Corporate Practice of Medicine Rules and Telehealth Companies

The corporate practice of medicine (CPOM) doctrine says that a business entity not owned by licensed physicians may not practice medicine, employ physicians to practice medicine, or control their clinical judgment. Each state sets its own version through statutes, regulations, board positions, attorney general opinions and court decisions. For a telehealth company, the version that usually matters is the one in the state where the patient is, because that is where the medicine is practiced. A company with no office in a state can still be subject to that state's rule.

This describes the rules for operators; it is not legal advice. Whether a particular structure works in a particular state is a question for your counsel.

How does the doctrine vary from state to state?

Roughly three patterns, with many variations inside each:

• Strong. General business corporations may not employ physicians or control medical practices, with exceptions for professional corporations and certain licensed facilities. California is the standard example: Business and Professions Code § 2400 says "Corporations and other artificial legal entities shall have no professional rights, privileges, or powers," subject to the professional corporation exception.
• Moderate. The doctrine exists in case law or board positions but with broader exceptions, or applies to some professions and not others.
• Limited or none. Lay entities may employ physicians, though the physician's independent judgment is still protected by the medical practice act.

The doctrine can also differ by profession within one state. Rules for nurse practitioners, physician assistants, psychologists, dentists and therapists do not always match the rules for physicians. Our state pages list each state's doctrine for physicians in the corporate practice field; start at telehealth laws by state, for example California and Oregon.

Why does the patient's state matter more than the company's?

Licensure follows the patient, and so does the practice of medicine. When a physician in Colorado treats a patient located in California, that physician is practicing medicine in California and needs to be authorized there, and the arrangement under which the physician is employed and managed can be judged under California law. Telehealth companies that organize in a permissive state and treat patients nationwide do not escape the strong-doctrine states.

Some newer laws address telehealth directly. Oregon's SB 951, for example, contains an exemption that Venable's summary describes as covering telemedicine practices without a physical location where patients receive clinical services in Oregon. Exemptions like this are narrow, and their conditions matter. See Oregon SB 951.

Which arrangements draw scrutiny?

• A lay company deciding which clinicians to hire or fire, or how much they are paid.
• A lay company setting clinical protocols, or deciding which patients get which treatment.
• A lay company owning medical records or making coding and billing decisions. The Medical Board of California has said both should be made by a licensed physician.
• Management fees that look like a share of professional fees, especially percentage-of-revenue fees.
• Agreements that let the company replace the physician owner at will. California's Attorney General argued in an April 2026 amicus brief that such terms mean "the corporation effectively owns the practice."
• Marketing that presents the company, rather than the practice, as the provider of care.

What happens if a structure fails the doctrine?

Consequences differ by state and can include discipline of the physicians involved, contracts held unenforceable (which can unwind the management agreement and the fees under it), claims by payers that services billed by an improperly organized entity should not have been paid, and actions by attorneys general or private parties where a statute allows them. Oregon's SB 951, for instance, provides for civil actions in Oregon circuit court, according to Epstein Becker Green's summary.

Does the doctrine apply to nurse practitioner-led telehealth?

Sometimes differently. In states that grant nurse practitioners full practice authority, NP-owned practices may be permitted, and some states apply their CPOM rules only to physicians. But many states require a collaborative or supervisory agreement with a physician for NPs or PAs, and those rules shape how an NP-led model can be organized. See NP practice authority by state on our sister site.

How should operators organize the question for counsel?

1. List every state where you treat or plan to treat patients, by profession of the clinicians who treat there.
2. Describe the entity chart and who owns each entity.
3. For each decision category (hiring and firing clinicians, compensation, clinical protocols, conditions treated, records, coding and billing, pricing, payer contracts, marketing claims), write down who decides today.
4. Describe how money moves: management fee method, loans, and any payment to or from pharmacies, labs or device vendors.
5. Flag planned transactions, since transaction-notice laws in Oregon, California and Washington, among others, may apply.

Counsel then compares those facts with each state's rules and tells you where the structure works, where it needs changes, and where it does not work. No honest adviser will tell you one structure is approved everywhere. See the friendly PC and MSO model for how the common structure is put together.

Our Counsel-Ready Structure Packet ($950) assembles those facts with a state-by-state summary of each CPOM and fee-splitting rule for your counsel to review. We do not give legal advice or design structures. See pricing.