Corporate Practice of Medicine: What Telehealth Founders Should Know

Most direct-to-consumer telehealth brands are not, legally, the ones practicing medicine. Behind the app and the brand there is usually a separate medical group owned by physicians, and a management company that runs everything else. That split exists because of state corporate practice of medicine (CPOM) laws.

In June 2026, STAT reported on how online care is getting caught up as states tighten those rules, noting that corporations cannot legally practice medicine in more than 30 states. This guide explains what CPOM means for a telehealth founder, how the common structure works, and which state changes are confirmed so far.

What the corporate practice of medicine doctrine is

CPOM is a state-law doctrine. In states that follow it, a business that is not owned by licensed physicians generally cannot practice medicine, employ physicians to provide care, or control physicians' clinical judgment. The idea is that medical decisions should be driven by the patient's needs, not by investors or a corporate owner.

The details vary a lot by state. Some states write CPOM into statute, some rely on court decisions or attorney general opinions, and some have little or no restriction. Many states also have related rules on fee splitting, which limit how a physician practice can share revenue with a non-physician business. Because telehealth companies often serve patients in many states, they have to account for the strictest rules that apply to them.

How the MSO and friendly PC model works

The most common structure for a venture-backed telehealth company has two main parts:

The professional corporation (PC). A medical group owned by one or more licensed physicians. It employs or contracts with the clinicians, holds the patient relationship from a legal standpoint, and makes clinical decisions. It is often called a "friendly PC" because its physician owner is aligned with the company's founders.
The management services organization (MSO). A regular company, which can take outside investment. It owns the brand, technology, marketing and operations, and provides those services to the PC under a management services agreement in exchange for a fee.

Founders and investors usually want some way to keep the PC aligned with the MSO over time. Common tools have included stock transfer restriction agreements, option agreements that let the MSO designate a new PC owner, and broad management agreements. These are exactly the tools that regulators and legislators have started to examine.

The core question in most CPOM reviews is substance over form: does the physician-owned practice actually control clinical decisions, or does the management company control them in practice through fees, contracts and governance?

What Oregon changed in 2025

Oregon's Senate Bill 951, signed by Governor Tina Kotek on June 9, 2025, is the most significant recent state CPOM law. Law firm summaries describe these main features:

Ownership and role overlap. Shareholders, directors and officers of a medical practice generally cannot also own or hold roles in an MSO that manages that practice, with narrow exceptions.
Limits on control tools. MSOs face sharp limits on using option agreements, stock transfer restrictions and similar arrangements to control who owns the practice. These are allowed only in narrow situations, such as an owner losing a license.
Decisions the MSO cannot control. MSOs cannot hold final authority over areas such as hiring and firing clinicians, clinical staffing levels, coding, pricing, billing and collection policies, and payor contracts. They can assist, but the practice must keep ultimate authority.
Noncompetes. Many noncompete and nondisclosure agreements between MSOs and clinicians are void, subject to limited exceptions.
Enforcement. The law gives affected clinicians and medical groups a private right of action against MSOs.

Timing. The ownership and control limits took effect January 1, 2026 for newly formed entities and ownership transfers on or after June 9, 2025. Existing structures that are not sold or transferred have until January 1, 2029.

Telemedicine exemption. The ownership and control limits do not apply to a medical group that practices telemedicine and has no physical location in Oregon where patients receive services. Foley notes that the exemption does not cover locations needed for DEA controlled substance registration. Oregon later passed HB 3410, which amends parts of SB 951, so counsel should review both together.

What California changed in 2025

California has long followed a strict CPOM doctrine. In October 2025, Governor Newsom signed two bills that took effect January 1, 2026:

SB 351 puts parts of California's CPOM practice into statute for private equity groups and hedge funds. It bars them from interfering with physicians' and dentists' professional judgment, and from controlling areas such as medical records content, clinical hiring based on competency, coding and billing decisions, and payor contract terms. Contracts that allow that kind of interference are void. It also limits noncompete and non-disparagement terms in certain deals, and lets the Attorney General seek injunctive relief.
AB 1415 expands the reach of California's Office of Health Care Affordability. Private equity groups, hedge funds, MSOs and certain other entities must give notice before certain transactions involving health care entities or MSOs.

Not every bill passes

It is easy to overstate the trend. Washington considered a sweeping CPOM bill (Second Substitute Senate Bill 5387) in its 2026 session. According to Holland & Knight, it did not make it out of the Senate. In its first-quarter 2026 recap of health care consolidation bills, the same firm noted that more state bills had failed to progress than had been enacted.

At the federal level, members of Congress introduced the Stop Corporate Takeovers of Physicians Act in September 2026. It would create a national CPOM ban and restrict MSO arrangements, drawing heavily on Oregon's law. It is only a proposal, and Holland & Knight noted it would need significant further action to become law.

Questions founders often bring to counsel

A telehealth CPOM review usually covers questions like these:

Which states will we serve patients in at launch, and how does each treat CPOM and fee splitting?
Who owns the PC, and are they licensed where they need to be?
Does the management agreement leave clinical decisions, and the items Oregon now lists, with the practice?
Is the management fee set at fair market value and structured to avoid fee-splitting problems?
What alignment tools (stock transfer agreements, options) are we using, and are they allowed in our states?
Do we have any physical patient care location in Oregon, or plans for one?
Are our clinician contracts using noncompete or nondisclosure terms that a state may now void?
Who is tracking new state bills, and how quickly can we restructure if one passes?

These are planning questions, not answers. The right structure depends on the states, the services offered and the investors involved.

Where NutriCove fits

NutriCove helps founders launch telehealth companies, covering brand and platform build, with entity structure coordinated with the founder's healthcare counsel, plus provider agreements and BAAs. NutriCove does not give legal advice; the CPOM and state-by-state analysis belongs with your attorney. If you are planning a launch, see how the telehealth launch service works.

Sources

This article is general information, not legal or medical advice. Talk to a qualified attorney or licensed professional about your situation.