Health Care Law Blog

Many licensed professionals in Michigan including physicians, surgeons, dentists, and others, have heard the phrase “corporate practice of medicine,” often shortened to CPOM. Even fewer understand what it means, whether it applies to their profession, or when it becomes relevant. 

CPOM issues tend to surface at specific moments such as when a practice seeks outside investors, contracts with a management company, or considers a sale or expansion. They also arise in multidisciplinary practices and, with increasing frequency, when a wellness business begins offering services that constitute the practice of medicine under state law. By the time the issue appears on the radar, key business decisions have often already been made. 

This article is a practical overview intended to build awareness. 

What is the CPOM doctrine in Michigan? 

Michigan, like many states, restricts the corporate practice of medicine to keep professional judgment in the hands of licensed professionals rather than unlicensed individuals or business entities. These restrictions arise from a combination of statutes, case law, and regulatory interpretation. Michigan law provides limited exceptions, including certain nonprofit entities, but those exceptions are narrow and beyond the scope of this overview. 

While the name references medicine, the concept is broader. Similar principles can apply to licensed professional services where a license is required as a condition to provide care or treatment (e.g., dentists, chiropractors, physical therapists, etc.). When a profession falls into this category, the law often requires services to be delivered through a professional entity owned and controlled by licensed providers, rather than a standard business corporation. Exactly which professions are subject to these restrictions depends on the governing statutes and how the services are structured. 

At its core, CPOM restricts nonprofessional entities from owning or controlling a professional practice. The focus is not on ownership percentages or entity names alone. What matters is who has real decision-making authority over clinical judgment and whether business arrangements can influence those decisions. 

For this reason, professional practices in Michigan are typically organized as professional corporations or professional limited liability companies owned and governed by licensed professionals. Nonprofessional investors or for-profit platforms usually back through separate management or services entities rather than owning the professional practice directly. 

How the MSO model is used 

To accommodate growth, outside investment, and operational support, many professional practices work with management services organizations, or MSOs. This model separates clinical services from unlicensed support. Licensed professionals retain independence over clinical matters, while the MSO provides administrative and operational services, such as billing, human resources, facilities, or information technology, for a reasonable fee. 

When properly structured, MSO arrangements can be both compliant and effective. Problems arise when professional independence exists on paper but not in practice. 

Common CPOM Tripwires 

Certain features consistently raise CPOM concerns across healthcare professions in Michigan. One or more of the following factors typically warrants closer review:

• Nonprofessional control of key professional assets. MSOs frequently own or lease the facilities, equipment, or technology a professional practice uses. That alone is not problematic. CPOM concerns arise when control of those assets gives unlicensed individuals practical leverage over clinical decisions. 

• Nonprofessionals serving as owners, officers, or directors of the professional entity. Even nominal ownership interests can create governance arrangements that meaningfully influence clinical operations. CPOM concerns may also arise when owners are licensed but do not belong to the same profession. 

• A management company directly employing or supervising licensed professionals. Staffing arrangements that place licensed professionals under the control of a nonprofessional entity can create CPOM issues if they influence professional judgment or clinical decision-making. 

• The MSO holding itself out as the provider of professional services. Marketing materials, websites, or patient communications that blur who is providing care can undermine an otherwise sound 
  structure. An MSO brand that implies delivery of professional services may draw closer review from 
  Michigan’s Department of Licensing and Regulatory Affairs (LARA). 

• Long-term or effectively irrevocable management agreements. Agreements that make it very difficult for licensed owners to exit or replace a manager may indicate a transfer of control away from the professionals. 

• Financial arrangements that create leverage over professional judgment. Budget controls, fee structures, or other economic pressures that influence clinical decision-making can raise regulatory risk. 

• Management fees that exceed fair market value. An MSO should not be a vehicle to extract all of a professional practice’s profits. Management fees must reflect fair market value for services actually rendered. Overvalued arrangements may also implicate federal and state fee-splitting and anti-kickback statutes. 

Regardless of how legal documents are drafted, if licensed professionals do not maintain independent clinical decision-making in practice, the structure may violate Michigan’s CPOM framework. 

Final Thoughts 

For physicians, dentists, chiropractors, and other professionals, CPOM concerns are easiest to address early and before documents are signed, investors are courted, or a management model becomes entrenched. In many cases, a targeted review can determine whether a structure aligns with Michigan’s requirements and what adjustments, if any, are needed. The first step is simply understanding when CPOM applies and why. 

This article is provided for informational purposes only and does not constitute legal advice. Every business's legal needs are different, please consult with legal counsel prior to taking any action.