The emerging opportunity in creating a ketamine telehealth company (also known as at-home ketamine company) demands a nuanced understanding of corporate structures since these types of companies sit at the intersection of two highly regulated and evolving areas: telehealth and controlled substances. Through representing some of the first ketamine telehealth companies at my law firm and working with various ketamine telehealth companies through my investment fund (Iter Investments), one corporate structuring strategy that has emerged as an effective model is the “friendly PC” (Professional Corporation), tailored to comply with the unique legal and operational needs of ketamine telehealth companies.
The Reason for the Friendly PC Structure – Corporate Practice of Medicine
The corporate practice of medicine refers to an entity delivering medical services or employing physicians if the entity is owned by non-physicians. While some states have no prohibition on the corporate practice of medicine, other states have strict prohibitions on the corporate practice of medicine with limited exceptions (i.e., California, Colorado, New Jersey, New York, Tennessee, and Texas). In other words, a ketamine telehealth entity owned by non-physicians is not allowed to provide medical services in states that prohibit the corporate practice of medicine. The friendly PC model, through the structuring of multiple entities and multiple agreements between those entities as described below, provides a viable solution to this problem.
The Friendly PC Structure
In its simplest form, the friendly PC structure involves at least two entities: an investor-owned management service organization (MSO) and a professional corporation owned by a single physician owner (the PC or medical group). The MSO and PC enter into a management service agreement whereby the MSO provides management services to the PC, and the PC in turn compensates the MSO. The PC is kept “friendly” to the MSO through various agreements that provide rights to the MSO as it relates to the single physician owner. This structure can begin to look even more complex as the MSO expands into additional states where a separate PC entity is formed in certain states.
Other Considerations
Beyond the simple explanation above, the friendly PC structure involves various other complicated aspects that should be discussed with an attorney, including:
- Selecting the right physician to own the PC;
- Understanding who can be the owner of the PC under various different state laws;
- Determining the conditions for which the MSO may replace the physician owner with another owner;
- The proper staffing of the PC;
- The amount the MSO charges the PC for the management services and how the funds should flow, including avoiding anti-kickback laws;
- The structure of the MSO providing funding to the PC; and
- Accounting standard for consolidating the financials of the MSO and PC.
Mr. Cannabis Law has been at the forefront of advising ketamine telehealth companies and at-home ketamine companies. If you are interested in learning more about the complexities of a friendly PC model for your at-home ketamine company or ketamine telehealth company, please do not hesitate to contact us.
Author: Dustin Robinson
Date: 1/13/2024
