How Does the Corporate Practice of Medicine (CPOM) Impact Ketamine Practices?

The Doctrine That Determines Who May Own the Clinic

The corporate practice of medicine doctrine prohibits unlicensed entities from practicing medicine, employing physicians, or exercising control over clinical judgment. Thirty-three states enforce some version of this prohibition, and the version that applies to a ketamine clinic in California bears almost no resemblance to the version that applies in Florida, where the doctrine does not exist at all. The investor who proposes to open ketamine infusion centers in four states has proposed to contend with four distinct regulatory regimes, each of which defines the boundary between permissible ownership and unlawful corporate practice with a specificity that general business counsel has not been trained to recognize.

The doctrine originated in the early twentieth century as a judicial response to corporations that employed physicians and directed their clinical conduct. Its purpose was to preserve the independence of medical judgment from commercial pressure. Its consequence, a century later, is a patchwork of state-by-state prohibitions that determine whether a non-physician may hold equity in a ketamine practice, whether a management company may collect a percentage of clinical revenue, whether an investor may participate in decisions regarding staffing, marketing, or the selection of treatment protocols, and whether the corporate structure that counsel assembled at formation will survive the scrutiny of a medical board investigation that commences without prior notification.

The number of ketamine therapy clinics in the United States grew from fewer than 100 in 2015 to more than 1,500 by 2024, with industry estimates placing the market at approximately $3.9 billion. That expansion occurred across states with strict CPOM enforcement, states with dormant CPOM doctrines, and states with no CPOM prohibition whatsoever, and it occurred with a velocity that outpaced the capacity of many clinic founders to examine whether the ownership structure they selected at incorporation would remain defensible once regulators turned their attention to the sector.

What Strict Prohibition Means in Practice

California, New York, Texas, and Washington represent the most restrictive jurisdictions. In California, a layperson is categorically forbidden from holding an ownership interest in a professional medical corporation. Governor Newsom signed Senate Bill 351 on October 6, 2025, codifying elements of the state’s CPOM restrictions and imposing new prohibitions on private equity and hedge fund involvement in physician practices, effective January 1, 2026. The statute prohibits such entities from interfering with the professional judgment of physicians in determining what diagnostic tests are appropriate, how many patients a provider shall see in a given period, and whether referrals to other providers are indicated. The California Attorney General may enforce the statute through injunctive relief. A ketamine clinic in Los Angeles whose corporate parent exercises influence over treatment volume or protocol selection now confronts a statutory prohibition that did not exist in codified form eighteen months ago.

New York requires all medical practices to be owned by physicians, without exception. Medical practice in the state may occur only through a professional corporation or professional limited liability company authorized by the New York State Education Department. Compensation to management entities based on a percentage of physician revenue constitutes prohibited fee-splitting under New York law in most circumstances. Public Health Law section 2806 imposes penalties including license suspension, financial sanctions, and civil liability. The New York courts have, in recent years, narrowed the permissible scope of management service organization involvement in physician practices to a degree that has required several prominent telehealth ketamine operators to restructure their New York operations or withdraw from the state.

Washington may be the most restrictive jurisdiction of all. Courts there will not permit a management services organization to be involved in patient care, capital improvements, marketing, the setting of patient fees, the establishment of contractual relationships with payors, strategic planning, or the resolution of patient concerns. What remains, once those functions are subtracted, is the work of an office secretary and a bookkeeper. The management services agreement cannot share in the profits of the professional entity. The fees must reflect fair market value. The term cannot be excessive. A non-physician who invests in a ketamine clinic in Seattle expecting to participate in operational decisions of any clinical significance has invested in an entity whose regulatory environment will not accommodate that expectation.

