Navigating the Challenges
Expanding a Medical Practice Across State Lines
The allure of expanding a medical practice across state lines is undeniable. The promise of reaching a larger patient base, capitalizing on underserved markets, or even just the appeal of starting fresh in a new location can be compelling. However, crossing state borders is not without its unique set of challenges. Among the foremost concerns are licensing issues and the critical aspects of entity structure, especially concerning the corporate practice of medicine and taxation.
1. Licensing – An Absolute Necessity
Before establishing a presence in a new state, physicians must ensure that they possess the requisite licenses.
Medical Licensing: Each state has its medical board and licensing requirements. While some credentials may be transferable, often a completely new set of examinations, verifications, and other formalities await. Some states may participate in the Interstate Medical Licensure Compact (IMLC), which can simplify the process, but it’s vital to be informed and prepared.
DEA Registration: If prescribing controlled substances, a new DEA registration for the new practice location will be necessary. DEA registrations are state and location-specific.
Controlled Dangerous Substances (CDS) License: Beyond the DEA, many states require an additional state-level CDS license. Requirements vary widely and may involve additional applications, fees, and even inspections.
2. The Corporate Practice of Medicine Doctrine
The Corporate Practice of Medicine (CPOM) doctrine, upheld in numerous states, prohibits business corporations from practicing medicine or employing a physician to provide medical services. This doctrine aims to ensure medical decisions are made by licensed physicians rather than corporate entities.
When expanding across state lines, practices must:
Know the Rules: Familiarize yourself with whether the state you’re moving to upholds the CPOM doctrine.
Structure Accordingly: If CPOM is enforced in the new state, consider structuring the practice such that non-physician owners are separated from the medical decision-making and revenue, often through management service organizations (MSOs) or similar entities.
3. Tax Implications and Entity Structure
The structure of your medical practice – be it a sole proprietorship, partnership, LLC, or corporation – can have far-reaching implications, especially when crossing state lines.
State Income Taxes: Different states have different income tax rates, and some states, like Texas and Florida, don’t impose a state income tax at all. Knowing this can influence your decision on where to establish a significant portion of your practice.
Sales and Use Taxes: If selling products (like eyewear or supplements), be aware of different states’ sales tax rates and regulations.
Franchise or Business Taxes: Some states impose a tax simply for the privilege of doing business there.
Entity Structure: Consider if restructuring your business entity will provide advantages in a new state. For instance, an LLC might be beneficial in one state, while a corporation could be more advantageous in another.
4. Continuous Monitoring and Compliance
Licensing and regulatory compliance doesn’t end once you’ve expanded. Continuous monitoring of ever-evolving state laws and regulations is crucial to remain compliant and avoid potential legal issues.
In Conclusion:
Expanding a medical practice across state lines offers exciting growth opportunities but is rife with complexities. Thorough preparation, a deep understanding of licensing requirements, and a keen eye on the implications of entity structures will be your best allies. Consider seeking expert counsel in medical licensing and business structuring to ensure a smooth transition and successful expansion.