Physicians increasingly work in business arrangements involving hospitals, health systems, management companies, private equity groups, medical practices, telehealth companies, and other corporate entities. These relationships can provide valuable administrative and financial support, but they may also raise questions about who controls medical decisions.
In Mississippi, one of the principal sources of guidance is Policy 3.02 of the Mississippi State Board of Medical Licensure. The policy addresses the corporate practice of medicine and establishes important safeguards for physicians who are employed by or associated with business entities.
Although Mississippi does not broadly prohibit physicians from entering corporate employment arrangements, Policy 3.02 makes one principle especially clear: business ownership or management cannot override a licensed physician’s independent medical judgment.
What Is the Corporate Practice of Medicine?
The term “corporate practice of medicine” generally refers to the involvement of a corporation or other business entity in employing physicians or organizing the delivery of medical services.
Corporate-practice concerns frequently arise when an entity that is not owned or controlled entirely by physicians becomes involved in:
- Employing or contracting with physicians
- Operating a medical practice or healthcare facility
- Establishing clinical policies
- Setting fees for medical services
- Billing patients or insurance programs
- Advertising medical services
- Managing referrals
- Controlling staffing, scheduling, or treatment protocols
These business arrangements are increasingly common. However, the delivery of medical care remains subject to professional licensing requirements, patient-care standards, and healthcare fraud-and-abuse laws.
Physicians and organizations entering these arrangements should evaluate them as both business relationships and regulated healthcare relationships. Gilchrist Donnell’s healthcare law practice assists physicians and healthcare organizations with the overlapping legal, operational, and regulatory issues these structures may create.
Does Mississippi Prohibit the Corporate Practice of Medicine?
Mississippi does not impose a blanket prohibition against every corporate arrangement involving physicians.
Under MSBML Policy 3.02, the Board generally does not concern itself with the particular form or type of business arrangement entered into by a physician, provided the arrangement satisfies certain prerequisites.
This gives Mississippi physicians and healthcare businesses some flexibility when establishing employment, contractual, and management relationships. However, flexibility does not mean that every arrangement is automatically permissible.
Policy 3.02 identifies several important requirements concerning:
- Physician licensure
- Independent medical judgment
- Billing and professional fees
- Compensation for referrals
- Federal fraud-and-abuse compliance
- Patient choice
- Physician approval of advertising
- Ownership of professional corporations
Each requirement should be considered when drafting or reviewing a healthcare business agreement.
Physicians Must Be Properly Licensed in Mississippi
Policy 3.02 first requires that a physician employed by or associated with an entity be licensed by the Mississippi State Board of Medical Licensure.
A business cannot avoid Mississippi’s licensing requirements simply by characterizing the physician as an independent contractor, consultant, remote provider, or medical advisor. If an individual is practicing medicine in Mississippi, the appropriate Mississippi license and any required registrations must generally be maintained.
Healthcare organizations should establish procedures to verify physician credentials when the relationship begins and monitor license status throughout the term of the agreement.
Physicians Must Retain Control Over Patient Treatment
One of the most important provisions of Policy 3.02 concerns clinical independence.
The policy states that the method and manner of patient treatment must be left to the “sole and absolute discretion” of the licensed physician. The provision of medical services and the exercise of sound medical judgment must remain under the physician’s control and should not be subject to direct or indirect influence to the contrary.
In practical terms, a corporation, owner, manager, investor, or administrator should not pressure a physician to:
- Order medically unnecessary services
- Limit medically necessary treatment for financial reasons
- Use a particular treatment regardless of the patient’s condition
- Prescribe medication to increase revenue
- Refer patients to a preferred provider when another option is medically appropriate
- Allow unqualified personnel to perform medical procedures
- Approve clinical protocols the physician considers unsafe
- Alter medical documentation
- Place business objectives above patient welfare
Written contracts should reflect the physician’s clinical authority. More importantly, the organization’s actual operations should allow the physician to exercise that authority.
