A licensed physician owns the Professional Corporation (PC), which employs or contracts the clinicians and charges patients directly for care. The management services organization (the LLC)holds everything else (technology, staffing, contracting, compliance infrastructure) and is paid by the PC under a Management Services Agreement. MedGrid is a consulting agency: it advises and provides non-clinical services to the LLC, and is paid a fixed monthly retainer for doing so.
Structure Primer
How the MSO and PC Model Works
MedGrid builds and administers the business side of medical practices. The medicine itself sits in a separate, physician-owned entity. Every practice in the model is cash-pay only: no insurance billing and no Medicare or Medicaid enrollment. This page explains why the two entities exist, what each one does, how they contract with each other, and how the arrangement changes between states that restrict the corporate practice of medicine and states that do not.
One Entity Cannot Be Both the Doctor and the Business
Most states hold that only a licensed physician, or an entity owned by licensed physicians, may practice medicine, employ physicians to treat patients, or hold the professional relationship with a patient. That doctrine is called corporate practice of medicine (CPOM). A general-purpose company funded by outside investors cannot itself be the treating provider in those states.
Splitting the business into two entities resolves the tension. Clinical authority, licensure and the patient relationship live in the PC. Capital, technology and administration live in the MSO. Each does only what it is legally permitted to do, and a contract joins them. Because MedGrid's work is largely structural (forming PCs, recruiting medical directors and mid-level providers through our network, and running the administrative engine underneath them), the two-entity model is not an edge case for us. It is the default operating unit we replicate state by state.
What MedGrid Is, Exactly
MedGrid is a consulting agency. It is not a medical practice, not a provider, and not a party to any patient's care. Its client is the LLC (the management services organization), and every service it delivers is non-clinical by design. That boundary is what keeps the model clean in all fifty states: MedGrid cannot invoke clinical authority because nothing in its scope of work touches clinical decision-making.
Structure and Playbooks
Structure design, PC formation, state-entry sequencing and operating playbooks.
Books and Payroll
Bookkeeping, financial reporting, payroll administration and invoicing discipline.
Brand and Patient Acquisition
Brand, website, patient acquisition and content, never tied to encounter volume.
Membership Programs
Membership program design, pricing, enrollment, billing and renewals.
LegitScript and Comparable Accreditations
LegitScript and comparable accreditations, plus the documentation they require.
Anything Clinical
Diagnosis, treatment, prescribing, clinical protocols, supervision, or any decision reserved to the PC.
The Canonical MedGrid Unit
Ownership sits on the solid lines; the dashed lines are contracts, not control. One PC per state (or per license type), one MSA per PC, and one monthly retainer to MedGrid.
Owners
Investors and Founders
Own the LLC (the management services organization).
100% Owner
Licensed Physician
Owns the professional corporation outright.
Management Services Org.
The LLC
Signs the MSA with the PC. Holds the administrative infrastructure. Receives the PC's monthly transfer.
Professional Corporation
The PC
Holds the license. Employs or contracts clinicians. Owns the patient relationship. Charges patients directly. Sets clinical policy.
Consulting Agency · Monthly Retainer
MedGrid
Consulting, accounting and payroll, marketing, memberships, certifications. All for the LLC, none clinical.
Clinical Team
Medical Director, Physicians, NPs and PAs
Employed or contracted by the PC.
All Clinical Revenue Lands in the PC First
All clinical revenue is earned and received by the PC, and all of it is cash pay: patients pay the PC directly for the service, whether as a one-time fee or a membership. No claims are submitted to any insurer or government program. The PC covers clinician compensation, then transfers funds to the LLC on the schedule set in the MSA, normally monthly. The LLC pays MedGrid a fixed monthly retainer for the administrative services it delivered. MedGrid never charges for medical services in its own name and never touches a patient payment.
Patients
Cash pay: card, ACH or membership, at the point of care.
The PC
Sole party of record. No insurance.
The LLC
Monthly, per the MSA.
MedGrid
Fixed monthly retainer, invoiced.
From the PC, clinician compensation, malpractice insurance and clinical supplies are paid before any transfer to the LLC. Each step is a separate, invoiced transaction, and the direction of every arrow matters in diligence.
Both Legs Must Be Fair Market Value
Both legs must be fair market value for services actually delivered, set in advance and documented. The MSA sets what the PC transfers to the LLC and when, normally a fixed monthly amount trued up against the services schedule. MedGrid is then paid a fixed monthly retainer by the LLC, invoiced against a written scope, with per-unit fees only for defined one-off work (forming a PC, onboarding a provider, a credentialing file).
