Episode 28 – Corporate Practice of Medicine Laws: Employed Physician’s Remedy—or Nightmare?


In this episode, Brad Adatto, a business law and healthcare attorney, takes us on a journey through the intent, implications, and risks associated with state laws that “ban” the corporate practice of medicine. He describes how these state laws arise from a variety of legal and regulatory sources, and prohibit corporations (or any “non-physicians”) from employing physicians or owning medical practices.
The Corporate Practice of Medicine Doctrine (CPMD) originated in the early 1900s and sought to prevent:

1. Commercialization of medicine or lay people profiting from physician practice

2. Business interests conflicting with the best interests of patients

3. Obligations of employment interfering with physician decision-making

How do the Corporate Practice of Medicine laws vary by state?

Widely! To further complicate the legal landscape—there are big variations in enforcement. Mr. Adatto divvies the states up into three categories:

  1. Strict adherence: only physicians can own medical practices (example: New York)
  2. Mixed: Physicians and non-physicians can co-own a medical practice as long as physicians own a majority (example: California)
  3. Lenient: Anyone can own a medical practice (example: Florida)

How could a physician get in trouble with the Corporate Practice of Medicine?

Well, I have to admit, Mr. Adatto did not reassure me that Corporate Practice of Medicine Laws were the answer to my quest for bolstering physician leadership and physician autonomy. In his business law practice, he not only advises non-physician entities about how to avoid legal snarls—he also counsels physicians about how to stay out of trouble with the Corporate Practice of Medicine laws. Here is some of his advice:

  1. Do not assume “because everyone is doing it” your practice structure is legal.
  2. Hit “pause” and hire a healthcare attorney to make sure the contract you are about to sign protects your interests AND is legal.
  3. Have you been asked to be a Medical Director to help out a non-physician entrepreneur and make a few bucks yourself? Don’t be an “absentee” medical director just so a non-physician can check the “physician-run” box. It’s YOUR hard-earned license at risk if you are prosecuted for “aiding and abetting” violations of these laws.
  4. Believe it or not, if you submit to corporate practices that could harm patients then you are putting your medical license at risk. Regardless of corporate pressure, poor staffing, prior authorization mandates, or practice management chaos—YOUR obligation is to protect the patient. (THIS is the stuff of burnout and moral injury.)

Wait a minute Brad Adatto—don’t all healthcare systems violate Corporate Practice of Medicine laws? How is this legal?

Our new friend of the show, healthcare legal whiz, and business law podcaster walks us through how corporatized medicine is allowed to exist:

  1. Some states allow “not-for-profit” systems to employ physicians.
  2. Management Services Organizations (MSOs) established by non-physicians (or physicians) can contract with physician groups through a Management Services Agreement (MSA). This structure gives non-physicians an opportunity to profit from medical practices.
  3. Even with various exceptions, there must be no interference with the physician’s clinical decision-making. (After all, corporations are not allowed to practice medicine, right?)

Other questions that are answered in this podcast:

How is a physician’s medical license like a Ferrari?
Why is filing a lawsuit like driving at high speed and throwing your steering wheel out the window?
Who is always ultimately responsible for patient care?

Meet Brad Adatto, JD

Bradford E. Adatto is an attorney in the business law firm ByrdAdatto. He specializes in regulatory, transactional, and securities law. Having worked in health care law his entire career, he has an in-depth knowledge of the “do’s and don’ts” of this heavily regulated industry. He enjoys helping physicians, physician groups and others build successful businesses by showing them how to avoid legal problems, create new opportunities, develop new partnerships, and form new entities. He and Michael Byrd, the co-founder of their law firm, host the Legal 123s podcast together and write extensively about business law on their website blog.


Legal 123s with ByrdAdatto   available on all podcast platforms

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