A contract may state that the physician controls medical decisions, but the arrangement may still create problems if business owners or managers routinely interfere with treatment.
Business Management and Medical Judgment Must Remain Distinct
Healthcare businesses often need centralized systems for scheduling, purchasing, staffing, billing, marketing, and other administrative functions. Policy 3.02 does not necessarily prevent a business from providing this type of management support.
The concern arises when administrative control becomes clinical control.
For example, a management organization may be able to develop administrative policies, maintain office space, employ nonclinical personnel, provide technology, and perform billing support. It should not use that authority to dictate diagnoses, treatment decisions, prescriptions, referrals, or other matters requiring professional medical judgment.
A well-structured agreement should clearly distinguish between:
- Business and administrative responsibilities
- Clinical and professional responsibilities
- Decisions requiring physician approval
- Decisions the management entity may make independently
- Procedures for resolving disagreements involving patient care
This distinction can be especially important in management-services arrangements, telemedicine businesses, physician-employment relationships, and investor-backed healthcare organizations.
Physician Employment Agreements Should Preserve Clinical Independence
Physician employment contracts frequently address compensation, schedules, productivity requirements, termination rights, restrictive covenants, professional liability coverage, and ownership of patient records.
Those provisions should be reviewed alongside Policy 3.02.
For example, productivity standards should not create incentives that undermine appropriate patient care. Termination provisions should address what happens when a physician refuses to follow a directive that the physician believes is clinically inappropriate. Contracts should also explain the physician’s authority to raise and document patient-safety concerns.
Healthcare employers and physicians can learn more about important contract provisions in Employment Agreements: 10 Terms Mississippi Healthcare Providers Should Review.
Physicians should also review any restrictions affecting their ability to practice after the relationship ends. Gilchrist Donnell’s article, Are Physician Non-Compete Agreements Enforceable in Mississippi?, explains how Mississippi courts may evaluate these provisions.
Who Controls Billing and Professional Fees?
Policy 3.02 also addresses billing and the fees charged for medical services.
The policy states that the manner of billing and the amount of fees and expenses charged to patients should, whenever possible, remain within the licensed physician’s discretion. It acknowledges that physicians participating in HMOs, PPOs, and other managed-care arrangements may give up some control over fees.
Billing responsibilities should be clearly addressed in the parties’ contracts. Physicians should understand:
- How claims are coded and submitted
- Whether claims are submitted under the physician’s provider number
- Who determines medical necessity
- Who reviews denied claims
- How billing errors and overpayments are handled
- Whether outside billing companies are used
- Who has access to billing records
- How the organization responds to audits
- Whether compensation is connected to collections or productivity
A physician should not assume that billing compliance is solely the responsibility of an administrator or outside billing company. If claims are submitted using the physician’s name, services, or credentials, improper billing may create risk for the physician as well as the organization.
Compensation Cannot Be Used to Induce Referrals
Policy 3.02 prohibits physicians from entering arrangements in which compensation is received as an inducement for:
- Patient referrals
- Referrals for medical services
- Referrals for medical supplies
- Hospital admissions
This requirement overlaps with significant federal healthcare laws, including the Anti-Kickback Statute and, depending on the arrangement, the Physician Self-Referral Law, commonly known as the Stark Law.
Potentially problematic arrangements may include:
- Compensation based directly on referrals
- Payments tied to hospital admissions
- Bonuses based on laboratory, pharmacy, or imaging volume
- Above-market payments for limited or undocumented services
- Free or discounted benefits provided in exchange for patient business
- Ownership interests offered to secure referrals
- Payments for services the physician does not actually perform
Healthcare organizations should ensure that compensation is commercially reasonable, reflects fair market value when required, and is supported by written documentation.
Gilchrist Donnell advises healthcare organizations on the Stark Law, Anti-Kickback Statute, False Claims Act, and other fraud-and-abuse compliance requirements.
Patient Choice Must Be Protected
Policy 3.02 recognizes that patients generally have the right to select and change their physicians and hospitals.
