Forming a medical practice or investing in one can be an exciting venture — but in New Jersey, it also comes with a unique set of legal considerations. Chief among them is the Corporate Practice of Medicine (CPOM) doctrine, a foundational rule that governs who can own and operate a medical practice in the state. At our firm, we regularly advise physicians and healthcare entrepreneurs navigating these complexities. Understanding CPOM is critical for anyone looking to establish a compliant and sustainable healthcare business in New Jersey.

The CPOM doctrine prohibits corporations or other business entities from practicing medicine or employing physicians to provide professional medical services. In short, only licensed physicians — or professional entities owned entirely by licensed physicians — can own and control a medical practice. This principle exists to protect the integrity of medical judgment. Lawmakers and regulators want to ensure that clinical decisions remain in the hands of medical professionals, not business executives or investors whose motivations might prioritize profit over patient care.

For many physicians and potential investors, CPOM can feel like a roadblock. Entrepreneurs often ask whether they can partner with non-physicians, form a joint venture with a hospital system, or bring in investors to scale operations. These are valid goals, and fortunately, there are legal strategies that can accommodate them — as long as the structure is carefully crafted to respect CPOM boundaries.

One of the most common workarounds is the Management Services Organization (MSO) model. Under this arrangement, the medical practice itself is owned and operated by a licensed physician or a professional medical corporation. The MSO, a separate legal entity, provides all non-clinical administrative services — such as office space, billing, HR, and marketing. The two entities are bound by a Management Services Agreement (MSA), which outlines the terms of the relationship.

It is crucial that the MSO never interfere with clinical decision-making. While the MSO can run the business side of the practice, it cannot hire or supervise physicians, dictate clinical protocols, or influence how care is delivered. This distinction must be crystal clear not only in day-to-day operations but also in contractual documents and financial arrangements. Any suggestion that the MSO exerts control over the practice of medicine could be deemed a violation of CPOM.

Failure to comply with the CPOM doctrine can have serious consequences. Noncompliant structures risk triggering regulatory scrutiny, invalidating contracts, jeopardizing medical licenses, and in some cases, attracting civil or criminal penalties. These risks often arise not from bad intentions, but from misunderstandings or poorly drafted agreements. That’s why it’s so important to involve legal counsel early in the planning process.

At our firm, we work closely with healthcare providers and investors to develop legally sound structures that support both compliance and business growth. This often includes entity formation, corporate governance, drafting MSAs, and advising on operational best practices. We also review existing arrangements to identify and resolve any compliance gaps before they become problems.

Ultimately, navigating the CPOM doctrine is about more than avoiding legal trouble — it’s about building a healthcare business that is ethically and structurally sound. With the right guidance, it is entirely possible to balance regulatory compliance with innovation, investment, and growth.

If you’re a physician or practice owner exploring opportunities in New Jersey, we invite you to reach out. Our attorneys are here to help you move forward with clarity and confidence, ensuring your practice is built on a strong legal foundation from day one.