The MSO Structure and Its Inherent Fragility

The management services organization model emerged as the primary mechanism through which non-physician capital enters the ketamine sector in CPOM states. The structure is familiar: a professional corporation or professional limited liability company, owned in its entirety by a licensed physician, employs the clinical staff and holds the DEA registrations. A separate management services organization, which may be owned by non-physicians, provides administrative support pursuant to a management services agreement. The MSO handles billing, human resources, lease negotiation, technology infrastructure, and other non-clinical functions. The physician entity pays the MSO a management fee. The physician entity retains exclusive authority over clinical decisions.

The structure is legally permissible in many jurisdictions when implemented with precision. It is, in practice, seldom implemented with precision.

The management services agreement that governs the relationship between a professional corporation and its MSO must delineate, with a clarity most template agreements do not achieve, the boundary between administrative support and clinical control. An MSO that selects the brand and dosage of ketamine to be administered has crossed that boundary. An MSO that determines which patients qualify for treatment has crossed it. An MSO that establishes productivity targets for physicians, that penalizes providers who decline to treat patients the MSO has approved, that controls access to the professional corporation’s bank accounts (a practice New York courts have identified as indicative of impermissible corporate control), that drafts clinical protocols and presents them to the physician as operational directives rather than as recommendations subject to the physician’s independent judgment, has constructed an arrangement that regulators will characterize not as a management relationship but as the corporate practice of medicine conducted through a nominal physician intermediary.

The management services organization that controls every operational dimension of a ketamine clinic except the one dimension that requires a medical license does not support a physician practice. It operates a physician practice through a physician whose ownership is formal and whose authority is nominal, and the regulatory consequence of that arrangement varies from license revocation to criminal prosecution depending on the jurisdiction and the investigator.

I should note that not every MSO arrangement in the ketamine sector reflects this pattern. There are management organizations that observe the boundary between administrative support and clinical authority with genuine discipline, that compensate the physician entity at fair market value through flat-fee or cost-plus arrangements, that maintain no access to clinical records except as necessary for billing, and that have submitted their management services agreements to counsel familiar with the CPOM requirements of every state in which the clinic operates. Those organizations exist. They are not, in my observation, the majority. The structure is sound when executed with the rigor the doctrine demands. The doctrine demands more rigor than most parties, at the moment of formation, are prepared to supply.

Fee-Splitting Prohibitions Compound the Structural Risk

The corporate practice of medicine doctrine and the prohibition on fee-splitting operate as distinct legal constraints that converge upon the same corporate arrangements. Fee-splitting statutes prohibit physicians from sharing professional fees with unlicensed persons or entities. In states that enforce both CPOM and fee-splitting prohibitions, the management services agreement between a physician entity and its MSO must satisfy the requirements of both doctrines at once, and the compensation structure that satisfies one may violate the other.

A management fee calculated as a fixed percentage of the physician entity’s gross revenue implicates fee-splitting prohibitions in jurisdictions that define the sharing of professional fees to include percentage-based compensation to non-physician management companies. California, New York, Texas, and Ohio each maintain prohibitions that encompass this structure, though the specificity of enforcement varies. The management fee that one state’s medical board regards as a permissible payment for administrative services, another state’s board will regard as a division of professional fees with an unlicensed entity, and the determination often depends not on the percentage itself but on the degree to which the MSO’s operational involvement suggests that the management fee constitutes, in substance, a distribution of clinical revenue to the entity that controls the clinical operation.

There are states that do not maintain statutory fee-splitting prohibitions. Alaska, Arkansas, Connecticut, Colorado, Indiana, Iowa, Louisiana, Maine, Massachusetts, Mississippi, Missouri, New Hampshire, New Jersey, North Dakota, Oregon, Pennsylvania, South Carolina, and Wyoming have no such prohibition in statute or regulation. The absence of a fee-splitting prohibition does not eliminate CPOM risk. A state may permit percentage-based compensation to a management company while prohibiting the management company from exercising clinical control. The fee structure is permissible. The operational structure through which the fee is earned may not be.