The policy acknowledges that patients participating in an HMO, PPO, closed-panel practice, or other managed-care arrangement may accept certain limitations. Even so, situations may arise in which a patient would be better served by a physician, specialist, facility, or hospital outside the contractual network.
When the physician believes an outside provider or facility would better serve the patient, Policy 3.02 states that the physician has an obligation to inform the patient. The patient can then decide whether to obtain the outside service at personal expense or remain within the available network.
A corporate relationship should not prevent a physician from discussing medically appropriate alternatives with the patient.
Physicians Must Approve Medical Advertising
Policy 3.02 gives licensed physicians sole responsibility for approving public communications and advertisements related to medical services.
This requirement can be particularly important when a healthcare organization uses a marketing agency, management company, franchise system, social media contractor, or nonphysician business owner.
Before publication, physicians may need to review:
- Website content
- Social media posts
- Paid advertisements
- Treatment claims
- Before-and-after photographs
- Patient testimonials
- Promotional offers
- Statements about physician involvement
- Descriptions of medical procedures
- Claims about treatment results
Advertisements must also comply with the Board’s requirements governing physician advertising.
A physician should be cautious about allowing a company to use the physician’s name, license, photograph, credentials, or professional reputation without a clear review-and-approval process.
Who May Own a Mississippi Professional Corporation Providing Medical Services?
Policy 3.02 also references Mississippi Code Section 79-10-31. Under that provision, shareholders of a professional corporation rendering medical services must be licensed physicians.
This requirement concerns professional corporations specifically. Other proposed entity structures should be evaluated based on the applicable Mississippi statutes, licensing requirements, tax considerations, and the nature of the services being provided.
The fact that an entity can be formed with the Mississippi Secretary of State does not, by itself, establish that every contemplated healthcare operation or ownership arrangement complies with professional licensing law.
Before establishing or restructuring a medical practice, the parties should review:
- The proposed legal entity
- Ownership eligibility
- Governance rights
- Voting control
- Clinical decision-making authority
- Management agreements
- Fee arrangements
- Professional liability
- Referral relationships
- Exit and ownership-transfer provisions
Policy 3.02 Is a Policy—Not a Statute or Administrative Rule
The MSBML website expressly explains that its board policies are policies rather than statutes or administrative rules. If a Board policy conflicts with an adopted rule or statute, the rule or statute controls. The Board’s current page states that its posted policies reflect revisions through December 2025. Mississippi State Board of Medical Licensure
Policy 3.02 should therefore be considered as one part of a broader legal and regulatory analysis.
A healthcare arrangement may also be governed by:
- The Mississippi Medical Practice Act
- Mississippi professional-entity statutes
- MSBML administrative rules
- Facility-licensing requirements
- Medicare and Medicaid participation rules
- The federal Anti-Kickback Statute
- The Stark Law
- The False Claims Act
- HIPAA and patient-privacy requirements
- Professional liability standards
- Contract and employment law
The applicable requirements will depend on the parties, entity structure, services, compensation, and sources of payment.
Common Red Flags in Corporate Healthcare Arrangements
Physicians should carefully examine a proposed business relationship if:
- A nonphysician manager has final authority over medical treatment
- The physician is asked to approve care without reviewing it
- Compensation is tied to referrals or admissions
- The business controls medical advertising without physician review
- The physician cannot access billing records
- Management pressures the physician to order unnecessary services
- Clinical protocols are developed without meaningful physician input
- The physician’s name or license is used primarily to legitimize the business
- The physician lacks authority to correct unsafe practices
- The agreement assigns responsibility to the physician without granting corresponding authority
- The physician is expected to supervise services outside the physician’s experience
- The business discourages medically appropriate referrals outside its network
These issues do not automatically establish that an arrangement is unlawful, but they may indicate that the agreement and business structure need closer review.
Questions Physicians Should Ask Before Signing
Before entering a corporate employment, ownership, or management arrangement, a physician should ask:
- Who has final authority over clinical decisions?