If It Cannot Be Invoiced, It Does Not Happen
MedGrid does not use percentage-of-collections, percentage-of-revenue or any other arrangement that shares in professional fees. Not in CPOM states, not in non-CPOM states, and not where federal program dollars are absent. Every payment between a medical director, a clinician, a clinic and MedGrid is properly invoiced: a written scope, a stated rate agreed in advance, an invoice describing the services or hours delivered, and a matching record in the payer's and payee's books.
How the Medical Director Is Paid
Every PC needs a medical director: a licensed physician who provides clinical oversight, signs off on protocols, and supervises mid-level providers within state scope rules. That work is real, and it is compensated on an invoiced, fair-market-value basis. There are two routes, and which one applies follows the state. Option A is the default in non-CPOM states, and Option B is the default in CPOM states. Either way the arrangement is papered in writing before any money moves.
Billed to the Consulting Agency
The medical director invoices MedGrid directly for advisory and oversight time, and MedGrid pays it out of its own retainer. This is the default in non-CPOM states, where the law does not require the payment for oversight to originate inside the licensed entity, so the director's role can sit where it is simplest to administer: consultative work, protocol review, escalation availability.
How it runs: independent contractor agreement with MedGrid; hourly or fixed monthly advisory rate set in advance; monthly invoice describing hours and work performed; 1099 issued by MedGrid; never contingent on patient volume, revenue or what the PC collects.
Paid Out of the PC
The PC pays the medical director as its own clinician, before any transfer to the LLC. This is the default in CPOM states: the clinical relationship and the payment for it both sit inside the licensed entity, which is exactly what those states require.
How it runs: the director signs an employment or medical-director agreement with the PC; the rate is a stated monthly or hourly amount in that agreement; the PC pays it from its own account as an operating cost of the practice; that cost is settled first, and only the remainder is transferred to the LLC under the MSA; the PC issues the W-2 or 1099 and books the expense on its own ledger.
The state default is the starting point, not a license to ignore the underlying rule: if the medical director is doing clinical work, the PC pays, including in a non-CPOM state. MedGrid may only pay for non-clinical advisory time, because MedGrid's scope is non-clinical. Where a director does both, the roles are split into two agreements with separate scopes and separate invoices, so it is always clear which entity is buying which service.
The Line MedGrid Holds in Every State
The single most common reason a structure is challenged is drift: the MSO making decisions that belong to the PC. This matrix is the line MedGrid holds in every state.
| Decision | PC (Physician-Owned) | MSO Side (LLC / MedGrid) |
|---|---|---|
| Diagnosis and Treatment Plan | Sole authority | None |
| Clinical Protocols, Formulary, Standard of Care | Sets and approves | May draft options for PC review |
| Hiring and Firing of Clinicians | Decides | Sources candidates, runs the process |
| Clinician Compensation Amounts | Approves | Models and administers payroll |
| Patient Scheduling Capacity and Visit Length | Sets clinical minimums | Operates the schedule within them |
| Utilization Review, Peer Review, QA | Owns | Provides tooling and reporting |
| Medical Records Ownership and Custody | Owns records | Hosts under a BAA |
| Patient Fee Schedule and Membership Pricing | Approves | Models, publishes, collects |
| Payment Processing and Refunds | Sets policy | Operates |
| Technology, Real Estate, Marketing, HR (Non-Clinical) | Consulted | Owns |
Held Together by Contract Instead of Equity
In a CPOM state, the PC is mandatory and its ownership is restricted to licensed professionals. MedGrid cannot hold a single share. The structure is held together by contract instead of equity, the arrangement commonly called a friendly PC.
The Document Set
Management Services Agreement
Long term. Defines every administrative service and the fair-market-value fee. Reserves all clinical authority to the PC in writing.
Physician Employment Agreement
Between the PC and each clinician, including the medical director. Sets scope, supervision and compensation.
Trademark and IP License
Lets the PC use the MedGrid brand and platform without transferring ownership.
Stock Transfer Restriction Agreement
The physician owner cannot sell, pledge or transfer shares without consent. On defined trigger events the shares move to a successor physician at a nominal, pre-agreed price.
Succession and Nominee Terms
Names the replacement physician owner in advance so a departure never orphans the PC's license or its patient agreements.
BAA and Records Custody Addendum
The PC owns the chart; MedGrid processes it as a business associate.
Operating Rules MedGrid Applies in Every CPOM State
- One PC per state, owned by a physician licensed in that state, unless a state's law expressly allows a foreign professional entity to register.
