in most states, and outright illegal in some.

Best practice: A fixed-fee model supported by a Fair Market Value (FMV) analysis is the most defensible structure nationwide. FMV can be determined by third-party appraisers, benchmarking studies, or valuation reports from firms familiar with healthcare transactions.

Protecting Both Parties

A properly constructed MSA protects both the physician and the non-physician owner. It ensures:

• The physician retains full clinical authority.
• The MSO receives predictable compensation for its legitimate services.
• The business maintains transparency and auditability.

At GuardianMD, we often describe the MSA as the “backbone of CPOM compliance.” But even the best MSA is only as compliant as the way it’s followed in real life — which brings us to funds flow.

3. Establishing a Compliant Funds Flow

The Golden Rule of CPOM

All patient-generated revenue must flow first into the physician-owned PC or PLLC bank account, not the MSO account.

Once the PC receives the revenue, it can pay the MSO its fixed fee according to the MSA.

If this sounds overly technical, it’s because regulators often use funds flow as the litmus test of compliance. You can have the perfect structure on paper, but if the money moves incorrectly, your entire model is at risk.

Why Funds Flow Matters

State boards and regulators interpret improper funds flow as a strawman arrangement — where the physician is merely a figurehead, and the business effectively “controls” medical revenue.

Example:
A clinic had all the right documents in place — a compliant MSA, a physician-owned PC, and even a separate practice bank account. But they never deposited patient payments into that account. Instead, all funds went directly to the MSO, which then paid the physician. When reviewed by regulators, the clinic was found non-compliant because their actual behavior contradicted their legal structure.

Paper compliance means nothing without operational compliance.

Fee Model Variations and State Rules

Let’s revisit how states view the different fee models:

The “Fixed Plus” approach — a fixed base fee with a small performance-based adjustment — can sometimes be used, but only if the performance metrics relate to business efficiency (e.g., scheduling speed or customer satisfaction) rather than clinical output or volume of care.

Determining Fair Market Value (FMV)

FMV ensures your management fee reflects what a third party would pay for similar services in a competitive market. Over- or under-charging can both create red flags:

• Too high: Regulators may see it as disguised profit-sharing.
• Too low: It can suggest the MSO is subsidizing clinical operations, another CPOM concern.

FMV can be established through:

• Independent valuation reports
• Industry benchmarks
• Cost analysis of equivalent administrative services

ByrdAdatto attorneys emphasize documenting FMV annually to stay defensible — especially as your revenue grows or services expand.

Operationalizing Funds Flow

In practice, a compliant setup looks like this:

1. Patients pay for medical services (credit card, bank, or EMR payment).
2. Funds are deposited into the PC’s bank account.
3. The PC retains clinical expenses (physician payroll, malpractice, supplies).
4. The PC pays the MSO a fixed monthly fee (per the MSA) for management and business services.

Every step should be traceable through invoices and bank statements. This transparency creates an audit-ready compliance trail.

4. Beyond Structure: Building Ongoing Clinical Compliance Infrastructure

Many entrepreneurs stop once the MSA is signed. But true compliance requires ongoing operational systems — what we call Clinical Compliance Infrastructure (CCI).

A proper CCI ensures that the PC/MSO model is more than a shell — it’s a functioning, compliant, and patient-safe ecosystem.

Elements of a Strong CCI

• Medical Oversight: The physician actively reviews charts, supervises providers, and signs off on protocols.
• Standardized Protocols: Documented procedures for common treatments (e.g., IV hydration, aesthetics, peptides).
• Quality Assurance (QA): Regular audits, peer reviews, and feedback loops.
• License Monitoring: Ensures all clinicians and supervising physicians maintain valid, active licenses.
• Telemedicine and Consent Compliance: Especially critical for virtual care or remote clearance exams.

GuardianMD provides these frameworks as part of its platform — embedding compliance into workflows so clinic owners can operate confidently under CPOM constraints.

5. Common Mistakes That Lead to CPOM Violations

Even well-intentioned owners can slip into non-compliance. Here are the most frequent pitfalls:

6. Why a Compliant Structure Increases Enterprise Value

Building CPOM compliance into your business isn’t just about avoiding penalties — it’s about increasing valuation.

Investors, lenders, and acquirers prefer businesses with:

• Defensible structures across all 50 states
• Audit-ready compliance (MSA, funds flow, CCI)
• Separable entities that can be sold or franchised

A properly built PC/MSO framework lets you scale your clinic network, license your brand, or sell your MSO to private equity without tripping legal wires.

In essence, compliance isn’t a constraint — it’s a growth enabler.

Frequently Asked Questions

Conclusion

Structuring your business to be CPOM compliant isn’t just about legal paperwork — it’s about building a foundation for ethical, scalable, and investable growth.

When done correctly:

• Medical judgment stays where it belongs — with licensed providers.
• Business operations remain efficient and profitable.
• Regulators, investors, and patients all gain confidence in your model.

By aligning your friendly PC, MSA, and funds flow, and maintaining ongoing clinical compliance infrastructure, your business isn’t just compliant — it’s future-proof.