Can a Non-Physician Own a Medical Practice?

There is a growing interest in healthcare investments and expanding opportunities for non-physicians to enter the healthcare and wellness industries as practice owners. These trends are changing the landscape of healthcare ownership, creating new possibilities for investors and entrepreneurs who aren't medically trained or legally able to provide healthcare. 

The article thoroughly examines the prerequisites, legal constraints, and strategic factors that non-physicians should know before determining whether they wish to own a medical practice successfully.

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Definition of Medical Practice Ownership

Owning a medical practice has different meanings for people with and without medical degrees. Depending on their background and business goals, they could have financial ownership (being an investor), operational control (running and managing specific components of a medical practice), or clinical responsibilities (offering services to patients). 

Types of Medical Practices

Examples of types of medical practices include:

• Private medical practice: a practice that's run and operated by one or several owners.
• Medical partnership: Two medical providers or a physician and non-medical provider who partner together to run a medical practice.
• Group practice: Two or more providers running single or multiple healthcare disciplines combined into one unit.
• Independent contractors: physicians who work as contractors for private or group practices.
• Solo practice: a practice without affiliations with other practices or partners. 
• Direct primary care: These models use a non-traditional payment system. Patients pay a flat membership fee on an annual, quarterly, or monthly basis for defined medical services without having to submit claims to insurance companies. 

6 Steps to Start a Non-Physician-Owned Practice

The following steps can help an individual start a non-physician-owned medical practice or determine if this business venture is right for them.

#1. Understand State Regulations

Understanding the importance of state-specific regulations that affect non-physician-owned medical practices is vital. Before opening this type of practice, the first step is to research state laws and consult with a healthcare attorney to ensure compliance with state regulations. 

For example, you might not need to be a physician to own or help operate a medical practice. Still, credentialed providers are the only people allowed to treat and offer recommendations to patients. Some medical providers, such as physician assistants, must work under the supervision of a medical doctor. 

#2. Form a Management Services Organization (MSO)

A Management Services Organization (MSO) can manage non-clinical operations while complying with state laws about non-physician ownership. 

Building an MSO benefits healthcare systems by improving quality and cost, incentivizing network expansion, and offering multi-payer managed care arrangements. 

MSOs centralize the management and administrative functioning of healthcare systems to leverage resources. They may provide:

• Strategic and administrative services
• Clinical decision support
• Technology
• Information systems support
• Quality control reporting and improvements
• Network development
• Advertising 
• Operations or clinical program design
• Care management
• Financial services
• Claims services
• Human resources
• Payroll
• Employee benefits
• Compliance

To set up an MSO, consult with an attorney, secure financing, and plan a host of management and administrative functions vital to the ever-changing healthcare industry. MSOs are gateways that allow providers to focus on outcomes and quality and enable the practice to better control spending.

#3. Partner with a Licensed Physician

A non-physician owner must partner with a licensed physician to oversee clinical operations, treat patients, abide by laws, and avoid liability concerns. Find a licensed physician to partner with and draft legal agreements before opening the practice.

Find a firm that assists in drafting, evaluating, implementing, and negotiating legally binding medical contracts with management services to ensure regulatory compliance. 

#4. Secure Financing

Financial requirements involved in starting a medical practice may be $70,000 to $100,000, depending on the practice's type, size, and location. There are costs associated with:

• Renting or purchasing office space
• Paying providers and other staff
• Staff benefits
• Medical equipment and supplies
• Advertising and marketing
• Medical-associated membership dues
• Facility maintenance 
• Insurance
• Operational expenses specific to the practice
• Continuing education for licensures
• Utilities
• Lab fees
• Legal fees

Potential funding sources for opening a non-physician-owned medical practice include personal contributions, investors, government-backed loans, and traditional loans. Create a business plan to secure financing.

#5. Obtain Necessary Licenses and Certifications

Proper licensing and certifications for a practice and its staff are critical. All medical providers must be appropriately certified and take continuing education to keep their licenses current. 

