Tools to Challenge Big Medicine: Enact and Enforce Corporate Practice of Medicine (CPOM) Laws

The Problem

Medical practices across the country — specialty care clinics, pharmacies, dental practices, and others — are being bought up by distant investors looking to profit from the high costs of healthcare in the United States, but with little concern for the quality of care that patients receive. These investors might be large, established healthcare systems or private equity investors looking to cut costs and maximize billing. In either case, ownership of more and more of American healthcare is falling into the hands of profit-seeking businesspeople rather than healthcare professionals concerned with the well-being of the patients entrusted to them.

Corporate practice of medicine (CPOM) laws require that certain types of medical practices be owned and operated by licensed medical professionals. These laws were meant to avoid the commercialization of medical care, to prevent the conflict of interest between corporate profits and medical professionals’ obligations to their patients, and to prevent management from interfering with healthcare professionals’ medical judgment.[1] Most states have CPOM laws to prohibit corporate ownership, but a near-universal set of exceptions provides loopholes that allow investors to circumvent these regulations.

Most notably, private equity funds often make their healthcare investments through a physician management company (PMC) or management services organization (MSO). This typically means having a “friendly physician” remain as the legal owner of the medical practice, while a separate, corporate-owned MSO receives all the excess compensation in return for management “services.”[2] While this in effect is nearly indistinguishable from private equity ownership, this arrangement is legal in most states.

The Solution

States can implement and strengthen CPOM laws to close these loopholes, which have allowed private equity and others to acquire medical practices. States should be careful to close the common loopholes used to circumvent these laws by, for example, having a physician owner in name only. This would protect healthcare and medical practices from predatory private equity investors and ensure that doctors can maintain professional and health-centered relationships with their patients.

Notes

[1] American Medical Association Advocacy Resource Center, “Issue brief: Corporate practice of medicine,” 2015, https://www.ama-assn.org/media/7661/download.

[2] For an example of corporate guidance for circumventing these laws, see Matt Wilmot, Wes Scott, and Ethan Rosenfield, “Corporate Practice of Medicine Doctrine: Increased Enforcement on the Horizon?” Nelson Mullins, January 17, 2023, https://www.nelsonmullins.com/idea_exchange/blogs/healthcare_essentials/enforcement/corporate-practice-of-medicine-doctrine-increased-enforcement-on-the-horizon.