The Friendly Physician Model and Its Vulnerabilities

The arrangement the industry refers to as the “friendly PC” or “captive PC” model warrants particular examination, because it represents the structure most common among venture-backed ketamine platforms and the structure most vulnerable to regulatory challenge. In this arrangement, a non-physician investor identifies a licensed physician willing to serve as the nominal owner of a professional corporation. The physician’s name appears on the corporate filings. The physician holds 100 percent of the equity. The physician may or may not participate in the clinical operations of the practice. The management services organization, controlled by the non-physician investor, provides all operational infrastructure and collects a management fee that, in many instances, constitutes the majority of the professional corporation’s revenue.

The arrangement resembles the relationship between a landlord and a tenant, except that the tenant holds the lease, pays the rent, selects the furnishings, determines the occupancy schedule, and retains the right to change the locks, while the landlord’s name appears on the mailbox and nowhere else. The regulatory authorities in strict CPOM states have demonstrated an increasing capacity to identify this arrangement and an increasing willingness to prosecute it.

In late winter 2026, as enforcement attention toward ketamine clinics continues to intensify in the wake of the Matthew Perry prosecution and the COPE Ketamine Clinic indictments in St. Louis, the friendly physician model presents vulnerabilities at multiple levels. The physician who serves as nominal owner assumes personal liability for the practice’s regulatory compliance, including DEA registration obligations, controlled substance record-keeping, and the clinical adequacy of patient care delivered under the physician’s license. The MSO that controls the practice’s operations assumes no such liability in its corporate capacity but may, if the arrangement is characterized as the unlawful corporate practice of medicine, face civil penalties, disgorgement of management fees, and potential criminal exposure in jurisdictions where CPOM violations carry criminal sanctions.

The physician who agrees to serve as the friendly owner of a ketamine practice controlled by a non-physician MSO has, in a very precise sense, agreed to bear the regulatory consequences of decisions made by persons who possess no regulatory obligation to bear those consequences themselves. That asymmetry is the structural deficiency the doctrine was created to prevent.

States That Permit Corporate Ownership and the Risks That Remain

Florida does not maintain a corporate practice of medicine doctrine. Non-physicians may own medical practices, employ physicians, and operate ketamine clinics without the structural intermediation that CPOM states require. The regulatory terrain is not unobstructed. A medical practice in Florida that is not 100 percent physician-owned and that bills insurance must obtain a Health Care Clinic License from the Agency for Health Care Administration. Fee-splitting prohibitions apply to arrangements where management fees are tied to referrals. Physicians must retain full control over clinical decisions regardless of the ownership structure.

Minnesota permits not-for-profit corporations to practice medicine but prohibits for-profit corporations from doing so. Arizona’s CPOM doctrine has been characterized as dormant, though not extinct, and the state’s courts have not addressed its application to ketamine clinics with specificity. Oregon, which does not impose a statutory fee-splitting prohibition, introduced legislative proposals in 2024 that would have imposed new restrictions on corporate involvement in ketamine clinic operations, reflecting a national trend toward increased scrutiny of non-physician ownership in the psychedelic and dissociative medicine sectors.

The states that permit corporate ownership of medical practices offer structural simplicity. They do not offer regulatory immunity. The DEA registration requirements, the controlled substance record-keeping obligations, the state medical board’s authority to investigate clinical practice, the corresponding responsibility of pharmacists who fill prescriptions originating from clinics whose corporate structures suggest that clinical judgment has been subordinated to commercial objectives (although one might contend that the pharmacist’s inquiry into corporate structure exceeds the pharmacist’s dispensing obligation, the DEA’s enforcement position is that corresponding responsibility extends to circumstances where the totality of circumstances known to the pharmacist should have raised concern about the legitimacy of the prescription’s origin), these regulatory obligations apply regardless of whether the state recognizes the corporate practice of medicine doctrine. Ownership structure determines who controls the entity. It does not determine whether the entity’s controlled substance practices will withstand federal scrutiny.

