Avoiding CPOM and Fee-Splitting Violations Inside Your MSO
These rules are the compliance backbone of every Management Services Organization. Still designing the structure? Our guide to setting up an MSO in Texas covers formation. This one covers the MSO you already run.
What Is the Corporate Practice of Medicine and Why Does It Matter for Your MSO?
CPOM bars non-physicians from employing physicians or controlling medical decisions. In Texas it sits in the Texas Occupations Code and is enforced by the Texas Medical Board.
How Does CPOM Directly Affect MSO Structures?
Billing, marketing, staffing, equipment, and administration are fair game. Clinical territory is not. Common violations:
- A non-physician owner directing care decisions
- MSO authority to hire or fire physicians
- Scheduling control that shapes clinical judgment
- Non-physician equity in the PC or PLLC
- The MSO as employer of record for physicians
Direct authority over clinical operations is a problem. See our CPOM page.
What Is Fee-Splitting and How Does It Show Up Inside an MSO?
Section 165.156 of the Texas Occupations Code bars splitting professional fees with unlicensed parties. Your management fee must reflect fair market value for real services; priced as a slice of clinical revenue, it starts to look like a split.
What Makes a Management Fee a Fee-Splitting Violation?
Regulators look at:
- Whether the fee tracks volume or clinical revenue
- Whether it resembles payment for referrals
- Whether it reflects fair market value
- Whether it is disguised profit-sharing
“40% of net collections” invites scrutiny; a flat fee backed by a detailed scope is defensible. The federal Anti-Kickback Statute applies wherever federal programs are involved. See our Stark and Anti-Kickback breakdown.
Where Do Most MSO Operators Go Wrong?
Most violations are unintentional, inherited from generic templates and non-healthcare advisers.
Are You Making These Common Structural Mistakes?
| Common MSO Mistake | Why It Creates Legal Risk |
|---|---|
| Percentage fee tied to revenue | Resembles fee-splitting or a kickback |
| MSO controls clinical hiring | Staffing decisions sit with a non-physician |
| No physician ownership of the PC | Directly violates CPOM in Texas |
| Vague scope of services | Ambiguity is read against you |
| MSO controls clinical records | HIPAA and CPOM exposure |
| Physician authority is nominal | Compliance on paper only |
The MSO structure is not the problem; the build is.
How Should a Compliant MSO Structure Be Built?
The physician-owned entity keeps clinical control. The MSO delivers defined non-clinical services at fair market value.
What Are the Core Elements of a Compliant MSO Agreement?
- Define scope precisely: billing, marketing, IT, equipment, non-clinical HR, facilities
- Set fair market value fees supported by a valuation
- Preserve physician authority over all clinical decisions
- Assign employment correctly: clinical staff to the PC
- Include real termination rights for the physician
See our breakdown of Management Services Agreements.
What Ownership Structure Protects You from CPOM Violations?
In Texas the physician owns the medical entity outright. Operators typically combine:
- A friendly PC governed by contract
- An option agreement granting rights, not equity
- A profit participation tied to non-clinical metrics
Drafted poorly, these become evidence of the violation you are avoiding. See CPOM for non-physician buyers.
How Do You Establish Fair Market Value for the Management Fee?
The fee must reflect genuine value for services rendered.
What Methods Are Used to Determine Fair Market Value?
- Cost approach: what buying each service separately would cost
- Market approach: published management fee surveys
- Income approach: the fee against earnings and industry norms
Flat and hourly fees defend more easily than percentages. Use a percentage only if you benchmark, document, and review it. The Office of Inspector General publishes advisory opinions to measure against.
What Role Does the Medical Director Play in MSO Compliance?
A Medical Director Agreement pays the physician separately for oversight and documents independence apart from the management fee.
What Should a Medical Director Agreement Include?
- Defined oversight responsibilities
- Separate compensation at fair market value
- Documentation of active clinical judgment
- Retained authority over protocols and supervision
See what the agreement should contain.
How Do Med Spa MSO Structures Create Unique CPOM Risks?
Med spas are marketed and staffed in ways that make clinical control look absent, yet injections and lasers cannot be directed by a non-physician owner.
What Does CPOM Compliance Look Like in a Med Spa MSO?
- The physician signs and updates protocols
- Delegations documented under Texas rules
- Evaluations and prescriptions from licensed providers
- Marketing that does not misstate the services
- A physician genuinely engaged, not a figurehead
Our medical spa team audits these, and we explain the MSO model for med spas.
