The corporate practice of medicine (CPOM) doctrine is a principle of state law in the United States, under which a business corporation, or any other person or entity that does not hold a medical license, may not practice medicine. Depending on the state, the doctrine limits who may own a medical practice, whether a company may employ physicians to treat patients, whether someone without a license may direct a physician's clinical decisions, and whether a physician may share professional fees with a partner who holds no license. The traditional reasoning is that a corporation cannot be licensed to practice medicine, because only a human being can complete the education, training and character screening a license requires, and so cannot practice medicine through the physicians it employs.
There is no federal corporate practice rule. Each state decides for itself whether the doctrine applies and how far it reaches, and the rule may be found in a statute, a regulation, a licensing board's rule or policy, a court decision or an attorney general's opinion. States that apply the doctrine commonly recognize exceptions, for example for licensed hospitals, certain nonprofit organizations and professional corporations owned by licensed practitioners. A 2026 survey of the 50 states, the District of Columbia and Puerto Rico found that 42 of the 52 jurisdictions restrict ownership of a medical practice by persons or companies without a license, while 8 permit it.
State legislatures have more recently addressed investor ownership of medical practices, including ownership by private equity firms and through management services organizations, companies that provide non-clinical services to a practice that physicians own. In 2025 Oregon enacted limits on how such a company and its owners may own and control a medical practice, and Maine provided for regulatory review of health care transactions involving private equity companies, hedge funds or management services organizations.
Rationale Courts have given two kinds of reason for the doctrine. The first is drawn from licensing itself: because a corporation cannot receive a medical license, it cannot legally practice medicine, and the acts of physicians it employs are attributed to it as their employer. The second rests on public policy. The Supreme Court of Illinois summarized these arguments as "the dangers of lay control over professional judgment, the division of the physician's loyalty between his patient and his profitmaking employer, and the commercialization of the profession."
Courts have not applied the doctrine uniformly. In a 1997 survey of decisions from other states, the Illinois court found that some jurisdictions had declined to adopt the doctrine at all; that others held it inapplicable to nonprofit hospitals and health associations, reasoning that its policy concerns do not arise when physicians are employed by charitable institutions; and that the remainder held it inapplicable to hospitals because other laws authorize hospitals to provide medical treatment. The same court later concluded that "a focus upon licensing best protects the public's interest in quality health care," and that it is for the legislature to decide which kinds of licensed and regulated entity may employ physicians.
History Illinois first applied the doctrine to medicine in People ex rel. Kerner v. United Medical Service, Inc. (1936), in which the Supreme Court of Illinois held that a general business corporation that operated a low-cost clinic was illegally practicing medicine, even though every medical service in the clinic was rendered by a licensed physician. The court rejected the argument that owning a clinic in which licensed employees treat patients is not itself the practice of medicine.
Some states have written the rule into statute. California's Medical Practice Act provides that corporations and other artificial legal entities have no professional rights, privileges or powers, while preserving medical corporations formed under the state's Moscone-Knox Professional Corporation Act. Professional corporation statutes in other states similarly let licensed practitioners incorporate while keeping ownership among licensees, as in New York's Business Corporation Law and Florida's Professional Service Corporation and Limited Liability Company Act.
Courts and legislatures have carved out exceptions, most prominently for hospitals. In Berlin v. Sarah Bush Lincoln Health Center (1997), the Supreme Court of Illinois held that the doctrine does not apply to a corporation licensed by the state to operate a hospital. In Carter-Shields v. Alton Health Institute (2002), the same court held that a nonprofit corporation that was not itself a licensed hospital could not lawfully employ a physician, and that the physician's employment agreement, including its noncompetition clause, was void and unenforceable from its inception. The court noted that the Illinois General Assembly had in the meantime amended the Hospital Licensing Act to let licensed hospitals and hospital affiliates employ physicians on conditions that protect the physician's independent medical judgment. Texas allows nonprofit health organizations certified by the Texas Medical Board to employ physicians, an exception to its general rule that only a licensed person may practice medicine.
Other states have moved away from the doctrine. Arizona permits a licensed health professional, physicians included, to practice in or be employed by any form of business entity, and Ohio expressly allows physicians to render professional services through business corporations, limited liability companies, partnerships and professional associations.
Elements Corporate practice rules can be analyzed as a set of separate questions, and a state may answer them differently.
