Guide to the Corporate Practice of Medicine for Virtual Care Companies

New virtual care services must be built on sound legal foundation. Learn how to structure a “Friendly PC” model with physician executives — a necessary model for compliant care delivery — and ensure your company is operating above-board from the start.

As telehealth adoption exponentially increases, virtual care services offer an incredible opportunity for enterprising businesses. There are a number of challenges companies face when standing up a virtual care offering such as choosing geographies, modalities, technology platforms, clinical treatment areas and protocols — and critically — ensuring compliance. Many of these choices require legal consideration to ensure compliance with state laws and regulations regarding telehealth.

One of the most important legal foundations required to launch compliant virtual care is the corporate practice of medicine doctrine.

What is the corporate practice of medicine?

The corporate practice of medicine (CPM) is a legal doctrine that prohibits companies from profiting from the practice of medicine or directly employing a physician to provide professional medical services. The law is based on an ethical standard that medical judgment should be held separate from the influence of corporate profit incentives and unlicensed individuals.

Many states have laws surrounding the corporate practice of medicine that ban persons or entities from practicing medicine or employing physicians to provide medical services. These laws are intended to avoid corporate influence on physicians and the commercialization of medicine.

The “Friendly PC” model for telehealth companies

You may be wondering, how do digital health companies comply with the requirements of this law?

One way to scale a virtual care company compliantly is through what is known as the “Friendly PC” model. In this model, one or more physicians set up, exclusively own, and exert full clinical control over a professional entity (PC) which is in turn managed by a telehealth company operating as a Management Services Organization (MSO).

These PCs are considered “friendly” because they work closely with the MSO. The MSO provides administrative services to the PC, and usually employs the physician-owner of the PC, but does not influence clinical decision-making.

How a Friendly PC works:

  • A physician executive registers a professional corporation in the state(s) the physician is licensed to practice medicine.
  • The newly established PC will deliver all of the professional services, i.e., contract with other clinicians to deliver the care alongside the technology.
  • The physician executive is sometimes referred to as being the “PC Owner.”
  • In parallel, the digital health company and the PC agree to a master service agreement (MSA) that outlines the “Friendly” relationship between the new professional company and the technology company.

Given the complex nature of telehealth state laws, digital health companies like Wheel have become increasingly crucial so that physicians can devote more time to their practices instead of administrative matters.

Practical Consequences of the Corporate Practice of Medicine (CPM)

The CPM is a significant concern for physician-business ventures because failure to comply with a state’s CPM laws can result in:

  • Physician discipline or revocation of their medical license
  • Civil or criminal liability for non‑physician entities for practicing medicine without a license
  • Voiding an MSO for illegality
  • Commercial or government insurers (like Medicare and Medicaid) seeking to recover reimbursement payments because of the illegality of the underlying business structure

In order to compliantly utilize a Friendly PC structure, MSAs must be carefully structured to ensure the company does not exert undue influence over the PC or become too involved in the PC’s business.

In the digital healthcare space where medical services are often offered across state lines, it may be best to structure your MSA to meet the requirements of the state with the most stringent CPM laws if you are planning a multi-state or national service offering.

Barriers to Friendly PC Implementation

Aside from legal concerns, Friendly PCs are also expensive to organize. The digital health company in a Friendly PC structure is typically subjected to all the costs associated with the provision of medical services, aside from physician compensation, benefits, and medical malpractice costs.

Since Corporate Practice of Medicine laws vary from state to state, with differing degrees of stringency and interpretation, it's advisable to engage the services of legal professionals well-versed in telemedicine to navigate the optimal PC structure. This also applies to nurse practitioner utilization, as there are also Corporate Practice of Nursing laws in many states.

Friendly PCs with Wheel

Companies like Wheel are well-equipped to navigate this legal complexity by providing, in some cases, access to a nationwide PC structure for client partners. Ultimately, you’ll need to consult with experienced legal counsel, but Wheel’s expert team can aid in helping you get started with the process of determining the best go-to-market strategy for compliant care delivery.

Find out how Wheel can help launch, scale, and deliver your brand of the highest-quality, compliant virtual care.

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