- The physician owner is a real participant: credentialed, compensated and engaged in clinical oversight. A pure figurehead is the fact pattern regulators look for.
- PC board minutes exist and record clinical decisions as the PC's own.
- Fee structure avoids anything a state characterizes as splitting professional fees.
- Patient-facing materials, consents, receipts and superbills name the PC as the provider. MedGrid appears as the administrator, if at all.
- Separate bank accounts, books, tax filings and payroll. No commingling, ever.
States also differ on secondary questions even when they all restrict corporate ownership: whether non-physician clinicians may co-own the PC, how cash-pay and membership pricing must be disclosed, whether telehealth-only practices are treated differently, and whether the PC must register with the medical board separately from the secretary of state. Those answers are tracked per state in our compliance matrix.
One Model, Fifty States
A handful of states do not restrict who may operate a medical practice as tightly. MedGrid's answer there is the same as everywhere else: a physician-owned PC, a management services agreement, and a monthly service fee. The structure does not change from state to state, only the amount of law forcing it. That means one MSA template, one onboarding workflow, one set of patient agreements, and nothing to re-paper when a state's law tightens or a practice expands across a border.
What Is Genuinely Lighter
Fewer Protective Documents
The stock transfer restriction and nominee-succession terms exist to satisfy CPOM constraints. Where the state does not impose them, the document set is shorter.
Simpler Entity Questions
The PC may often be formed as an ordinary professional entity without separate medical-board registration, and a broader set of entity types may qualify.
Fewer Constraints on Who May Be Involved
States that restrict co-ownership to physicians, or bar mid-level providers from holding an interest, generally do not do so here.
Faster Stand-Up
Less state-specific tailoring means the launch sequence runs on a shorter clock.
What Does Not Change in Any State
- The PC is physician-owned and holds the patient relationship. MedGrid is the administrator, never the provider.
- MedGrid is paid a fixed monthly retainer at fair market value, invoiced against described services. No revenue share, no percentage of collections, no fee-splitting.
- Clinical judgment stays with the licensed clinician. No state permits a corporation to direct diagnosis or treatment, and no agreement may condition pay on a clinical outcome or on ordering volume.
- Fee-splitting and kickback rules still apply: several states prohibit splitting professional fees regardless of their CPOM posture, and federal law is indifferent to state CPOM status.
- Licensure, facility, telehealth, supervision and scope-of-practice rules for NPs and PAs apply exactly as before.
- Malpractice coverage, medical-record custody and patient price-transparency obligations are unchanged.
CPOM State vs. Non-CPOM State
| CPOM State | Non-CPOM State | |
|---|---|---|
| Who Owns the Practice | Licensed physician(s) | Licensed physician(s), the same |
| Is a PC Required by Law | Yes | No, but MedGrid uses one anyway |
| Who Employs Clinicians | The PC | The PC, the same |
| Stock Transfer Restriction | Required | Optional |
| Nominee Physician Succession | Required | Optional |
| Medical Director Paid By | The PC (Option B) | MedGrid, by invoice (Option A) |
| How MedGrid Is Paid | Fixed monthly retainer from the LLC | Fixed monthly retainer, the same |
| Percentage-of-Collections Fee | Never used | Never used |
| Who Charges the Patient | The PC | The PC, the same |
| Clinical Authority | Clinician | Clinician, unchanged |
| Insurance and Government Payers | None, cash pay | None, cash pay |
| Anti-Kickback and Stark Exposure | Limited (no federal dollars) | Limited, unchanged |
| Typical Document Count | Six or more | Three to four |
Two Bodies of Law Sit on Top of the Structure
State fee-splitting statutes bar a licensee from sharing professional fees with an unlicensed person, and they apply to cash-pay practices just as they do to billing ones. Federal law (the Anti-Kickback Statute and, for physician self-referral, Stark) reaches items and services payable by a federal health care program. Because MedGrid practices are cash-pay and enroll in no federal program, that exposure is limited. We hold to the federal standard anyway, so the model does not have to be rebuilt if a program-funded line of business is ever added.
- No revenue share of any kind. MedGrid takes no percentage of collections, revenue or professional fees. Compensation flows only against invoiced, FMV-priced services.
- Everything is invoiced. Payments from medical directors and clinicians to clinics, and from clinics to MedGrid, run on written scopes, pre-agreed rates and itemized invoices. No handshake payments, no lump sums without a described service, no offsets.
- Fees are set in advance, in writing, for a term of at least one year, and do not vary with the volume or value of referrals.
- Fees are supported by an FMV analysis kept on file and refreshed when the service mix changes.
