Fake or Real: Medical Director Agreements

February 5, 2020

Fake or real: Medical director agreements are not required in management services organization (“MSO”) arrangements.


What Is a Medical Director Agreement?

The purpose of a medical director agreement is to memorialize the responsibilities of a physician, which are typically entail supervision and delegation, and address physician compensation. In an MSO, the physician who owns the medical entity is usually the physician who is in charge of supervision and delegation. Where a single physician owns, delegates, and supervises, he or she would not need a medical director contract with themselves. Moreover, financial terms, including medical director compensation, are typically captured in the management services agreement (“MSA”) between the MSO and the physician-owned medical entity. Thus, medical director agreements are only necessary when a company is operating in states that allow non-physician-owned companies to contract with or directly employ physicians, and in MSO arrangements where the supervising physician is different than the physician owner.

Does Your Business Need a Medical Director Agreement?

To determine whether your company needs a medical director agreement, you should begin by looking to two places: (1) your state’s corporate practice of medicine doctrine, if any; and (2) any applicable supervision and delegation laws or regulations applicable to physicians.

CPOM and Supervision & Delegation Requirements

The corporate practice of medicine (“CPOM”) is a doctrine that prohibits an unlicensed individual or non-professional entity from: (i) practicing medicine; (ii) employing or contracting with a physician to practice medicine on its behalf; or (iii) interfering with or influencing a physician’s professional judgment or practice of medicine. This includes both the physician’s health care or medical decisions and business or management decisions that necessarily implicate the practice of medicine.

CPOM States

In CPOM states, such as California, Texas, and New York, the medical entity must be properly owned by a licensed physician. A company owned by a non-physician that employs a physician to render medical services and receives compensation in exchange for providing those services is structured in violation of CPOM. Where the MSO model is used to comply with CPOM prohibitions, a medical director agreement would be unnecessary, unless the physician-owner hires a different physician to supervise the medical entity’s operations.

Non-CPOM States

In non-CPOM states, such as Florida, non-physician-owned companies are allowed to contract with or directly employ physicians, so long as the physician’s professional judgment and practice of medicine are not interfered with. Therefore, a medical director agreement would be necessary to memorialize the responsibilities and compensation of a physician acting as a medical director. Such responsibilities typically are for treatment plans, supervision, and delegation, and are in accordance with state supervision and delegation laws or regulations that are applicable to physicians.

Have Questions About Medical Director Agreements?

If you have any questions about whether your company should have a medical director agreement, please contact ByrdAdatto at info@byrdadatto.com.

ByrdAdatto founding partner Michael Byrd

Michael S. Byrd

As the son of a doctor and entrepreneur, ByrdAdatto attorney Michael S. Byrd has a personal connection to both business and medicine.