The Corporate Practice of Medicine Persists
Washington State, like many other states, generally prevents non-medical professionals from having ownership interests in businesses providing medical services. Washington State utilizes the Corporate Practice of Medicine (CPOM) doctrine, which in its simplest form, generally provides that a business entity may not employ medical professionals to practice their licensed professions. The CPOM doctrine ostensibly protects the relationships between medical providers and patients by keeping non-medical interests out of the equation. I previously addressed the CPOM in detail in a blog post here. Several exceptions to the CPOM exist. For example, professional entities, such as professional corporations (PCs) and professional limited liability companies (PLLCs) can engage in the practice of medicine because of the inherent requirement that the ownership structure consist of only like-kind professionals. Additionally, HMOs can employ physicians as well. Other arrangements in which licensed medical professionals can form businesses also may be available.
The CPOM involves a significant amount of uncertainty and complexity, in part because the Washington State legislature has yet to pass a law codifying the CPOM. Instead, the CPOM has its roots in Washington State case law, and that case law, unfortunately, remains relatively scant. For example, uncertainty exists around whether nonprofit hospitals can pass muster under the CPOM. Moreover, the legal effect upon non-medical practitioners engaged in the corporate practice of medicine, after litigation, can be uncertain and potentially catastrophic. The CPOM doctrine also varies dramatically from state to state, with some having much more stringent and codified standards (i.e., California, Colorado), some having the CPOM doctrine based in case law rather than statute (Washington, Arizona), and still some having no CPOM at all, and simply allowing the corporate practice of medicine (i.e., Alabama, Alaska).
Despite the scant case law, and the lack of codification, the CPOM remains an active part of Washington law. Indeed, on January 21, 2025, the Washington State legislature introduced Senate Bill (SB) 5387, to codify the CPOM, and expressly prohibit any non-licensed entities from owning a medical practice, employing licensed healthcare providers, or engaging in the practice of medicine. Indeed, SB 5387 would have created additional restrictions not currently found in the case law to prevent investors from financially aligning with physicians through affiliated practices. For example, it would prohibit shareholders, directors, and officers, from owning or controlling shares in a management services organization that contracts with a healthcare practice, or even serving as a director, officer, or employee of such an organization. Limited exceptions would still exist for licensed hospitals, entities controlled by licensed hospitals, private establishments, nursing homes, and some other establishments.
SB 5387 did not gain further traction, however, and the legislature has not passed it into law. As a result, Washington State has not adopted any additional restrictions through statute not currently found in the case law. Nonetheless, the CPOM doctrine remains alive and well in Washington State and it can create significant hazards for those who remain unaware of its restrictions, and who engage with entities that provide medical services.
The attorneys at Beresford Booth have significant experience navigating through the CPOM doctrine in both transactional and litigation contexts. If you need assistance with any business issues or disputes, including those involving the CPOM, please do not hesitate to contact Beresford Booth at info@beresfordlaw.com or by phone at (425) 776-4100.
