The MSO and PC Model Explained for Telehealth Founders

Short answer: The MSO PC model telehealth founders use splits the business into two companies. A professional corporation (PC) owned by a licensed clinician delivers medical care, and a management services organization (MSO), which a non-clinician can own, provides the business services around it under a written management agreement. It exists because many states restrict who can own or control a medical practice. It only works when the clinical side keeps real control, so design it with a healthcare attorney.

If you are a non-clinician founder, the MSO PC model telehealth companies rely on is probably the first legal structure anyone mentions to you. You will also hear it called the “friendly PC” model. It sounds complicated at first, but the logic is simple once you see who does what. This guide walks you through why the structure exists, how the pieces fit, what the agreements usually cover, where founders get into trouble, and the questions to bring to your attorney.

Why the MSO PC model exists: corporate practice of medicine

The reason this structure exists is a legal doctrine called the corporate practice of medicine, often shortened to CPOM. In plain English, CPOM rules in many states generally say that a business owned by people who are not licensed clinicians cannot practice medicine, employ physicians to practice medicine, or control how licensed professionals make medical decisions. The goal is to keep clinical judgment in the hands of licensed people and out of the hands of investors or business managers.

Organized medicine takes this seriously. In June 2026, the American Medical Association adopted expanded policy stating that physician practices should remain majority owned by actively practicing licensed physicians who retain final authority over clinical decision-making. That is a policy position, not a law, but it tells you where the conversation is heading.

Corporate practice of medicine telehealth rules vary by state

There is no single national rule. Some states enforce corporate practice of medicine strongly, some have little or no restriction, and many sit in between with rules on fee splitting, licensing or who can employ clinicians. Telehealth adds a twist: under guidance from the Federation of State Medical Boards and the U.S. Department of Health and Human Services, the practice of medicine generally happens where the patient is located. So if you serve patients in many states, you may need to think about many states’ CPOM rules, not just the state where your company is formed.

The rules are also moving. Two recent examples show the direction:

• Oregon Senate Bill 951, signed in June 2025, places significant limits on MSOs, including restrictions on MSO owners and staff holding ownership or leadership roles in the medical entities they manage, and on MSOs controlling a practice’s clinical or business decisions.
• California Senate Bill 351, signed in October 2025, codified protections against private equity and hedge fund interference with physician judgment and limited what MSOs can control in certain arrangements.

You do not need to memorize these. You do need to know that “the way everyone set it up a few years ago” may not be how your state wants it set up today. That is the single best reason to hire a healthcare attorney before you form anything.

How the MSO PC model telehealth structure works

Think of your digital clinic as two companies working side by side. If you are new to the concept of a digital clinic, our explainer on what a digital clinic is is a good primer.

The professional corporation (PC)

The PC (or a professional LLC or professional association, depending on the state) is owned by a licensed clinician, usually a physician. In some states and service lines, a nurse practitioner may be able to own it, which we cover in how to start a telehealth company as a nurse practitioner. The PC is the medical practice. It employs or contracts the providers, holds the clinical responsibility, sets clinical protocols and makes every treatment decision.

The management services organization (MSO)

The MSO is a regular business company that a non-clinician founder can own. It provides non-clinical services to the PC: the brand, the website, marketing, technology, customer support, billing support, office functions and general administration. The MSO is where most founders spend their time and where most of the business value tends to be built.

The agreements that connect them

The two companies are tied together by contracts. The names vary by attorney, but the core set usually looks like this:

Who controls what

The line that matters most is clinical control. Here is a simple way to think about it.

In some states, even items on the business side of this table, like setting prices for medical services or coding decisions, may need to sit with the PC. That is why the table is a starting point, not a template.

Can a non-doctor own a telehealth company?

Often, yes, but “own” means something specific. In a state with strong corporate practice of medicine rules, a non-doctor generally owns the MSO, not the medical practice itself. You own the brand, the technology relationships, the marketing engine and the business operations. The licensed clinician owns the practice and the medical decisions. In states with little or no CPOM restriction, other structures may be possible. We cover the broader path in how to start a telehealth business without being a doctor.

What you should not do is assume. Some founders pick a structure because a friend used it, or because it worked in a different state. Your structure should be built for your states, your service lines and your plans for growth.

What makes a friendly PC model hold up

The phrase “friendly PC” refers to a PC owned by a clinician who is aligned with the MSO founder. There is nothing wrong with alignment. The risk is when the arrangement is a paper exercise, where the PC exists on paper but the MSO actually calls the medical shots. Regulators and courts tend to look at how the relationship works in practice, not just what the documents say.

Signs of a structure built to last:

• The clinician is real and engaged. The PC owner reviews protocols, oversees providers and is reachable, not a name on a filing.
• Clinical decisions are documented as the PC’s. Protocols, formularies and treatment criteria are approved and signed off by licensed clinicians.
• Management fees are set with care. Your attorney will advise on how fees are structured and documented. Many states have fee-splitting rules, and federal and state anti-kickback laws can apply in some situations, so fees should reflect the actual services provided.
• Marketing never pressures prescribing. No quotas, no bonuses tied to prescriptions, no copy that promises a patient will be approved.
• Separate books and bank accounts. Each entity has its own accounts, records and tax filings.
• Patient data flows under a BAA. Under HIPAA regulations (45 CFR 164.502(e)), a covered entity may share protected health information with a business associate only with documented assurances that it will be safeguarded.

