Washington Practice Structure Guide: The Professional Service Corporation, a Strict Common-Law Doctrine and the 2027 Non-Compete Ban

Entity and Ownership

Chapter 18.100 RCW governs professional service corporations. Owners must be individuals duly licensed or otherwise legally authorized to render the same professional services in Washington, stock may go only to such individuals or a qualified trustee, and transfers in violation are void. Health professionals licensed under a long list of chapters, including those for physicians, may share one corporation and are treated as rendering the same services. Directors and officers other than the secretary and treasurer must be licensed, services are rendered only through licensed individuals, and the shareholder list goes in the annual report. We found no medical board registration step, though our read of the chapter text was partial. A physician assistant statute says nothing prohibits physician assistants from owning their own practice or clinic.

The Corporate Practice Position

Washington's rule is common law and agency interpretation, with no corporate practice statute. A 2025 law-firm article says it rests on relatively scant case law. The Attorney General's 2020 opinion states the doctrine and cites State ex rel. Standard Optical v. Superior Court (1943) and Columbia Physical Therapy v. Benton Franklin Orthopedic Associates (2010), which held a physician-owned professional entity may employ physical therapists because the professional service corporation act authorizes it. Morelli v. Ehsan (1988) is reported as voiding a partnership between a physician and a non-physician, and we could not retrieve it. In 1997 a bill tried to end the doctrine for most health professions and Governor Locke vetoed the key sections.

The Medical Commission's medical director guideline, reaffirmed in October 2024, names a medical spa as a setting, says directors should ensure clinicians exercise independent clinical judgment and are not influenced by financial interests, and warns practitioners to be wary of arrangements with unlicensed persons, citing aiding unlicensed practice, corporate practice and fee-splitting, rebating and kickback risks. The Department of Health's med spa guidance flags the same risks and recommends an attorney. We found no published enforcement action against an MSO in 2025 or 2026, which is a negative finding from searches. The 2026 bill to codify the doctrine, 2SSB 5387, would have required licensees to own all voting shares, board seats and officer roles other than secretary and treasurer, and barred licensees from taking substantial compensation from a contracted MSO. It advanced to the Senate floor calendar and did not pass, and a return in 2027 is plausible but speculative.

The Management Agreement and Fees

Chapter 19.68 RCW bars licensees in medicine, dentistry and pharmacy from paying or receiving rebates, commissions, unearned discounts or profits for referrals or in connection with care, and requires charging only for services actually rendered. We found no Washington statute, rule or opinion approving or prohibiting a percentage-of-revenue management fee. A law-firm blog says courts look at substance, MSO control and payment, that fees should be fair market value and that an MSO should not control marketing, fee-setting or payer contracts or share in profits, which is risk guidance and not law. The unprofessional conduct statute covers false advertising, aiding unlicensed persons and failure to supervise.

The 2026 non-compete law, ESHB 1155, signed March 23, 2026 and effective June 30, 2027, voids all non-competes including those already signed, with exceptions for sale of a business or an interest of at least 1% and for franchises, allows non-solicits up to 18 months for customers with a direct relationship, and carries a penalty of the greater of damages or $5,000 plus fees. Until then, the existing salary thresholds apply. HB 2548, signed March 25, 2026 and effective June 11, 2026, broadened the transaction notice statute to require 60 days' notice to the Attorney General of changes of majority ownership or control. A provider organization is an entity representing seven or more providers in carrier contracting, so a single small cash-pay clinic and its MSO likely falls outside, which is our inference.

Med Spa and Aesthetic Rules

Washington has no med spa license or medical director statute. Medical Commission rules let a trained physician delegate laser, intense pulsed light and radiofrequency procedures to a properly licensed professional whose own scope allows device use, require the physician on the premises for the first treatment, a written protocol, a quality assurance program and consent disclosing that a non-physician may operate the device, and bar the delegate from independent judgment. A separate rule limits delegation of injectables and other prescription cosmetic devices to physician assistants, registered nurses and licensed practical nurses, requires the physician on site for non-FDA-approved uses and reachable within 30 minutes for approved ones. The Department of Health treats an IV hydration bag as a medication needing an order and has a work group considering IV, compounding, injectables and prescribing, with no rules yet.

How We Structure It

As a rule we set up a professional service corporation owned by the licensed physician, with no exceptions for what looks like a more flexible state. Patients pay the physician-owned practice. The practice pays the management company a fixed monthly fee under a written management services agreement. The management company pays MedGrid a fixed monthly retainer for consulting. The MSO never practices medicine, and the physician makes every clinical decision. In Washington the medical director is Washington-licensed, the agreement has no profit share and nothing in it moves control of marketing, fees or payer contracts to the MSO.

Disclaimer

This article is general educational information, not legal advice. Entity and corporate practice rules change, and parts of this summary rest on secondary sources, so have health care counsel in the state confirm the structure before you form or sign anything.