TL;DR — Key Takeaways

• California’s Corporate Practice of Medicine doctrine applies to telehealth platforms. A non-physician cannot directly own a telehealth medical entity in California.
• The standard structure is the friendly PC / MSO model. The technology platform and operations are owned by the MSO (open ownership). The medical services are owned by a physician-owned professional medical corporation.
• Each California patient must be seen by a California-licensed clinician. Out-of-state physicians cannot legally practice telemedicine on California patients without a California license.
• Asynchronous telehealth (questionnaire-only, no real-time interaction) is heavily restricted. Most clinical encounters in California require synchronous interaction or meet specific Medical Board exceptions.
• Multi-state telehealth platforms typically operate a separate physician-owned PC in each state with restrictive corporate practice rules.

Does CPOM Apply to Telehealth Companies in California?

Yes. California’s Corporate Practice of Medicine doctrine applies regardless of the modality of care. A telehealth platform that provides medical services to California patients is practicing medicine in California, and the medical entity providing those services must be a physician-owned professional corporation.

The Medical Board of California has been consistent on this point. The location of the physician, the format of the visit (video, phone, asynchronous messaging), and the technology used do not change the corporate structure analysis. Telehealth platforms that operate in California using a non-physician-owned medical entity face the same enforcement exposure as a brick-and-mortar non-compliant practice.

This affects venture-backed digital health companies, telemedicine startups, and large national platforms entering the California market.

Can a Non-Physician Own a Telehealth Platform in California?

A non-physician can own the technology platform and the operating company. They cannot own the medical entity that provides clinical care to California patients.

The standard structure separates the technology and operating business from the medical practice. The technology company (often a Delaware C-corp owned by founders, employees, and investors) provides software, marketing, customer support, billing infrastructure, and operations. A separate professional medical corporation, owned by a California-licensed physician, employs the clinicians and provides the medical services. The two entities operate under a management services agreement.

From the patient’s perspective, the experience is unified: one app, one brand, one user flow. From a corporate and regulatory perspective, the medical practice is legally distinct from the technology business. This separation is what allows non-physician investment in telehealth while complying with CPOM.

What Corporate Structure Does a California Telehealth Business Need?

The friendly PC / MSO model adapted for telehealth involves the following entities.

Operating company / parent. Usually the venture-backed entity. Can be a Delaware C-corp, LLC, or California corporation depending on tax and investor structure. Owns the technology, brand, and operational infrastructure.

California professional medical corporation. Owned by one or more California-licensed physicians. Employs all California clinicians who treat California patients. Holds the California fictitious name permit if operating under the platform brand name. Maintains a relationship with the operating company through the MSA.

Additional state PCs as needed. For multi-state telehealth, a separate physician-owned PC in each state with corporate practice restrictions (New York, New Jersey, Illinois, Texas, and others). The technology platform is the same; the medical entities are separate.

Management services agreement. Between the operating company (or a dedicated MSO subsidiary) and each state PC, with FMV compensation and CPOM-compliant scope.

Smaller telehealth operators with no investors and a single physician owner can simplify by having the physician own both the operating company and the PC. The structure scales up by separating ownership when investors come in.

How Does an MSO Structure Work for a Telehealth Company?

For a venture-backed telehealth company, the MSO is typically the operating company itself or a wholly-owned subsidiary. It provides all non-clinical services to the PC: technology, marketing, customer support, scheduling, billing back-office, IT, HR, supply chain (for any prescriptions or kits shipped), and regulatory compliance support.

The PC pays the MSO a management fee. The fee should be set at fair market value for the services delivered, documented through an FMV opinion or comparable methodology. Percentage-of-revenue fees are common in telehealth but require careful structuring to comply with BPC § 650 fee-splitting rules.

The PC is the contracting party with payers (when payer reimbursement is involved), holds the medical license and DEA registration, and owns the patient relationship and medical records. The MSO holds the technology IP, the brand, and the customer-facing systems. Patient consent forms and privacy notices identify the PC as the medical provider, even though the brand the patient interacts with is the MSO/operating company.

Done well, this is invisible to the patient. Done poorly, it creates compliance gaps that surface in Medical Board investigations or payer audits.

What Licensing Is Required to Operate a Telehealth Practice in California?

Physician licensure. Every clinician treating a California patient must hold an active California license. There is no telehealth-specific license. Out-of-state physicians cannot treat California patients, even by telehealth, without obtaining a California medical license. Limited Medical Board allowances exist for specific exceptions (consultations, follow-up care under defined conditions), but the default is that the treating physician must be California-licensed. [VERIFY: BPC § 2052.5 telehealth provisions and any 2024-2026 amendments.]

DEA registration and California pharmacy licensure. If controlled substances are prescribed (often for ADHD telehealth, weight loss platforms, mental health), DEA registration in the prescriber’s name is required. Federal Ryan Haight Act rules apply to controlled substance telehealth and have been the subject of evolving DEA flexibilities since the 2020 public health emergency. [VERIFY: current DEA telehealth controlled substance rules.]

Medical corporation registration. PC registered with the California Secretary of State and recognized under California’s professional corporation framework.

Fictitious name permit. If operating under a name other than the PC’s legal name.

Local and state business licenses. Standard registrations apply to the operating company and any physical California presence.

Pharmacy partnerships. Telehealth platforms that include medication shipping work with licensed pharmacies. The PC writes prescriptions; a separate licensed pharmacy fills them. Direct sale of prescription drugs by a telehealth platform without pharmacy involvement is not legal.

Asynchronous Telehealth and the Good Faith Exam

California requires a good faith examination as part of the prescriber-patient relationship. Asynchronous telehealth — where a patient fills out a questionnaire and receives a prescription without any synchronous (live) interaction — is heavily restricted in California for most clinical scenarios.

Some asynchronous workflows are workable when paired with synchronous clinician review or when limited to specific use cases (refills of established prescriptions, follow-up under defined protocols). Pure questionnaire-only workflows for new prescriptions face significant Medical Board scrutiny.

Telehealth platforms operating in California should map each clinical workflow against current Medical Board guidance and design synchronous touchpoints where required. National platforms importing pure-async workflows from less restrictive states create exposure when they expand into California.

Multi-State Telehealth Considerations

Telehealth platforms serving patients across multiple states need to address each state’s CPOM and licensure rules. California is one of the most restrictive states, alongside New York, New Jersey, Texas, and Illinois.

The standard pattern is a single technology platform paired with separate state-specific physician-owned PCs in CPOM states. This adds complexity but is the only way to operate compliantly at scale.

Companies that try to operate one national medical entity covering all states face the strictest state’s rules effectively. Where the strictest state is California, the structural cost of compliance can be significant. Building it correctly from the start is much easier than retrofitting after a Medical Board investigation.

This article is for general information and is not legal advice. For guidance on your specific situation, contact Bay Legal, PC at 650-668-8000 to schedule a consultation.