California Physician PC Owner & CPOM Guide

California Business and Professions Code Section 2400 is the primary CPOM provision. It prohibits corporations from engaging in the practice of medicine or employing physicians to practice medicine. The law has been interpreted broadly by California courts and the Medical Board to cover arrangements where a non-physician entity exercises control over clinical operations.

California Senate Bill 351, effective January 1, 2026, represents the most significant tightening of CPOM enforcement in California in decades. The bill prohibits management agreements that give MSOs hiring and firing authority over physicians, control over clinical protocol development, or other operational authority over clinical decisions. The California Medical Board received enhanced audit authority. Operators with management agreements drafted before January 2026 should have them reviewed for SB 351 compliance immediately.

Despite strict enforcement, the MSO-PC structure remains valid in California when properly structured. The PC must be owned by a licensed California physician. The MSA must clearly delineate non-clinical management services and include affirmative physician independence provisions. The PC Operating Agreement must preserve physician governance over all clinical decisions. SB 351 adds specific prohibitions that must be reflected in updated documentation.

California medical professional corporations are formed under the Moscone-Knox Professional Corporation Act (Corporations Code §13400 et seq.). All shareholders must be licensed California physicians. The corporation must have "Medical Corporation" or "Inc." in its name and must be licensed by the Medical Board as a medical corporation.

The California Medical Board has a documented history of enforcement actions against CPOM violations, including cases involving medspa operators, telehealth companies, and MSO-backed practices. Recent enforcement has focused on management agreements that were structured to transfer effective operational control of medical practices to non-physician entities.