The healthcare sector in Colorado operates under specific regulations that determine who can legally own and operate medical practices. Understanding these rules prevents costly legal battles and protects your medical license. The Corporate Practice of Medicine (CPOM) doctrine stands at the center of these regulations, creating both challenges and opportunities for healthcare entrepreneurs in our state.
What Colorado’s Corporate Practice of Medicine Laws Mean for You
Colorado takes a firm stance on medical practice ownership compared to many other states. The fundamental principle behind these laws centers on maintaining medical decisions in the hands of licensed physicians, free from corporate influence that might prioritize profits over patient care.
According to a 2024 survey by the American Medical Association, 73% of physicians believe corporate influence negatively impacts clinical decision-making. This statistic highlights why Colorado maintains strict CPOM regulations.
The Colorado Medical Practice Act doesn’t explicitly mention CPOM, but multiple provisions effectively establish the doctrine through:
- Licensing requirements that limit medical practice to licensed individuals
- Professional corporation statutes restricting ownership
- Board of Medicine positions on management relationships
These rules affect everyone from solo practitioners to large healthcare groups, making compliance essential regardless of your practice size.
Who Can Legally Own a Medical Practice in Colorado?
The short answer: licensed physicians must maintain ownership and control of medical practices in Colorado. The longer answer involves several nuances:
Licensed physicians can own practices individually or through professional corporations (PCs) where all shareholders are licensed physicians. This restriction prevents non-medical investors or corporations from directly owning practices.
Physician assistants are permitted to have ownership in a medical practice but it must be a minority ownership. A physician must be the majority owner.
Dentists face similar restrictions but operate under dental practice laws rather than medical practice regulations. Unlike some states, Colorado keeps dental and medical practice ownership rules largely parallel. Dental hygienists are permitted to own a dental hygiene practice but not a dental practice.
Non-physician practitioners like nurse practitioners cannot independently own medical practices but may establish limited practices within their scope of practice. This creates a common misconception about ownership rights. Med Spas need to pay special attention to these rules.
The Colorado Department of Regulatory Agencies (DORA) actively investigates suspected CPOM violations, with penalties including license suspension or revocation. These investigations have increased 35% since 2023, demonstrating heightened enforcement.
The Management Services Organization Solution
Many healthcare businesses use Management Services Organization (MSO) models to navigate CPOM restrictions while allowing non-physician investment. This structure separates:
- The medical practice (physician-owned PC) handling clinical services
- An MSO providing management, marketing, equipment, and facilities
This arrangement works when structured properly but faces scrutiny on several fronts. The MSO must avoid controlling clinical decisions while providing valuable business services.
Key factors for compliant MSO structures include:
- Fair market compensation between MSO and practice
- Proper documentation of independent clinical authority
- Clearly defined scopes of services
- Appropriate termination provisions
MSO structures fail when management fees resemble profit-sharing or when the MSO exerts too much control over medical operations. Regulators look beyond legal documents to actual practice operations when evaluating compliance.
Med Spa Rules in Colorado
Med spas represent one of the most challenging areas for CPOM compliance due to their hybrid medical-aesthetic nature. In Colorado, med spa ownership follows these core principles:
Medical treatments like Botox, fillers, and laser treatments count as medical procedures requiring physician oversight. This means non-physicians cannot independently own businesses providing these services.
Dental spas face similar restrictions, though dentists can provide certain facial aesthetic treatments within their scope of practice. This creates opportunities for dental practice expansion while maintaining CPOM compliance.
Nurses, estheticians, and other non-physician practitioners must work under appropriate supervision when performing medical procedures. The supervision requirements vary by procedure and license type.
A properly structured med spa typically involves:
- A physician-owned medical entity providing treatment
- Potentially a separate entity handling non-medical services
- Clear supervision protocols
- Compliant fee structures
The popularity of med spas has brought increased regulatory attention, with DORA conducting targeted investigations of these businesses since late 2024.
Common CPOM Violations to Avoid
Several arrangements frequently trigger CPOM violations in Colorado:
Fee-splitting arrangements where physicians share professional fees with non-physicians based on referrals or services violate both CPOM and fee-splitting prohibitions. This includes percentage-based compensation for marketing or management. Legal advice regarding Stark Law and Anti-Kickback violations is highly recommended.
Employment of physicians by non-medical entities generally violates CPOM principles. While exceptions exist for hospitals and certain healthcare facilities, most businesses cannot directly employ physicians to provide medical services.
Control issues arise when non-physicians make decisions affecting medical judgment. Even subtle influence over scheduling, treatment protocols, or patient selection can constitute a violation.
Documentation problems occur when legal agreements don’t match operational reality. Regulators increasingly look beyond paperwork to actual control relationships.
Setting Up a Compliant Healthcare Business
Creating a CPOM-compliant business requires careful planning from the start. The foundation includes:
Begin with a clear understanding of which services count as medical versus non-medical. This fundamental distinction drives the entire business structure.
Consult with a healthcare attorney familiar with Colorado’s specific regulations before establishing business entities or relationships. Generic business lawyers that lack experience in or knowledge of regulatory law often miss crucial CPOM nuances.
Document everything properly, including:
- Operating agreements
- Management services agreements
- Employment contracts
- Clinical protocols
Establish clear lines of clinical authority that place licensed professionals in control of all medical decisions without interference.
Review compensation arrangements to ensure they reflect fair market value rather than disguised profit-sharing.
Changes on the Horizon for Colorado Healthcare Businesses
Colorado’s approach to CPOM continues evolving. Several trends warrant attention:
Telehealth expansion has complicated traditional practice models as providers treat patients across state lines. Each state maintains different CPOM rules, creating compliance challenges for multi-state operations.
Private equity investment in healthcare continues growing despite CPOM restrictions. These investors increasingly use sophisticated MSO structures to participate in the healthcare market while navigating ownership limitations.
Legislative efforts to modernize CPOM rules gained traction in early 2025, with proposed changes potentially allowing greater flexibility in certain practice areas while maintaining core patient protections.
When to Consult a Healthcare Attorney
The complex nature of CPOM requires specialized legal guidance in several situations:
- Starting a new healthcare practice or med spa
- Restructuring an existing healthcare business
- Receiving correspondence from DORA about potential violations
- Negotiating management or employment agreements and independent contractor agreements
- Expanding services into areas with different regulatory requirements
A healthcare attorney with CPOM expertise offers preventative guidance that helps avoid costly restructuring or penalties. The upfront investment typically saves substantial money and headaches later.
At Maureen West & Associates, LLC, I bring both legal expertise and clinical experience as a healthcare attorney who understands the practical realities of medical, dental, nursing and cosmetology and esthetician practices. This combined perspective helps create compliant structures that still achieve business goals.
Protecting Your Healthcare Business and License
Colorado’s CPOM doctrine exists to protect patients, but it creates real challenges for healthcare entrepreneurs. Understanding these rules helps protect both your business investment and professional license.
The most successful healthcare businesses in Colorado combine quality care with compliant business structures. By respecting the boundaries between clinical and administrative functions, these practices thrive while avoiding regulatory problems.For personalized guidance on CPOM compliance for your specific situation, schedule a consultation to discuss your healthcare business needs and ensure you’re building on a legally sound foundation. Contact Attorney Maureen West at maureen@maureenwestlaw.com or call 720.270.0488.
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