- MedGrid does not pay anyone, internal or external, per patient, per referral or per prescription.
- Marketing compensation is not tied to conversions into clinical encounters, and state patient-brokering statutes are checked per state, since several reach cash-pay arrangements.
- Any deviation from these rules requires written health-care-regulatory counsel sign-off before it goes live.
The Operational Sequence for a New State
Steps 1 to 3 are legal setup; steps 4 to 8 are what makes the PC able to see a patient and get paid. Cash pay means no payer enrollment queue: licensure and entity registration are the long poles.
Determine CPOM Posture
Confirm ownership rules, permitted entity type, fee-splitting treatment and telehealth rules.
Identify the Physician Owner
Licensed in the state, clean board history, willing to serve as medical director.
Form the PC
Entity filing, medical board registration where required, EIN, bank account and registered agent.
Paper the Relationships
MSA, stock restriction, employment and IP agreements, and the BAA.
Licensure and DEA
Individual state licenses for every clinician; DEA registration and CSR where prescribing.
Malpractice
Coverage in the PC's name, per-state limits and tail arrangements.
Credentialing and Payments
Internal credentialing file per clinician, NPI where required, merchant processing and patient agreements under the PC's own TIN.
Go Live and Monitor
Supervision ratios for NPs and PAs, chart audits, annual FMV and document refresh.
10 / Questions We Get Asked
Common Questions About the Model
Does MedGrid Own the Practice?
No. In CPOM states the physician owns the PC outright. MedGrid's rights are contractual.
If the Physician Owner Leaves, Do We Lose the Practice?
No. The stock transfer restriction and succession terms move ownership to a pre-identified licensed successor without interrupting the PC's licensure or its patient agreements.
Who Pays the Medical Director?
In non-CPOM states, the default is a direct invoice to MedGrid for non-clinical advisory time. In CPOM states, the default is payment by the PC, before the monthly transfer to the LLC. Clinical work is always paid by the PC, in either kind of state.
Can MedGrid Tell a Clinician What to Prescribe or How Long a Visit Should Be?
No. MedGrid can supply data, defaults and scheduling infrastructure; the clinician decides care and the PC sets clinical minimums.
Can the Fee Be a Share of Revenue?
No. Neither the PC's monthly transfer to the LLC nor MedGrid's retainer is tied to revenue or collections. Both are fixed monthly amounts, invoiced against described services.
Do We Need a Separate PC in Every State?
Usually yes. A few states let a professional entity register as a foreign entity; most require formation in state with an in-state licensed owner.
Why Keep the PC in a Non-CPOM State?
One operating model. A physician-owned PC paying a monthly fee under an MSA works everywhere, so nothing has to be re-papered when a state's law tightens or a practice crosses a border.
Glossary
- MedGrid
- The consulting agency. Serves the LLC only, with a non-clinical scope: consulting, accounting and payroll, marketing, memberships, certifications.
- PC
- Professional corporation. The physician-owned clinical entity, or the state's equivalent (a professional association or service corporation, depending on the state). Never a PLLC.
- MSA
- Management services agreement. The contract between the PC and the LLC; it sets the monthly transfer.
- FMV
- Fair market value. The standard both the MSA fee and MedGrid's retainer must meet.
- Fee-Splitting
- Sharing professional fees with an unlicensed person; restricted by many states.
- Mid-Level Provider
- NP or PA practicing under state scope and supervision rules.
- MSO
- Management services organization. The non-clinical entity (the LLC) that contracts with the PC; MedGrid runs it under a monthly retainer.
- CPOM
- Corporate practice of medicine. State doctrine limiting who may own a practice or employ physicians.
- Friendly PC
- A PC owned by a cooperating licensed physician, bound to the MSO by contract alone.
- AKS
- Federal Anti-Kickback Statute.
- Medical Director
- The licensed physician providing clinical oversight to a PC; paid by the PC for clinical work, or by MedGrid for non-clinical advisory time.
- Cash Pay
- Patient pays the PC directly; no insurance claim is submitted. The model MedGrid uses everywhere.
See What the Structure Looks Like for Your State.
Tell us your state and your service menu. We come back with the structure you need, what it costs, and what has to change in the clinic you are running today.
Notice. This page describes MedGrid's operating structure for orientation. It is not legal advice and does not create an attorney-client relationship. State law varies, changes and is fact-specific; the CPOM posture of any given state must be confirmed with health-care-regulatory counsel before a structure is put in place or changed. Where this page conflicts with an executed agreement, the agreement controls.