Meri Brick|12/2/2021|4 min read

Is Your Business Operating Illegally?

A guide to the corporate practice of medicine for telehealth companies


There are a lot of regulations to be aware of when launching a telehealth company. All of these rules make it very easy to slip-up and unknowingly operate your business illegally. Obviously, that is something you want to avoid at all costs.

To help maneuver these evolving laws, we put together this expert guide with everything you need to know to legally operate your company. We’re here to ensure you can start confidently caring for your patients without the stressors of falling into legal trouble. Get your pen at the ready and let’s get started!

Common pitfalls

To start, let’s cover the most common legal pitfalls telehealth companies can fall into.

  • Neglecting to or incorrectly setting up a Professional Corporation (PC Group)

  • Not establishing a Managed Services Organization (MSO) or Parent Company

  • Forgetting to create a Master Service Agreement (MSA)

You might be thinking, ‘what in the world are all of those?’ Don’t worry, we’ve got you covered. Before we dive into what these are and what they mean to you, we need to first cover the legal doctrine that encompasses these pitfalls.

The corporate practice of medicine

According to the American Medical Association (AMA), the corporate practice of medicine doctrine prohibits corporations from practicing medicine or employing a physician to provide professional medical services. Many states have put their own regulations in place surrounding the doctrine; however, every state requires separating the professional entity (the health care practice in this case) with the managing entity.

Why was the Corporate Practice of Medicine established? There were two main concerns it was designed to address:

  • That healthcare professionals’ medical/healthcare decisions will be driven/influenced by the desire to generate profit, rather than the care of patients.

  • That non-licensed individuals or companies will be able to control medical practices and limit health care professionals’ freedom and earning capacity.

This doctrine was put in place to make sure these concerns don’t turn into a reality. They are meant to avoid the commercialization of medicine and the influence of corporations placing profit over patient health and safety. And for a good reason!

Now that you have the why, let’s look at the specifics surrounding PC Groups, MSOs and MSAs.

Professional Corporation (PC Group)

Setting up a professional corporation is the first step to operating a telehealth business legally. In the healthcare field, the PC group must be organized and owned by at least one physician in order to provide medical services to patients.

Each state is slightly different in terms of guidelines but a good estimate to follow is to have about one PC group per state that you are operating in. If you’re planning on scaling your company across all 50 states, that can be a sizable cost. The typical cost per state to set up a PC group is about $1,000 and takes 1-2 months to establish.

Typical PC group tasks include:

  • Employing the healthcare professionals needed to provide medical services

  • Signing off on the clinical policies and procedures of the corporation

  • Establishing the PC group’s hours of operation

  • Controlling all bank accounts of the PC group(s)

It’s a big task to set up and operate a professional corporation, especially if you are taking your services nationwide. There are options other than establishing your own PC group but we will get into that later on.

Managed Services Organization (MSO)

After you get your PC group up and running, you will also need a Managed Services Organization to operate your telehealth company. An MSO, sometimes referred to as a Parent Company, is the overarching umbrella that provides the non-clinical operations for your telehealth company. Some responsibilities that MSOs typically cover include:

  • Ensuring Medicare & Medicaid compliance

  • Handling billing, coding and collections on behalf of the PC group(s)

  • Managing credentialing

  • Employing the non-healthcare professionals for the business operations

There are many more responsibilities that fall under your parent company including tasks in operations, finance, human resources, credentialing and compliance. Its primary function is to take the back-office operations off the medical staff’s to-do list and ensure your business is compliant with the corporate practice of medicine laws on a federal and state level.

Master Service Agreement (MSA)

Once you’ve completed setting up your PC group(s) and MSO, it’s time to create a Master Service Agreement. An MSA is an agreement between the professional corporation and parent company that outlines the exact services being provided with all terms and limitations clearly laid out. This is considered the “Friendly PC” model.

In other words, the MSA allows the PC group(s) to contract with the MSO for the management of all non-clinical assets.

The risk areas

There are a ton of small details that are essential for compliance when managing and setting up these entities. Any small slip-up can end up in legal action. Some things to keep in mind when going through the setup process include:

  • The PC group and MSO must have separate names and identities

  • The entities are required to have separate management and oversight structures

  • The financial structure and bank accounts of the two must be separate

  • Decision-making roles must be defined between the clinical (PC group) and business (MSO) sides of the business

Failing to comply with these risk areas can result in major fines and in some cases, is considered a crime. Making sure you understand all the ins and outs of creating the two entities is essential so you can avoid the consequences that come with falling out of compliance!

Powering new and established telehealth companies

That was a lot of information, we know. But, there is a silver lining! You can hand over these daunting tasks to experts in the industry, like OpenLoop!

OpenLoop is a telehealth company dedicated to empowering other telehealth companies. What does this mean? Partnering with us gives you access to our PC Groups and MSO so you don’t have to worry about spending the time, money and resources setting them up. If you want to operate in all 50 states, you can. We have PC Groups established nationwide to support you and allow your company to focus on serving patients.

Some other tasks that we can take off your plate include:

We don’t stop there! We have a team working around the clock to help you check boxes off your to-do list. Sound like something you’d be interested in? We’d love to set up a time to chat with you on how we can help you reach your goals and fulfill your needs. Get in touch!

Share this article:


What's next?

Let's discuss your needs.

Discover more >

Explore our handpicked content.