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The Enforcement Climate That Transforms Structural Deficiencies into Proceedings

A corporate structure deficiency that persisted without consequence during the period of rapid ketamine market expansion will not persist without consequence in the enforcement environment of 2026. The DEA has identified ketamine clinics as a sector warranting heightened scrutiny. Administrator Anne Milgram compared the ketamine market to the early stages of the opioid epidemic. State medical boards have increased their investigative activity in the ketamine space. The convergence of DEA enforcement, medical board oversight, and state attorney general authority (now augmented in California by the statutory enforcement mechanism of Senate Bill 351) has produced an environment in which a ketamine clinic’s corporate structure is no longer a formation document filed and forgotten. It is an operational framework subject to examination by regulators whose analytical sophistication regarding MSO arrangements, friendly physician models, and fee-splitting structures has advanced with each successive enforcement action.

The 2024 prosecution of Dr. Asim Ali and Dr. Mohd Malik in connection with the COPE Ketamine Clinic in St. Louis illuminated, among other deficiencies, the consequences of a clinical operation in which ketamine was administered under one physician’s DEA registration while that physician was absent from the registered location. The structural failures in that case extended beyond registration compliance to encompass the operational architecture of a clinic in which the relationship between corporate control and clinical authority had not been delineated with the precision the regulatory environment required. The prosecution did not charge a CPOM violation as such. It did not need to. The operational dysfunction that CPOM doctrine exists to prevent produced the registration violations, the false statements, and the unlawful distribution charges that the government did charge.

A ketamine practice whose corporate structure cannot withstand regulatory examination is a practice whose clinical operations will, when examined, reveal the deficiencies that follow from that structural inadequacy: physician supervision that exists on paper but not in practice, record-keeping that serves the management entity’s billing objectives rather than the DEA’s documentation requirements, and a correspondence between the volume of ketamine administered and the revenue collected by the MSO that regulators will interpret as evidence that commercial imperatives governed clinical conduct.

The Structural Inquiry That Precedes All Others

The physician who operates a ketamine clinic, the investor who proposes to fund one, the management company that offers to administer one, each occupies a distinct position within the regulatory framework the corporate practice of medicine doctrine establishes. The doctrine’s application varies across jurisdictions. Its purpose does not. It exists to ensure that medical judgment is exercised by persons whose training, licensure, and regulatory accountability qualify them to bear responsibility for the consequences of that judgment. Where the corporate structure of a ketamine practice has separated the authority to make clinical decisions from the accountability for those decisions, the structure has produced the condition the doctrine prohibits, regardless of whether the documents filed at incorporation employed the correct nomenclature.

The regulatory environment that ketamine practices inhabit in the spring of 2026 does not afford the latitude that characterized the sector’s period of rapid expansion. The DEA’s enforcement trajectory, the enactment of California’s Senate Bill 351, the medical board investigations proceeding in multiple jurisdictions, the unresolved status of the telemedicine flexibilities upon which many ketamine platforms depend, these developments have transformed corporate structure from a formation question into an ongoing compliance obligation. The entity that was properly structured at inception may require restructuring if its operations have evolved beyond the boundaries its formation documents contemplated. The entity that was improperly structured at inception confronts a remediation task whose difficulty increases with each month the deficiency persists, because the regulatory record that accumulates during the period of noncompliance does not disappear when the structure is corrected.

A consultation with counsel experienced in CPOM compliance, controlled substance regulation, and the defense of healthcare providers under federal and state investigation is the occasion to determine whether a ketamine practice’s corporate architecture will sustain the scrutiny that the present enforcement climate has rendered not merely possible but probable. The inquiry concerns structure, but its implications extend to licensure, liberty, and the continued capacity to practice medicine in a regulatory environment that has demonstrated its willingness to withdraw that capacity from practitioners whose corporate arrangements placed commercial interests where clinical judgment was supposed to reside.