In addition to the labor law issues, integrative clinical care centers and medical spas (and other health care entities) must understand the corporate practice of medicine rules.



The corporate practice of medicine doctrine is a legal rule stating that corporations cannot practice medicine and therefore cannot control physician practices. Laws prohibiting the “corporate practice of medicine” vary by state. The ‘weak’ corporate practice of medicine prohibition precludes non-physicians from owning or controlling a PMC. This is typically embodied in the state statute setting forth the requirements for a PMC. The ‘strong’ corporate practice of medicine prohibition typically states that physicians who wish to utilize a corporate vehicle can only practice medicine through a PMC, and cannot provide medical services through a regular corporation or LLC. 


            California has a strong practice of medicine doctrine.



California prohibits the following ownership structures:

·         Non-physicians owning or operating a business that offers patient evaluation, diagnosis, care and/or treatment.

·         Physician(s) operating a medical practice as a limited liability company, a limited liability partnership, or a general corporation.

·         Management service organizations arranging for, advertising, or providing medical services rather than only providing administrative staff and services for a physician’s medical practice (non-physician exercising controls over a physician’s medical practice, even where physicians own and operate the business).

·         A physician acting as "medical director" when the physician does not own the practice. For example, a business offering spa treatments that include medical procedures such as Botox injections, laser hair removal, and medical microdermabrasion, that contracts with or hires a physician as its "medical director."

            In California, there are two statutes setting forth California’s prohibition against the corporate practice of medicine:


·         "Any person who practices or attempts to practice, or who holds himself or herself out as practicing…[medicine] without having at the time of so doing a valid, unrevoked, or unsuspended certificate…is guilty of a public offense."[1]

·         "Corporations and other artificial entities shall have no professional rights, privileges, or powers."[2]


            The Medical Board of California explains that the rule is “intended to prevent unlicensed persons from interfering with or influencing the physician’s professional judgment.” The Board states that the following health care decisions should be made by a licensed physician and cannot be made by an entity such as the Center:

·         Determining what diagnostic tests are appropriate for a particular condition.

·         Determining the need for referrals to, or consultation with, another physician/specialist.

·         Responsibility for the ultimate overall care of the patient, including treatment options available to the patient.

·         Determining how many patients a physician must see in a given period of time or how many hours a physician must work.

            In addition, the Board prohibits entities such as the Center from making the following business" or "management" decisions and activities:


·         Ownership is an indicator of control of a patient’s medical records, including determining the contents thereof, and should be retained by a California-licensed physician.

·         Selection, hiring/firing (as it relates to clinical competency or proficiency) of physicians, allied health staff and medical assistants.

·         Setting the parameters under which the physician will enter into contractual relationships with third-party payers.

·         Decisions regarding coding and billing procedures for patient care services.

·         Approving of the selection of medical equipment and medical supplies for the medical practice.

            According to the Board, these kinds of decisions result in control over the physician’s practice of medicine. A physician may “consult” with the Center about these decisions, but must retain ultimate control over them.

[1] Business & Professions Code, Section 2052.

[2] Id., Section 2400.


Healthcare & FDA attorney Michael H. Cohen is a thought leader in healthcare law & FDA law, pioneering legal strategies in healthcare. wellness, and lifestyle markets. As a corporate and transactional lawyer, FDA regulatory attorney who also handles healthcare litigation, healthcare mediation and healthcare arbitration, and international healthcare & wellness law speaker, Los Angeles / Bay Area healthcare & FDA lawyer Michael H. Cohen represents conscious business leaders in a transformational era. Clients seek healthcare & FDA attorney Michael H. Cohen’s legal savvy on all aspects of business law, healthcare law, and FDA law, including:

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