Ownership Whether a person or company without a license may own a medical practice is the central question. Of the 52 jurisdictions surveyed in 2026, 42 restrict ownership to physicians or to physicians and specified other licensees, and 8 (Alabama, Arizona, the District of Columbia, Florida, Georgia, Ohio, Oregon and Virginia) permit a person or company without a license to hold an ownership interest. Restrictions are usually enforced through the professional corporation statutes, which limit share ownership to licensees. Washington's Professional Service Corporation Act, for example, lets physicians, physician assistants, nurses, pharmacists and several other listed health professions own a corporation together, while generally keeping its shares in licensed hands. New York requires a professional limited liability company that provides medical services to have physician members.
Ownership by a clinician other than a physician raises a second question. Where a nurse practitioner may own a practice, scope-of-practice law may still require a written agreement with a physician: a 2026 survey of the same 52 jurisdictions found that 18 grant nurse practitioners independent practice from licensure, 21 grant it only after a transition period defined by statute, and 13 require a relationship with a physician for the life of the practice. The agreement goes by names such as collaborative practice agreement, standard care arrangement, articulated plan and prescriptive authority agreement.
Employment Whether a company without a license may employ physicians to treat patients is a separate question from ownership. The 2026 survey found 18 jurisdictions that prohibit such employment and 10 that permit it, and published no conclusion for the other 24. Where employment is barred, exceptions such as those for licensed hospitals in Illinois and certified nonprofit health organizations in Texas determine who may employ physicians.
Control of clinical judgment Even where a company may own or manage a practice, most states forbid a person without a license from directing a physician's clinical decisions. The survey recorded such a prohibition in 34 jurisdictions. Illinois' hospital-employment statute, for instance, conditions a hospital's employment of physicians on guarantees of the physician's independent medical judgment and on periodic quality review by physicians the hospital does not employ.
Fee splitting Fee splitting rules prohibit a physician from sharing professional fees with a person who holds no license, or from paying a share of fees for referrals. They can limit how an investor or a management company may be paid. The survey recorded a fee-splitting prohibition in 36 jurisdictions.
Management services organizations Where a person without a license may not own a practice, investors commonly use a management services organization (MSO). The MSO provides non-clinical services, such as payroll, human resources and business administration, under a contract with a practice that physicians own, while the physicians keep the clinical decisions. Of the 52 jurisdictions surveyed, 13 permit such arrangements subject to conditions and 6 (Arkansas, New York, Oregon, Utah, Washington and Wisconsin) restrict them. New Jersey's practice-structure rules, as applied by the Supreme Court of New Jersey in 2017, reach arrangements in which physicians own a practice in name while a person without a license controls it in fact.
Other clinicians The doctrine is usually discussed in relation to physicians, but ownership rules also shape practices owned by other clinicians. Some professional corporation statutes let physicians, physician assistants and nurse practitioners co-own a single corporation, as in Washington and in Oregon's joint professional corporation, in which licensees of the participating professions together hold the voting and director majorities.
Pharmacists run anticoagulation services and manage long-term conditions such as diabetes and hypertension through collaborative drug therapy management, in which a physician or another prescriber authorizes the pharmacist, by written protocol or agreement, to start, adjust, continue or stop medicines and, where the state allows, to order the tests that monitor them. A pharmacist may also manage therapy for an organization, such as a hospital or health system, under a protocol signed by its representative. Each state sets which prescribers may authorize the arrangement and what the protocol must contain, and some let pharmacists manage therapy on their own authority.
Recent legislation Oregon's 2025 law, amended later the same year, requires a majority of each class of voting shares and a majority of the directors of a medical professional corporation to be physicians licensed in Oregon. It bars a management services organization's shareholders, directors and employees from together owning a majority of a medical practice with which the organization contracts, subject to narrow exceptions, and makes void any contract term that authorizes the organization to take a prohibited action. A physician or practice that suffers a loss may sue for damages and injunctive relief. The restrictions apply to entities formed on or after the law took effect, and to existing entities from January 1, 2029. Hospitals, federally qualified health centers, certain rural clinics, tribal and behavioral health programs, and some telemedicine entities are wholly or partly exempt.
By jurisdiction The table below summarizes each jurisdiction's rules as they apply to physicians, as published in a 2026 survey of the 50 states, the District of Columbia and Puerto Rico. The survey lists each jurisdiction's own sources, including the statutes, regulations and decisions behind every cell. A dash marks a question on which the survey published no conclusion; it does not mean that the activity is permitted.