Part 2 of 4 — The Legal Rules

The regulatory constraints that shape every medical practice deal.

With the framework in place, the next step is understanding the legal rules that govern who can buy a California medical practice and how. These rules are not optional deal points — they are constraints that determine whether your structure is even permissible. This post builds on the framework from Part 1 by adding the regulatory layer.

Corporate Practice of Medicine. California's Corporate Practice of Medicine doctrine holds that a medical practice must be owned by licensed physicians, and that unlicensed individuals and entities cannot own the practice or employ its physicians. A medical corporation must be at least 51% physician-owned, with only limited minority ownership permitted for certain other licensed professionals. If investors or a management company are involved, the deal typically requires a management services organization (MSO) structure to comply.

Licensing, enrollment, and credentialing. Much of what gives a practice its value is tied to licenses and enrollments that do not automatically transfer:

• Physician licenses and DEA registrations are individual and do not convey (transfer) with the practice.
• Medicare and Medi-Cal enrollments and payer contracts may require re-enrollment or re-credentialing, which can take months.
• Facility permits — such as radiology/x-ray registrations and clinic licenses — may need to be updated or reissued.

Fraud and abuse laws. Healthcare acquisitions sit inside a web of fraud-and-abuse regulation. The federal Anti-Kickback Statute and Stark Law, and California's own referral and fee-splitting prohibitions, restrict how compensation, referrals, and management fees can be structured. Arrangements that look ordinary in other industries can create real exposure in healthcare.

Privacy and records. Patient records carry obligations under HIPAA and California privacy law. The transfer of records, patient notification, and the buyer's assumption of the seller's compliance posture all need to be handled correctly — both to protect patients and to avoid inheriting a compliance gap.

How West Coast Health Law can help: We advise buyers on the full regulatory picture — CPOM-compliant structuring, credentialing timelines, fraud-and-abuse review, and privacy obligations. Next, we look at the mistakes buyers most often make when these rules are overlooked.

West Coast Health Law offers a FREE consultation which you may schedule by clicking the button on our website.

This article is provided for general informational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship. For guidance on a specific matter, contact West Coast Health Law.