Does the MSO Model Resolve Unlicensed Medical Practice Concerns?

In today’s video, we discuss how the MSO model can support a healthcare startup, let’s say for Women’s Health or Men’s Health or any other kind of specific medical concept.

Hi, I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. We provide legal strategies and solutions to healthcare companies just like you so you can navigate the legal landscape and launch, or continue to scale, your health and wellness product or other success.

Bob, our prototypical healthcare client here, wants to open a venture together with a physician, Let’s say to provide Men’s Health, or Women’s Health, or geriatric care, memory care, sleep care, fertility and reproductive health services, addiction counseling, or some other health and wellness specific service.

Let’s say that Bob has found some product, which happens to be regulated as a Class I medical device and wants to use it to treat some healthcare condition that is typical in one of the above fields.  According to Bob, the device can be used without a prescription, that is, it need not be operated by an MD. Let’s say it’s just something you wave over the patient’s arm, at least that is what the manufacturer is telling him.

What Bob does not know is that whatever FDA might say about the product, and whether it’s prescription or non-prescription, there is a whole separate body of law which is State law and not federal law, and that prohibits the unlicensed practice of medicine.  There are many therapeutic devices out in the market like this that might even be handheld, does not require a medical prescription; yet, if they are marketed for therapeutic purposes, such products should not be employed or applied by a layperson just because of the FDA designation.

Bob has asked whether the COVID pandemic has liberalized the laws around telemedicine and therefore made it easier for him to conduct his healthcare venture. If only. Also included in Bob’s questions are issues of supervision—who should he involve? a medical doctor (MD), a nurse and should that be a Nurse Practitioner or simply an RN, what about a physician assistant (PA) or even medical assistant (MA)?

In a few simple strokes, Bob has asked a boatload of legal questions.  So let’s boil this down to its essence.  Bob wants his venture to provide therapeutic services and therefore he is at risk of unlicensed and/or corporate practice of medicine (sometimes known as “CPOM”).  States do differ as to how strictly they regulate corporate practice of medicine.  Some are liberal, some are less so. California tends to be on the stricter side, and since Bob is starting out in California this legal territory does require even more careful navigation.

Bob has asked about Stark and anti-kickback concerns, and fee-splitting, and he wants to know whether he has a viable business or whether he will run into legal roadblocks right away.

One thing that lawyers do is “issue-spot,” that’s when you explore the legal issues here, there is a tangled mess that requires some sorting through.

Supervision has to do with the relationship between the clinicians, such as for example the MD and the RN. California recently relaxed the requirement of in-person supervision, but that was for very specified medical spa therapies, such as those involving lasers.

There is another issue, which is whether States still strictly require an in-person visit to satisfy the requirement of a good faith, or “appropriate prior,” or “prior appropriate” medical exam before prescribing a treatment such as, frequently, Botox or other therapies used in medical spas.  Some of these requirements may have been informally relaxed during the COVID pandemic, but that still leaves physicians in the grey zone of enforcement discretion, if there is no written legal rule directly and point relaxing requirements of a good faith exam.

This is all separate and apart from the requirement that Bob use a structure that leaves clinical decision-making on the clinical side, and puts administrative or management and marketing decisions squarely on the business side.  For that, Bob can use the MSO model.

As part of this MSO model, the clinical personnel, including the nurses, the medical assistants, PA, etc., should be hired by the physician or the professional corporation (PC), not by the MSO.

As a layperson, Bob can own shares in the MSO but not in the PC (which in some states would be called a PLLC, or Professional Limited Liability Corporation).

For Bob’s structure, there is a lot to cover, which is why we often start our clients with a Legal Strategy Session which basically gives you an orientation to issue-spotting and untangle the mess, so you at least know what you’re looking at. It’s a great entry-level way to get an early read on the structure because your business structure is so foundational, we can give you some foundational recommendations.

Here’s to the success of your healthcare venture, we look forward to working with you soon.

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