“An MSO is not a workaround. It is a compliant way to separate business from clinical practice, but only when built correctly.” – Dike Law Group PLLC
What Are the Consequences of CPOM and Fee-Splitting Violations?
What Penalties Can CPOM Violations Trigger?
- License action by the Texas Medical Board
- Contract voidance of the management agreement
- Criminal liability for unlicensed practice
- Civil claims from patients harmed
- Program exclusion from Medicare and Medicaid
- False Claims Act exposure under the False Claims Act
Read more on the False Claims Act in healthcare.
How Should You Audit Your Existing MSO for Compliance?
A proactive audit costs far less than an investigation.
What Does an MSO Compliance Audit Examine?
- The MSA, read for CPOM and fee-splitting flags
- The fee against fair market value benchmarks
- Documented physician ownership
- Which entity employs which staff
- How clinical decisions are documented
- Option agreements creating de facto control
- Data-sharing and billing practices
Our Dallas compliance attorneys and Houston healthcare lawyers can review yours.
What Documentation Practices Protect Your MSO from Regulatory Scrutiny?
Your defense rests on what you can show in writing.
What Records Should Every MSO Maintain?
- A signed MSA with a detailed scope
- Monthly itemized MSO invoices
- FMV analysis supporting the fee
- Records of physician decision-making
- Current protocols signed by the physician
- Separate clinical and non-clinical employment agreements
- The Medical Director Agreement and proof of activity
- Formation documents showing physician ownership
See the components of a compliance plan.
How Does the Texas Medical Board View MSO Arrangements?
The Texas Medical Board requires physicians to keep control of operations and independent judgment, and it investigates complaints about improper arrangements.
Physicians in MSO structures need their own counsel, separate from the owner’s. If a license is at risk, our licensing defense team can help.
Can Non-Physicians Use an MSO to Operate a Medical Practice in Texas?
You can run the business around a practice, not the medical entity itself. A non-physician owner can:
- Own and lease real estate and equipment
- Provide billing, marketing, and administration
- Employ non-clinical staff
- Hold contractual rights rather than equity
A non-physician MSO owner cannot:
- Own equity in the medical entity
- Direct clinical care decisions
- Control medical records
- Employ clinical providers
See how non-physicians structure MSOs in Texas.
What Is the Featured Snapshot on CPOM and MSO Compliance?
Inside an MSO, compliance means the physician-owned entity keeps full clinical authority while the MSO delivers only non-clinical services at fair market value. Fee-splitting arises when fees are structured as a share of clinical revenue. Compliant MSOs rely on a detailed agreement, benchmarked fees, and documented physician independence.
Frequently Asked Questions About CPOM and Fee-Splitting in MSOs
Can a percentage-based management fee ever be compliant in a Texas MSO?
It can, with a robust valuation and a clearly defined scope. If the percentage tracks clinical revenue like profit-sharing, it raises fee-splitting concerns.
What is the difference between CPOM and fee-splitting?
CPOM bars non-physicians from controlling practices; fee-splitting bars sharing professional fees with unlicensed parties. A bad MSO often violates both.
Does CPOM apply to medical spas in Texas?
Yes. Injectables, lasers, and prescription therapies are the practice of medicine, so the physician must hold real authority. See our med spa guide.
Can a nurse practitioner own a medical entity in Texas through an MSO?
No. Texas requires physician ownership of entities practicing medicine. See our analysis of nurse practitioner scope of practice.
How often should an MSO agreement be reviewed for compliance?
Annually, and on any material change: new locations, new services, or a change in the physician relationship. A healthcare business attorney costs less than a failure.
What happens to the MSO if the physician leaves or loses their license?
The agreement should say, or the MSO loses its operational foundation. Succession terms must not hand clinical operations to a non-physician.
Does the Anti-Kickback Statute apply to Texas MSO management fees?
Yes, where the practice treats federal program patients. Fees above fair market value or rewarding volume may be kickbacks. The OIG safe harbors protect qualifying management contracts.
Ready to Build or Fix Your MSO the Right Way?
The MSO works when built correctly, or corrected before regulators notice. Starting fresh? Our Texas MSO formation playbook covers the build.
At Dike Law Group, healthcare law is the only thing we do. Visit 6160 Warren Parkway, Ste. #100, Frisco, TX 75034, call (972) 290-1031, or schedule a consultation.
Related resources:
- How to set up an MSO in Texas
- Management services agreements
- Medical director agreements
- Our Frisco office
Disclaimer: This article is intended for general educational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a qualified healthcare attorney familiar with Texas law and the Corporate Practice of Medicine doctrine.