Common MSO and PC mistakes telehealth founders make

1. Forming the entities before talking to an attorney. Restructuring later is slower and more expensive than setting it up right.
2. Copying documents from the internet. Templates rarely match your states or service lines and may include provisions your state now restricts.
3. Letting the business side write clinical protocols. The MSO can format and deliver intake, but the clinical content must be the PC’s.
4. Ignoring multi-state exposure. Serving patients in a state can bring that state’s rules into play.
5. Forgetting about the pharmacy side. Prescriptions flow from the PC’s providers to licensed pharmacies. If you offer compounded products, review how 503A pharmacies work, and remember compounded drugs are not FDA-approved.
6. Treating LegitScript as an afterthought. LegitScript Healthcare Certification reviews licensing and business practices, so your structure should be clean and documented before you apply. Our guide on how to get LegitScript certification for telehealth explains the process.

How to set up an MSO PC model for telehealth: step by step

1. Define your service lines and states. What will you offer, and where? This drives almost every legal answer.
2. Hire a healthcare attorney who works with telehealth. Ask for a written recommendation on structure for your specific states.
3. Identify the clinical owner. Choose a licensed clinician who is genuinely willing to own clinical responsibility, and confirm they hold the licenses your plan needs.
4. Form the PC and the MSO. Your attorney handles professional entity rules, which differ from standard LLC formation.
5. Draft and sign the agreements. Management services agreement, IP licensing, any transfer or succession provisions your state allows, and BAAs.
6. Build provider coverage. The PC needs licensed providers in each state you serve. See our guide to building a telehealth provider network.
7. Set up compliance basics. HIPAA policies, BAAs with vendors, and marketing review. Our telehealth compliance checklist covers the list.
8. Review annually. Laws change. Put a yearly legal review on the calendar, and review before entering any new state.

Questions to ask your healthcare attorney

• Do the states I plan to serve have corporate practice of medicine restrictions, and how strict are they?
• Do I need an MSO and PC structure at all, or would a simpler structure work for my plan?
• Who can own the PC in each state, and can a nurse practitioner own it for my service lines?
• How should the management fee be structured and documented in my states?
• Are stock transfer restrictions or succession provisions allowed where I operate?
• What happens if the PC owner wants to leave?
• Which of my planned marketing and pricing activities must the PC control?
• Do fee-splitting or anti-kickback rules affect how I pay any partner?

How WellieMD helps

WellieMD is a white-label telehealth platform built for founders who want to run a real digital clinic without losing the line between business and clinical work. We connect your brand to a licensed provider network, route prescriptions to licensed 503A pharmacies, and power branded intake, payments and subscriptions, refills, and labs and wearables. We sign BAAs, follow HIPAA practices and build with LegitScript readiness in mind. We are not your law firm, so we will always point you to a healthcare attorney for your structure, but we build it with you once your structure is set. See how it fits together on our white-label telehealth platform page, or book a demo and we will walk through your plan together.

Frequently asked questions

What is the MSO PC model in telehealth?

It is a two-company structure. A professional corporation owned by a licensed clinician provides medical care, and a management services organization owned by the founder provides business services like marketing, technology and administration. The two are connected by a management services agreement.

Why do telehealth companies use a friendly PC?

Many states have corporate practice of medicine rules that limit who can own or control a medical practice. A friendly PC lets a licensed clinician own the practice while a non-clinician runs the business side. It only holds up when the clinician keeps real control over clinical decisions.

Can a non-doctor own a telehealth company?

Often, yes, though in states with strong corporate practice of medicine rules the non-doctor usually owns the MSO rather than the medical practice. The rules differ by state and service line. A healthcare attorney can confirm what applies to your plan.

Is the MSO PC model legal in every state?

Many states allow it in some form, but rules differ and are changing. Recent laws such as Oregon Senate Bill 951 and California Senate Bill 351 added new limits on what MSOs can control. Always get state-specific advice before you form entities or enter a new state.

Do I still need a BAA between the MSO and the PC?

If the MSO handles protected health information on behalf of the PC, HIPAA generally requires a business associate agreement. The same applies to vendors who touch patient data. Your attorney can confirm how it should be set up.

This guide is general information, not legal advice. Corporate practice of medicine rules vary by state and change over time. Talk to a healthcare attorney licensed in your states before forming entities or signing agreements. Compounded medications are not FDA-approved.

Sources

• American Medical Association: AMA strengthens opposition to corporate practice of medicine
• Federation of State Medical Boards: Telemedicine policies
• U.S. Department of Health and Human Services, Telehealth.HHS.gov: Licensing across state lines
• Oregon State Legislature: Senate Bill 951 (2025)
• California Legislative Information: Senate Bill 351 (2025)
• 45 CFR 164.502, Uses and disclosures of protected health information (Legal Information Institute)