Q: What are Corporate Practice of Medicine laws and how do they differ in Massachusetts and New Hampshire?
A: In general, corporate practice of medicine (CPOM) laws seek to prevent non-healthcare providers from owning healthcare practices. While the focus here is the provision of medical services, these laws can also apply to a wide range of licensed healthcare professionals, including psychologists, physical therapists, dentists, and physician assistants.
The laws stem from the concept that individuals should be licensed to practice medicine not corporations, as corporations may have divided loyalty between earning profit and prioritizing the needs of patients. States with CPOM laws usually permit formation and licensure of businesses established as professional corporations or professional limited liability companies (LLCs) to practice medicine but only if they are owned and controlled by physicians (or nurse practitioners with full practice authority).
However, the application of CPOM laws vary across states. Massachusetts, for example, is a CPOM state, meaning only licensed physicians and certain qualified nurse practitioners can own and operate a medical practice. MA laws also prohibit non-physician entities from practicing medicine or employing practicing physicians, with certain exceptions for non-profit entities. All shareholders or interest-holders in a medical practice must be licensed and practicing. Non-physicians can participate in the day-to-day operations of a medical practice by utilizing a management services organization (MSO), but there can be no fee-splitting (sharing a portion of fees in exchange for referrals) between the clinicians and the MSO. Payment for medical services must always be made directly to the practice, which can then pay an MSO for administrative or facility services. When affiliating with an MSO, practices should be careful that compensation arrangements do not violate any federal or state laws, such as anti-kickback statutes.
A Massachusetts medical practice can also employ and compensate non-physicians, as long as the non-physicians have no ownership stake in the practice and are not providing any medical services. Like with an MSO, providers should be extra careful when arranging non-physician employee compensation, particularly if there is anything resembling profit-sharing. Any indication that the employee is involved in medical decisions or patient care, or in the business in a way that resembles that of an owner, would put the practice at risk of violating CPOM laws. Nonetheless, there are other ways to reward non-physicians based on the success of the practice, such as flat bonuses based on achieving certain administrative targets or a percentage bonus based on expenses rather than profit.
New Hampshire, on the other hand, does not have an explicit prohibition on the corporate practice of medicine. Physicians are permitted to engage in medical practice either by forming a professional entity, or by working as an employee, member, consultant, or independent contractor for a healthcare organization. Like MA, NH has the regulatory framework to form professional corporations or limited liability companies, which are organized with the primary purpose of providing professional services. However, if a medical practice is formed as a professional corporation or limited liability company, then the owners must be licensed providers.
Know the Law is a bi-weekly column sponsored by McLane Middleton. Questions and ideas for future columns should be emailed to knowthelaw@mclane.com. Know the Law provides general legal information, not legal advice. We recommend that you consult a lawyer for guidance specific to your particular situation.