Obtaining licenses, certifications, and permits for a medical practice and staff may involve:

• National Provider Identification (NPI) number
• Clinical laboratory improvement amendment for an in-office laboratory
• Medical licenses from state medical boards
• License from the U.S. Drug Enforcement Administration (DEA) for dispensing medications
• Medicare enrollment for providers

Check with your state's requirements for offering telehealth services in multiple states. 

You can look up licenses via medical boards in the state you live in to ensure potential medical partners or employees have updated licenses. 

#6. Implement Compliance and Ethics Programs

Compliance with healthcare regulations and programs is essential to maintain high ethical standards. To create and implement an effective compliance and ethics program, consider the following:

• Create an organizational mission statement and values
• Develop and enforce ethical standards of behavior
• Implement quality-improvement practices
• Ensure comprehensive ethics resources
• Have an ethics committee
• Implement ethics training
• Hire employees who share similar organizational values
• Establish quality control standards

Focus on inclusion, equity, and diversity when establishing the culture of a medical practice.

Legal Restrictions on Non-Physician Ownership

While non-physicians can sometimes own a medical practice, mainly if they create an MSO, a physician must manage operations and patient care at a medical facility. Because of state laws, non-physician owners and investors are restricted from practicing medicine or making medical decisions that affect patients. 

State and Federal Regulations

The corporate practice of medical (CPOM) doctrine is a legal doctrine that prohibits non-physicians from practicing medicine. Some state laws and regulations allow non-physician ownership when partnering with a physician, though regulation variability exists from one state to the next.

For example, the Wisconsin (CPOM) law states that a medical practice must be 100% owned by one or more physicians, while in Texas, non-physicians may own it.

That's why it's vital to see an attorney specializing in state-specific laws before opening a medical practice to ensure you abide by the laws of your state. 

Exceptions and Loopholes

Exceptions and loopholes allow partial non-physician ownership while complying with state laws. For example, MSOs and professional medical corporations may be permitted in such partnerships. Consult with an attorney to gain a clearer understanding of your options. 

Models for Non-Physician Involvement in Medical Practices

Non-physician involvement in medical practices can occur without direct ownership. For example, non-medical professionals can legally participate in managing the business side of a medical organization. This may include financial bookkeeping, insurance claim submission, human resource management, paying bills, and purchasing equipment and office supplies. 

Management Service Organizations (MSOs)

MSOs allow non-physician owners to manage non-clinical aspects of medical practices while leaving clinical decisions to licensed physicians. MSOs provide the management and administration functions necessary for a medical practice to operate efficiently and succeed long-term, while physicians focus on direct patient care. 

Joint Ventures

Joint venture arrangements may include non-physicians partnering with physicians. Medical partnerships may occur with non-physicians and a single physician, multiple physicians, or a physician group. However, to limit liability, obtaining legal advice and contracts is critical before opening a medical practice as a non-physician. 

Benefits and Risks 

Non-physician ownership in a medical practice has potential advantages and disadvantages.

Benefits to Healthcare

Non-physician ownership may lead to improved efficiency, lower costs, and easier access to capital vs. physician-only owned practices. A non-physician owner might have more business or financial background than their physician partner. 

Risks and Challenges

Risks and challenges associated with a non-physician owning a medical practice include ethical, practical, and professional concerns. Potential impacts on professional autonomy also exist, as non-physicians must refrain from duties pertaining to treatment recommendations and patient care. 

Non-business owners are limited in their role of participating in the practice and must ensure they meet the legal guidelines of partnering with a physician.

Because non-physicians and physicians typically have varying professional backgrounds, it's vital to find a partner with whom you can collaborate well to avoid conflicts. 

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Key Takeaways

• Understanding and adhering to legal frameworks is critical when considering opening a non-physician-owned medical practice. 
• Conduct thorough research before gaining ownership in a medical practice to become familiar with state laws and regulations about owning and operating the practice.
• Consider forming an MSO.
• Obtain any necessary licenses and certifications.
• Implement compliance and ethics programs.
• Create a business plan, secure financing, and find the right medically-credentialled partner before opening a medical practice. 
• Seek professional guidance from an attorney to assist in meeting legal and regulatory obligations before pursuing medical practice ownership.