- Can the business change clinical protocols without physician approval?
- Who controls billing, coding, and fee policies?
- How is the physician’s compensation calculated?
- Is any payment connected to referrals, admissions, or service volume?
- Who approves medical advertising?
- Can the physician access patient and billing records?
- What happens if the physician objects to an unsafe practice?
- Does the physician have the authority to stop inappropriate care?
- Who is responsible for regulatory compliance?
- Does professional liability insurance cover the arrangement?
- Can the physician terminate the agreement immediately if continued participation creates licensing or patient-safety concerns?
The answers should be clearly reflected in the written agreements rather than left to informal expectations.
Corporate Practice Issues May Overlap With Medical Staff Governance
Corporate relationships can also affect credentialing, peer review, clinical oversight, corrective action, and medical-staff decision-making.
Hospitals and physician organizations should ensure that business leadership does not improperly interfere with processes that require independent clinical review or professional judgment. Clear bylaws, policies, documentation, and decision-making procedures can help protect both institutions and practitioners.
Gilchrist Donnell assists hospitals and physician organizations with medical staff governance and peer-review matters, including bylaws, credentialing, medical executive committee issues, and fair-hearing processes.
Frequently Asked Questions About the Corporate Practice of Medicine in Mississippi
Can a corporation employ a physician in Mississippi?
MSBML Policy 3.02 states that the Board generally does not concern itself with the form or type of business arrangement entered into by a physician, provided the arrangement meets the policy’s prerequisites. The physician must remain properly licensed and retain independent authority over patient treatment.
Can a nonphysician manager tell a physician how to treat a patient?
Business managers may oversee administrative matters, but Policy 3.02 provides that medical treatment and sound medical judgment must remain within the licensed physician’s discretion.
Can a healthcare company determine a physician’s fees?
Policy 3.02 states that billing methods and fees should, whenever possible, remain within the physician’s discretion. The policy recognizes that managed-care arrangements may limit the physician’s control over fees.
Can a physician be paid for referring patients?
Policy 3.02 prohibits arrangements in which compensation is received as an inducement for referrals of patients, medical services, supplies, or hospital admissions. Federal fraud-and-abuse laws may also apply.
Who approves advertising for a medical business?
Under Policy 3.02, licensed physicians have sole responsibility for approving public communications and advertising related to medical services. Advertising must also comply with the Board’s physician-advertising requirements.
Can nonphysicians own shares in a Mississippi medical professional corporation?
Policy 3.02 cites Mississippi Code Section 79-10-31, which provides that shareholders of a professional corporation rendering medical services must be licensed physicians. Other entity structures require separate legal analysis.
Does Policy 3.02 apply only to traditional medical practices?
No. Corporate-practice concerns may arise in hospitals, physician groups, telemedicine companies, management-services arrangements, medical spas, wellness businesses, investor-backed organizations, and other settings where a business entity is involved in providing or managing medical services.
Legal Guidance for Mississippi Healthcare Business Arrangements
Corporate healthcare arrangements can create opportunities for physicians and healthcare businesses, but the parties must preserve independent medical judgment and comply with state licensing requirements and federal healthcare laws.
Gilchrist Donnell helps physicians, medical practices, hospitals, healthcare companies, and other organizations evaluate:
- Physician-employment agreements
- Management-services arrangements
- Ownership and governance structures
- Compensation methodologies
- Referral relationships
- Billing and compliance responsibilities
- Medical advertising
- Fraud-and-abuse risks
- Clinical decision-making authority
If you are forming, acquiring, restructuring, or entering into a contractual relationship with a Mississippi healthcare business, contact Gilchrist Donnell to discuss the proposed arrangement before it is finalized.
This article is provided for general informational purposes only and does not constitute legal advice. The application of MSBML Policy 3.02 and other healthcare laws depends on the specific facts, parties, services, ownership structure, and financial relationships involved.
