SBA Question - California’s Corporate Practice of Medicine

April 13, 2026

by a searcher from University of Wisconsin - Milwaukee in United States

California's CPOM Disclosure: Pursuant to California’s Corporate Practice of Medicine (CPOM) laws, ownership must comply with state regulations. Eligible ownership includes a licensed healthcare professional (MD, DO, DC, NP, or similar) or a compliant structure involving a licensed, physician-friendly medical director. A Professional Corporation (PC) and/or Management Services Organization (MSO) structure may be required to ensure compliance. Our plan would be to set up an MSO structure. There would be someone with a healthcare license (MD, RN etc.) that sets up an entity to approve administration of care and then we would set up an operating entity that employed everyone and kept profits (but gives some payments to the medical license holder). Does anyone know if this is structure would be acceptable with the SBA?

Reply by a searcher
from Rockhurst University in Danville, CA, USA

I don't know if the SBA works with MSO-PC structure, but please make sure you understand the MSO-PC model more thoroughly before you proceed. You can't just put anyone with a clinical license in charge of a PC, nor can the MSO employ everyone. The PC, particularly in CA, needs to have an appropriately licensed owner. RNs don't practice independently and can't simply be put in to approve care. If providing medical care, the PC will need to be owned by a physician; for a psychology practice, by a PsyD etc. The MSO cannot employ any clinicians - they must be employed by the PC, and paid by the PC. Also, the MSO cannot keep the profits of the PC. All revenue generated by providing clinical care must be collected by the PC. This includes insurance-based care as well as direct payments by patients. The MSO can only bill for services it provides to the PC, such as admin, billing, marketing, non-clinical personnel etc. Of course, by being aggressive, most revenue generated by the PC can be pulled into the MSO. This is what most models do. However, caution must be taken to set that up properly.

Reply by a lender
from University of Missouri in Denver, CO, USA

For an MSO, you must buy out an existing MSO or it would have to be looked at as a start-up. I do not believe you can do an acquisition of the main practice and then split it up into an operating company and an MSO. You would have to buyout an already existing MSO or have the main practice buyout the business and you start-up an MSO.

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