States soon followed by adopting the corporate-practice-of-medicine (CPOM) doctrine, which generally bars unlicensed lay entities from owning or controlling medical practices.

Why, despite the existence of CPOM laws in many states, has the corporate land grab in health care continued? And how can the CPOM doctrine be strengthened to protect both the medical profession and the public interest?

Almost three quarters of physicians in the United States are now salaried employees, with half of all physician practices owned by a hospital or corporate entity.1

Today’s corporate investors wield greater market power and pursue more aggressive revenue models than health maintenance organizations of the past; as a result of highly leveraged and multilayered deal structures, they also tend to be more insulated from risk.

There is growing concern, however, that corporations aren’t simply providing ancillary business and operational support but are also increasingly assuming control over clinical operations, management and staffing decisions, billing and coding practices, and negotiations with insurers — which may exert pressure on physicians to change care delivery.

Emerging empirical evidence suggests three primary risks that corporatized medicine poses: increased health care prices and spending owing to market consolidation and exploitation of payment loopholes,3 patient care concerns associated with changes in practice patterns and pressures to reduce staffing, and moral injury and burnout among physicians.4

Even in states with clear CPOM prohibitions, certain corporate entities, such as professional corporations (PCs), are permitted to deliver clinical services, as long as all or the majority of their owners are physicians licensed in the state.

A second key reason that CPOM laws haven’t prevented corporatization is the sophisticated use of management-services agreements, which allow corporate entities to circumvent corporate-practice restrictions.

Control is further cemented by requiring physician-owners of the PC to sign stock-restriction agreements, which prevent physicians from selling their interests or exercising certain rights in the PC without the approval of the MSO.

Physician-owners are often also obligated to sign tight noncompete and nondisclosure agreements.

The organization contends that Envision exercised a prohibited level of control over the physician group by means of stock-transfer agreements and oversight of staffing, physician compensation and work schedules, coding decisions, payer contracts, and performance standards.

First, they could close existing loopholes that permit corporate ownership. For example, although Oregon has physician-ownership requirements for PCs, limited-liability companies and partnerships can deliver medical services in the state without being subject to such requirements.

In other words, a PC wouldn’t be able to claim to meet the requirement of ultimate control by licensed professionals if such professionals were also representatives of the MSO.