While the Corporate Practice of Medicine (CPOM) doctrine generally prohibits certain unlicensed individuals and/or entities from engaging in or otherwise being impermissibly involved in the practice of medicine, there is no one-size-fits-all rule or federal law to provide clear guidance for investing in health care-related entities and state-specific regulations vary widely.

As outlined in our previous advisory Michigan’s CPOM doctrine combines statutory requirements and limitations and common law to generally prohibit unlicensed individuals or entities from owning or controlling medical practice entities. It also prohibits fee-splitting arrangements between licensed medical professionals and non-licensed individuals or entities. For example, Michigan’s Public Health Code defines an unethical business practice, in part, as the dividing of fees for the referral of patients. Additionally, Michigan’s Penal Code imposes criminal penalties on any physician or surgeon who (i) divides fees with, (ii) promises to pay part of their fee to, or (iii) pays a commission to any other physician or surgeon or person who consults with or sends patients to such physician or surgeon for treatment/operation. Other states approach the issues and implement the CPOM doctrine differently, though, and to different degrees.

Florida’s Approach to CPOM Compliance

Unlike Michigan, Florida does not explicitly prohibit the ownership or control of medical practice entities by unlicensed persons. However, the state has enacted laws that may impact certain CPOM-related issues, particularly regarding fee-splitting and health care referral practices.

Prohibition of Fee-Splitting in Florida

Florida statutory law prohibits any person, including any health care provider or health care facility, from engaging in any split-fee arrangement, in any form whatsoever to:

1. Induce the referral of a patient or patronage to or from a health care provider or facility;
2. In return for referring a patient or patronage to or from a health care provider or facility;
3. In return for the acceptance or acknowledgment of treatment from a health care provider or facility; or
4. Aiding, abetting, advising, or otherwise participating in the conduct prohibited above.

Florida also has two other split-fee-related statutes, which make it unlawful for any person to engage in any split-fee arrangement, in any form whatsoever, with any physician, surgeon, organization, agency, or person, directly or indirectly for patients referred to:

1. A licensed facility or
2. A pharmacy registered in the state.

Restrictions on Referrals and Unauthorized Practice of Medicine

In addition to fee-splitting prohibitions, Florida imposes strict restrictions on health care providers including:

1. Prohibiting health care providers from referring patients for designated health services to an entity which the health care provider is an investor or has an investor interest,
2. Prohibiting the unauthorized practice of medicine, meaning the practice of a health care profession or the performance or delivery of medical or health care services without a valid, active license to practice, and
3. Permitting the operation of a Professional Service Corporation (PSC) and Professional Limited Liability Company (PLLC).

Professional Service Corporations and PLLCs in Florida

In Florida, a PSC and a PLLC are defined as a corporation or limited liability company organized for the specific purpose of rendering professional service. Simply put, a “professional service” is defined as any personal service to the public which requires a license or other legal authorization to perform such service.

To become a shareholder of a PSC or a member of a PLLC, individuals and entities must be licensed or legally authorized in the same professional service. PSCs and PLLCs can only provide services through their licensed shareholders, members, managers, officers, employees or agents. However, “employee” in this context, excludes roles that do not typically require licensure like clerks, secretaries, bookkeepers and technicians.

Health Care Clinic Licensing Requirements

In addition to the regulations governing PSCs and PLLCs, Florida’s Health Care Clinic Act requires health care clinics with unlicensed non-physician owners, to obtain a clinic license to operate. Under Florida law, “clinic” is defined as “an entity where health care services are provided to individuals and which tenders charges for reimbursement for such services…” In other words, a clinic license is required if the clinic bills a third party for its services and is owned by non-physicians.

Clinic licensure must be obtained from Florida’s Agency for Health Care Administration (AHCA).

Exceptions where a clinic license is not required include:

1. Clinical facilities affiliated with accredited medical schools where training is provided for medical students, residents and fellows.
2. Sole proprietorships, group practices, partnerships or corporations that provide health care services by licensed health care practitioners and is fully owned by one or more licensed health care practitioners.

Those clinics that fall under an enumerated exception may apply for a certificate of exemption.

The state-specific regulatory landscape facing medical professionals and entrepreneurs is complex. Understanding these requirements is essential to avoid legal risks.