Who Really Controls the Medical Practice? Understanding New Jersey’s Corporate Practice of Medicine Doctrine
May 11, 2026 | Written by: | Share
As healthcare businesses expand across state lines, many entrepreneurs and investors are discovering that ownership models permitted elsewhere may violate New Jersey law. Unlike some states that allow varying degrees of non-physician ownership of medical practices, New Jersey strictly enforces its Corporate Practice of Medicine (“CPOM”) doctrine.
Who Can Own a Medical Practice in New Jersey?
Under New Jersey law, medical practices must be owned by licensed healthcare professionals. And each owner must hold the same professional license as the practice’s highest-level licensed provider. For example, a licensed physician’s assistant cannot be an owner of a practice in which a licensed medical doctor (MD) provides services.
Permitted ownership structures may include:
- Sole proprietorships
- Partnerships
- Professional associations (PA)
- Professional Corporations (PC)
- Certain Limited liability companies (LLCs)
The Role of Management Services Organizations (MSOs)
Although non-physicians cannot own or control a medical practice, New Jersey law does allow certain business relationships through Management Services Organizations (“MSOs”).
An MSO may provide non-clinical administrative support to a physician-owned practice through a Management Services Agreement (“MSA”).
Typical MSO services may include:
- Billing and collections
- Human resources administration (except licensed provider staffing)
- Marketing and scheduling
- IT and compliance support
- Leasing office space and non-medical equipment
The key distinction is that the MSO may support the business side of the practice, but it cannot control the clinical practice itself.
In general, MSOs are prohibited from:
- Clinical decision-making
- Licensed provider staffing
- Controlling medical practice bank accounts
- Owning medical/clinical equipment
Scrutinization of MSO Financial Arrangements
NJ carefully scrutinizes financial arrangements between medical practices and MSOs. In general:
- Licensed clinicians must retain control over profits and losses
- Licensed clinicians must control how practice revenue is distributed
- MSO fees should reflect fair market value
- MSO compensation should not be tied to patient volume or profits
Compliance Considerations
For healthcare businesses operating in New Jersey, compliance with the CPOM doctrine requires more than properly drafted documents. Courts and regulators will examine the actual day-to-day relationship between the practice and the MSO to determine who truly controls the practice.
Healthcare providers, investors, and management companies should carefully evaluate ownership structures, operational authority, and compensation arrangements to avoid significant legal and regulatory exposure.
For assistance structuring a healthcare practice or an arrangement with an MSO, please feel free to contact me at 908-735-5161 or via email.
Kimberly L. Forino, Esq. concentrates her practice primarily in the areas of business and transactional law, insurance defense, municipal law, land use, employment law, and general litigation.
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Any statements made herein are solely for informational purposes only and should not be relied upon or construed as legal advice.