Illinois Med Spa Structure: The Physician-Owned Medical Corporation and Why Management Fees Get Reviewed
Illinois is where the corporate practice doctrine took its most famous shape in the 1930s. Today a physician-owned medical corporation is required and management-fee structures are closely reviewed for fee-splitting.
Key Highlights
- Illinois requires a physician-owned medical corporation, and management-fee structures are closely reviewed for fee-splitting.
- Illinois courts helped create the doctrine: in 1936 the state supreme court ousted a for-profit clinic corporation that employed physicians.
- In 1997 the same court declined to apply the doctrine to licensed hospitals, which is why Illinois is often cited as an example of how exceptions develop.
- For a med spa, the safe structure is a genuine physician-owned entity and a flat, fair-market management fee.
A State With a Long History
Illinois is central to the doctrine's history. In 1935 the Illinois Supreme Court held in Dr. Allison, Dentist, Inc. v. Allison that a corporate charter could not authorize a corporation to practice dentistry, and in 1936 People v. United Medical Service ousted a for-profit corporation that ran clinics staffed by licensed physicians. Those decisions are still cited around the country.
The Exception That Followed
The same court narrowed the doctrine in Berlin v. Sarah Bush Lincoln Health Center in 1997, declining to apply it to licensed hospitals. The result is a state where the doctrine is real but has defined edges, and where a med spa, which is not a hospital, sits squarely inside it.
What Illinois Requires of a Med Spa
A physician-owned medical corporation is required for the entity that practices medicine. Management-fee structures are closely reviewed for fee-splitting, so the management company's fee has to be a flat amount or documented cost-plus rate for services actually delivered, at fair market value, set in writing in advance. Percentages of collections, per-patient commissions and referral-linked pay are the arrangements to avoid.
Practical Checklist
- Real physician ownership: The owner is credentialed, compensated and engaged in clinical oversight, not a figurehead.
- Clean money flow: Patient revenue lands in the medical corporation's own account and is never routed through the management company.
- Written scopes: Both the management agreement and the medical director agreement describe defined work at a stated rate.
- Ongoing review: Refresh the fair market value analysis when your service mix changes.
Disclaimer
This article is general educational information, not legal advice. State law changes and depends on the facts of a clinic's structure, so confirm the specifics with health care regulatory counsel in the state before you rely on them.
MedGrid MSO provides management services to independently owned practices; it does not practise medicine and does not direct clinical decisions. Requirements vary by state and by service, and change over time — nothing on this page is legal or medical advice. Talk to us or your own counsel before making a structural decision for your clinic.