Buying a Medical Practice: Why the State Matters

Buying a medical practice is not the same transaction in every state, and understanding the legal and operational differences before making an offer can save a buyer considerable time, money, and frustration.

The Corporate Practice of Medicine

One of the biggest state-by-state differences involves the corporate practice of medicine, commonly called CPOM. These rules are designed to protect clinical judgment from control by unlicensed owners, but the restrictions vary significantly.

California is one of the stricter states. The Medical Board of California explains that corporations and other artificial entities generally do not have the professional rights needed to practice medicine. Professional medical corporations are permitted, but ownership and control requirements apply. A non-physician buyer therefore cannot simply purchase a California medical corporation in the same way they might acquire an ordinary commercial business.

New York also places substantial restrictions around professional entities. The New York State Education Department states that professional service corporations are generally owned by licensed professionals and must be properly organized to provide the professional service. New York also requires advance notice to the Department of Health for certain material healthcare transactions, which can add another step to larger acquisitions.

Texas has its own corporate practice restrictions and regulates the entities through which physicians practice. It permits some physician and physician assistant jointly owned entities, but ownership and management limitations apply. The important takeaway is that “I can afford to buy it” and “I am legally permitted to own it” are not always the same thing.

Florida Is Different

Florida’s framework is different, but buyers should not mistake that for a lack of regulation. The Florida Health Care Clinic Act broadly defines healthcare clinics and requires qualifying clinics to obtain a license unless an exemption applies. The statute includes exemptions for certain physician-owned arrangements, while licensed clinics may be required to appoint a medical or clinic director.

For a buyer, the entity structure, ownership, services provided, and billing model can therefore determine whether clinic licensure is required. This is particularly important for non-physician buyers. A healthcare attorney should review the proposed structure before a definitive purchase agreement is signed, rather than discovering a problem shortly before closing.

Asset Purchase or Equity Purchase?

State requirements may also influence whether a transaction is structured as an asset purchase or an equity purchase. In an asset deal, the buyer may acquire equipment, goodwill, intellectual property, phone numbers, websites, and certain contracts while operating through a new entity. In an equity transaction, the buyer purchases ownership of the existing company.

Neither approach is automatically better. Ownership eligibility, liabilities, taxes, payer agreements, licensing, contracts, and state law all matter. A purchase agreement cannot fix an ownership structure that was never permissible in the first place.

Do Not Assume Everything Transfers

Another common mistake is assuming everything moves automatically to the buyer on closing day. Payer agreements, credentialing, leases, provider contracts, licenses, registrations, and vendor arrangements may require consent, re-enrollment, notification, or entirely new applications.

This can become a cash-flow problem very quickly. A practice may look profitable on paper, but if the buyer cannot bill major payers immediately after closing, the first few months of ownership can become considerably less enjoyable. Credentialing and payer enrollment should be part of the transaction plan from the beginning.

Make the State Part of Due Diligence

Buyers naturally focus on revenue, adjusted earnings, patient volume, payer mix, and asking price. Those numbers matter, but medical practice due diligence needs to go further.

A buyer should understand who may legally own the practice, what licenses or registrations are required, whether contracts can transfer, how patient records will be handled, whether payer participation will continue, and whether state notifications or approvals are required.

Buying a medical practice can be an excellent opportunity, but it is not a one-size-fits-all transaction. The same structure that works in Florida may create significant problems in California or New York. An experienced medical practice business broker can help identify the commercial issues and coordinate the transaction, while qualified healthcare attorneys and accountants address the legal and tax details.

The goal is not simply to buy a practice. It is to buy one that you can legally own, successfully operate, and actually get paid for after closing.