How Does the Corporate Practice of Medicine (CPOM) Impact Ketamine Practices
The corporate practice of medicine doctrine is a state law principle that prohibits corporations from employing physicians to practice medicine or from exercising control over physicians’ clinical decisions. Its application to ketamine clinics varies significantly by state and has produced some of the most complex compliance questions in the ketamine practice space.
Most ketamine infusion clinics are organized as business entities, which may be corporations, limited liability companies, or other non-professional entities. If the non-physician entity directly employs the physician who prescribes and supervises ketamine administration, the employment arrangement may violate the CPOM doctrine in states that recognize and enforce it. The legal structures used to operate ketamine clinics must account for the CPOM doctrine in the relevant state, or the clinic’s operational structure may itself be unlawful regardless of its compliance with DEA and other federal requirements.
States That Enforce CPOM Strictly
States including California, New York, and Texas have strong CPOM doctrines that prohibit non-professional corporations from employing physicians or from exercising control over physicians’ medical decisions. In those states, ketamine clinics typically use a management services organization structure: the non-physician entity provides administrative, facilities, and operational support to a separate professional medical corporation or limited liability company that employs the physicians and makes the clinical decisions. The management services agreement between the MSO and the professional entity must be structured to avoid the prohibited corporate control over clinical decisions.
The MSO structure is legally permissible when properly structured but creates compliance complexity: the management services agreement must be at fair market value, the professional entity must retain genuine control over clinical decisions, and the operational relationship between the MSO and the professional entity must not functionally replicate the direct employment relationship that the CPOM doctrine prohibits. A poorly structured MSO relationship may violate the CPOM doctrine despite the nominal separation between the entities.
States With Weaker CPOM Enforcement
Other states have weaker or essentially unenforced CPOM doctrines, and in those states ketamine clinics may operate as directly integrated entities without the MSO structure that stricter CPOM states require. The legal analysis for a specific clinic’s operational structure must begin with an assessment of the CPOM doctrine in each state where the clinic operates.
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(212) 300-5196Multi-state ketamine clinic networks face the challenge of maintaining CPOM compliance across jurisdictions with different legal frameworks. A structure that is compliant in one state may require modification for another, and the management of multi-state compliance requires ongoing legal attention to each state’s current CPOM enforcement position.
The Anti-Kickback Statute Interaction
The corporate structure of ketamine clinics also creates potential anti-kickback statute exposure where the organizational structure involves financial relationships between entities that refer patients to each other. An investor in a ketamine clinic who also refers patients to that clinic may have an investment relationship that constitutes remuneration for referrals under the anti-kickback statute if the clinic bills Medicare or Medicaid for any services.
Most ketamine infusion therapy is not covered by Medicare or Medicaid, which significantly reduces the anti-kickback exposure for most clinic operational structures. But the esketamine administration that may be covered by Medicare, and any other ketamine-related services that are billed to federal programs, create the potential for anti-kickback exposure that the clinic’s organizational structure must address.
Todd Spodek
Lead Attorney & Founder
Featured on Netflix's "Inventing Anna," Todd Spodek brings decades of high-stakes criminal defense experience. His aggressive approach has secured dismissals and acquittals in cases others deemed unwinnable.
The corporate practice of medicine doctrine is a state law issue that the federal regulatory framework does not directly address. DEA compliance does not substitute for CPOM compliance, and CPOM compliance does not substitute for DEA compliance. The ketamine clinic that is DEA-registered, that maintains adequate controlled substance records, that documents its clinical services appropriately, and that is organized in compliance with the applicable state CPOM doctrine has addressed the primary regulatory dimensions of its operation. The clinic that has addressed one dimension while neglecting others has created the compliance gaps that generate regulatory and legal attention.
Legal Structure Counsel
The legal structure of a ketamine clinic is a matter that requires counsel experienced in healthcare corporate law alongside the DEA compliance and federal criminal defense dimensions. The attorney who understands the interplay of CPOM doctrine, anti-kickback exposure, state licensing requirements, and DEA regulatory obligations can advise on a clinic structure that addresses all of those dimensions simultaneously. The clinic that was structured by counsel who addressed only one dimension, whether the corporate structure or the DEA compliance but not both, has created vulnerabilities in the dimensions that were not addressed.
