MSO-PC and corporate practice of medicine, explained for non-lawyers

If you are building a telehealth business and you are not a physician, you will hear two terms early and often: corporate practice of medicine and MSO-PC. They describe a legal problem and the most common way the industry solves it. This article explains both in plain language so you can have a more useful conversation with your lawyer.

It is not legal advice. The doctrine is state law, it varies widely, and the details matter. Get healthcare counsel licensed in the states where you plan to operate before you sign anything.

What corporate practice of medicine means

The corporate practice of medicine doctrine, often shortened to CPOM, is the idea that only licensed professionals, or entities they own, should practice medicine. The concern behind it is straightforward: a business owned by non-physicians might pressure clinicians to put revenue ahead of patient care.

In states that enforce the doctrine, a general business corporation owned by lay investors typically cannot:

Employ physicians to provide medical services.
Bill for physician services in its own name.
Control clinical decisions, such as what to prescribe, which tests to order, or how long a visit should take.

States differ a great deal. Some enforce the doctrine strictly through statutes, regulations, and attorney general opinions. Others have weak or no enforcement. Some apply it to physicians but treat nurse practitioners or other professions differently. Because a telehealth company usually serves patients in many states, it generally has to design for the strictest states it serves.

Why the MSO-PC structure exists

The MSO-PC model separates the business of running a practice from the practice of medicine itself. It uses two companies.

The management services organization (MSO) is an ordinary business corporation. Lay investors can own it. It holds the brand, the technology, the marketing, the staff who handle billing and operations, and usually most of the capital.
The professional corporation (PC) is owned by one or more licensed physicians. It employs or contracts the clinicians, holds the relationships required to practice, and makes every clinical decision.

The two are tied together by contracts. The MSO provides services to the PC and is paid for them. The PC practices medicine. Done properly, the business gets the operating scale it needs and the clinical side stays in licensed hands.

Vayra uses this structure for its own practice. Vayra Health & Wellness, Inc. is the MSO. Vayra Medical, P.C. is the separate professional corporation that provides clinical services.

The management services agreement

The management services agreement, or MSA, is the core contract. It defines what the MSO does for the PC and what the PC pays for it. Typical services include:

Technology, including the patient-facing site, the electronic health record, and e-prescribing tools.
Billing, collections, and payment processing support.
Marketing and patient acquisition.
Office administration, staffing for non-clinical roles, and vendor management.
Space or equipment, where relevant.

A well-drafted MSA is just as clear about what the MSO does not do. It should state that the PC and its clinicians retain sole authority over clinical judgment: diagnosis, treatment, prescribing, protocols, and standards of care. The MSO can supply tools and data. It cannot tell a clinician what to prescribe.

How the fees are set

This is where many structures get into trouble. Two concepts matter.

Fair market value. The fee the PC pays the MSO should reflect the fair market value of the services actually provided. Many operators get an independent valuation to support the number.

Fee-splitting. Some states prohibit a physician from sharing professional fees with a non-physician, or restrict fees calculated as a percentage of the practice's revenue. In those states, a management fee set as a percentage of collections may be challenged as fee-splitting. Common alternatives include a flat fee, a fee tied to the cost of services plus a reasonable markup, or a per-unit fee for defined services. Which approach works depends on the states involved, so this is a question for counsel.

Federal rules can apply too. If a practice bills government healthcare programs, the federal anti-kickback statute and related laws add more constraints on how money moves between entities.

The friendly PC

You will hear the phrase "friendly PC" or "friendly physician." It refers to a PC owned by a physician who is aligned with the MSO, often a medical director or a founder's clinical partner. The physician owns the PC on paper and in law, and the MSO provides everything else.

The friendly PC model is common and, structured correctly, widely used. It also carries real responsibility. The physician owner is not a figurehead. They are legally accountable for the practice, they must hold the licenses the states require, and they must actually exercise clinical authority. Regulators look past paperwork. If the facts show that the MSO is directing clinical care, the structure may not protect anyone.

Stock transfer restriction agreements

Because the MSO invests heavily in a PC it does not own, it needs some protection against the physician owner leaving, selling, or becoming unable to serve. The usual tool is a stock transfer restriction agreement, sometimes called a succession agreement.

These agreements typically:

Prevent the physician from selling or pledging PC shares without consent.
Give the MSO the right to designate a qualified successor physician to buy the shares if certain events happen, such as death, disability, loss of license, or breach.
Set the price for that transfer, often at a nominal amount.

Some states scrutinize these agreements if they give the MSO too much control. Again, counsel should review the specific terms against the states you serve.

Where the clinical line sits in daily operations

The legal documents only work if daily operations match them. A few practical tests:

Protocols. Clinical protocols are written and approved by the PC's medical leadership, not by a marketing team.
Prescribing. Every prescription is the decision of a licensed clinician reviewing that patient. Software can organize information. It does not decide.
Hiring clinicians. The PC credentials and engages clinicians, even if the MSO supports recruiting.
Quality review. Chart review, peer review, and adverse event handling sit with the PC.
AI tools. Any AI layer should support clinicians, for example by summarizing intake or drafting notes for review, and must never diagnose or prescribe. That is a clinical boundary as well as a product decision. Our AI page describes how we draw that line.

Questions to bring to your counsel

Which of our target states enforce corporate practice of medicine, and how strictly?
Do the rules differ for physicians, nurse practitioners, and other clinicians we plan to use?
How should our management fee be structured in each state to avoid fee-splitting concerns?
What fair market value support do we need for the fee?
Who owns the PC, and what happens if that person leaves?
What should the stock transfer restriction agreement say, and are there states where it needs to be softer?
Which entity is the HIPAA covered entity, and which is the business associate?
Which entity is the merchant of record, and does that match who contracts with the patient?

Using a partner that already has the structure

Building an MSO-PC from scratch takes counsel, a physician owner, and time. Some operators prefer to work with a partner whose structure is already in place. In Vayra's model, clinical services are provided through Vayra Medical, P.C., with a provider panel working under a medical director, while operators can also bring their own clinicians. Clinical decisions stay with licensed clinicians throughout. You can read more on our compliance page and in our provider network overview. Your own counsel should still review how any arrangement fits your business and your states.

To talk through how the structure would work for your brand, Book a demo.