Corporate practice of medicine and the PC–MSO model, explained for clinic owners

If you own a med spa or wellness clinic and you are not a physician, one legal doctrine shapes how your business can be set up: the corporate practice of medicine, or CPOM. It decides who may own the clinical side of your clinic, who may employ your injectors and prescribers, and how money can move between the business and the medical practice. This guide explains the doctrine, the "friendly PC" and management services organization (MSO) structure many clinics use, and how a few states differ.

What the corporate practice of medicine doctrine is

CPOM is a rule, found in many states' medical practice acts, board rules and court decisions, that keeps unlicensed people and ordinary business corporations from practicing medicine. In practice, that usually means a lay-owned company cannot own a medical practice, employ physicians to treat patients, or control physicians' clinical decisions.

The reasoning is that medical judgment should not bend to commercial pressure. California's statute is blunt: corporations "shall have no professional rights, privileges, or powers" (Business and Professions Code section 2400). In Texas, the Medical Practice Act bars a physician from helping an unlicensed person or a corporation practice medicine.

Why it matters for med spas and wellness clinics

Neurotoxin and filler injections, laser treatments, IV therapy and prescription weight-loss drugs are medical services, even when the goal is cosmetic. The Medical Board of California has said that using prescription drugs and devices for cosmetic reasons is the practice of medicine, and that the same laws apply as for any other treatment.

That makes the most common shortcut risky: a spa owned by a non-physician that simply "hires a medical director." California's board has called that arrangement prohibited and, citing a precedential decision, said a physician who acts as medical director of a lay-owned business is aiding and abetting the unlicensed practice of medicine. The American Med Spa Association (AmSpa) has warned that the same model can amount to illegal fee splitting in several states.

The consequences can reach everyone involved:

Physicians can face license discipline.
Courts can refuse to enforce the contracts. A federal court applying Texas law voided a set of management and equity agreements that let an unlicensed party run a practice through a "paper owner."
In Texas, violating the Medical Practice Act can also carry criminal penalties.

How the PC–MSO model works

The usual answer in CPOM states is to split the business in two:

The professional entity (a professional corporation, PLLC or similar) is owned by one or more licensed physicians, or by other licensees where state law allows. It holds the clinical side: it employs or contracts the clinicians, holds the patient relationships and records, and is responsible for care.
The management services organization can be owned by anyone, including a non-physician founder or investors. It provides the non-clinical business: space, equipment, front-desk staff, marketing, accounting, technology and similar support.
A management services agreement (MSA) connects them. The MSO provides defined services, and the professional entity pays a management fee. As AmSpa describes it, money goes from the patient to the medical practice and then to the MSO.

Many structures add a stock transfer restriction agreement. It limits the physician owner's ability to sell shares and lets the MSO name a qualified successor if the physician dies, becomes disabled or loses a license. These agreements draw closer scrutiny in strict states, and Oregon's new law largely bars MSOs from holding these rights.

Ownership rules for the professional entity also vary. In California, licensed physicians must own a majority of a medical corporation's shares. Certain other licensees, such as registered nurses and physician assistants, may together hold up to 49 percent, and unlicensed people may hold none.

What the MSO may and may not control

"Friendly" does not mean figurehead. The physician owner has to actually run the medical side. The Medical Board of California lists decisions that belong to physicians, not to unlicensed people or MSOs, including:

which diagnostic tests are appropriate, referrals, and overall patient care and treatment options
how many patients a physician sees or how many hours a physician works
ownership and content of patient medical records
hiring and firing clinical staff, as it relates to clinical competency
coding and billing decisions, and the parameters for contracts with insurers and other payers
approving the selection of medical equipment and supplies

A physician can consult business advisers on these questions but must keep the final say. Oregon's 2025 law goes further. It bars MSOs from controlling items such as clinician schedules and pay, clinical staffing levels, pricing, billing and collection policies, and advertising the practice's services under a name other than the professional entity's.

Courts look past labels to what actually happens. In one Texas case, a company that took two-thirds of a physician's profits and selected the medical staff was found to be violating the doctrine. In another, a management company that received roughly 20 percent of clinic distributions was upheld, because the physicians controlled fees, hiring of physicians and patient care. Your MSA should reserve clinical decisions to the physician, and your daily operations should match it.

Management fees: fair market value, and why percentages can be a problem

The management fee should reflect the fair market value of the services provided and should not rise or fall with the volume or value of referrals. Document how you arrived at it. A flat fee is generally the safer design. Percentage-of-revenue fees are where state fee-splitting laws come in:

New York prohibits management fees calculated as a percentage of the practice's revenue.
Florida's Board of Medicine held that paying a management company a percentage of the revenue its business-development services generated was illegal fee splitting, while a reasonable flat fee for management services is appropriate.
California generally permits percentage-based pay for services other than referrals if it is commensurate with the value of those services.

If the practice bills Medicare or other federal health programs, federal anti-kickback rules add another layer.

How states differ: a few examples

Stricter states:

California has a statutory ban that its medical board enforces. SB 351, effective January 1, 2026, bars private equity groups and hedge funds involved with physician practices from interfering with clinical judgment or controlling items such as records, clinical hiring, coding and billing. The attorney general can seek injunctions.
Texas generally prohibits lay entities from employing physicians, with limited exceptions such as nonprofit health organizations certified by the Texas Medical Board.
New York reserves ownership of medical practices, including med spas, to licensees. Non-licensees may own an MSO but not the clinical entity.
Oregon enacted SB 951 in June 2025, which the AMA has called the first law of its kind. It requires licensee majority ownership of professional medical entities and sharply limits MSO control. It applies from January 1, 2026 for new arrangements and January 1, 2029 for existing ones.

More permissive states:

Florida has no statute prohibiting the corporate practice of medicine. It regulates through its Health Care Clinic Act, which requires a clinic license for entities that tender charges for reimbursement unless an exemption applies, such as being wholly owned by licensed practitioners, one of whom supervises the business.
Ohio lets physicians practice through corporations and LLCs, and the State Medical Board has stated that Ohio law does not prohibit a physician from working as an employee of a corporation.

Two cautions. A permissive state still has supervision, delegation, licensing, advertising and fee-splitting rules. And these laws change: California and Oregon both tightened theirs in 2025. Check current law before you sign anything.

Questions to answer before you sign

Who owns the professional entity, and is that person licensed in your state?
Does the MSA list the MSO's services and reserve clinical decisions to the physician?
How is the fee set, and can you show it is fair market value?
Is a stock transfer restriction agreement permitted in your state?
Who owns the patient records?
Does your state require a clinic or facility license?

MedGrid MSO sets up this structure for clinics: the professional entity and the management company, joined by a management services agreement, with a physician licensed in the clinic's state. It takes no equity in the clinic. Whoever helps you, have your own counsel review the documents.

This article is general information, not legal advice. Rules vary by state; confirm specifics with your counsel and your state boards.

Corporate practice of medicine and the PC–MSO model, explained for clinic owners

What the corporate practice of medicine doctrine is

Why it matters for med spas and wellness clinics

How the PC–MSO model works

What the MSO may and may not control

Management fees: fair market value, and why percentages can be a problem

How states differ: a few examples

Questions to answer before you sign

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