--- title: "Arizona Corporate Practice of Medicine Rules (2026 Guide)" description: "Arizona corporate practice of medicine: old case law, a 2022 entity law, a strict fee-splitting rule, and a telehealth registration path. 2026 guide." slug: arizona-corporate-practice-of-medicine date: 2026-10-18 updated: 2026-10-18 author: MyOrbitHealth Compliance Team category: Compliance cpom: Moderate --- # Corporate Practice of Medicine in Arizona: What Telehealth and Clinic Founders Need to Know Arizona sits in the middle. Its CPOM doctrine comes from old court decisions about optometry and other professions, not from a medical statute. Courts have chipped at it, and a 2022 law now says licensed health professionals may practice through any form of business entity. As of October 2026, we still classify Arizona as moderate. The case law has never been formally overruled, Arizona's professional corporation statute keeps majority control with licensees, and its fee-splitting rule reaches contracts that act like a split. For a non-physician founder, the practical answer is a friendly PC-MSO, or a licensed facility path, with clinical control documented. For NP founders, Arizona is friendly. NPs have full practice authority, and experienced PAs can now practice under collaboration instead of supervision. Telehealth is unusually open. Out-of-state clinicians can register to treat Arizona patients without a full Arizona license. This is general information, not legal advice. Confirm the current rules with a healthcare attorney licensed in Arizona. *Last reviewed October 2026. State rules change often; statute and case references are summaries, not quotations.* ## Key takeaways - Arizona's CPOM doctrine is judge-made, tracing to the 1935 Arizona Supreme Court decision in Funk Jewelry Co. v. State ex rel. La Prade, and a 2008 Court of Appeals decision, Midtown, is generally read as narrowing it without overruling it. - Since September 24, 2022, Arizona law has said a health professional may practice in, or be employed by, any form of business entity in the state (now A.R.S. 32-3230.01). - Arizona treats dividing a professional fee for patient referrals, or a contract with the same effect, as unprofessional conduct for physicians under A.R.S. 32-1401. - Out-of-state physicians can register under A.R.S. 36-3606 to provide telehealth to Arizona patients without a full Arizona license, subject to conditions the Arizona Medical Board sets. - Arizona NPs have full practice authority, and under HB 2043 (2023), PAs who meet an experience threshold may practice under a collaborative model instead of supervision. ## Does Arizona have a corporate practice of medicine doctrine? Yes, but it is old and has been narrowed. The Arizona Supreme Court held in *Funk Jewelry Co. v. State ex rel. La Prade* (1935) that a corporation could not practice optometry by employing a licensed optometrist. Later decisions extended that reasoning, and practitioners have long applied it to medicine. The key modern case is [*Midtown Medical Group, Inc. v. State Farm Mutual Automobile Insurance Co.*](https://caselaw.findlaw.com/court/az-court-of-appeals/1024538.html) (Ariz. Ct. App. 2008). As case summaries describe it, the Court of Appeals allowed a lay-owned entity licensed as an outpatient treatment center to employ physicians, without overruling the Supreme Court's earlier CPOM decisions. It is generally read as creating a facility-licensing path, not a general repeal. Confirm the holding against the full opinion before relying on it. Then the legislature acted. A 2022 law, now [A.R.S. 32-3230.01](https://law.justia.com/codes/arizona/title-32/section-32-3230-01/), says a health professional may practice in any form of business entity in Arizona or as an employee of any form of business entity, subject to a carve-out for optometry. [Milligan Lawless](https://www.milliganlawless.com/arizona-laws/new-arizona-business-entity-law/) reports it took effect September 24, 2022. Read literally, that is a broad authorization. No appellate court has yet said how it interacts with *Funk Jewelry* for physicians. Until one does, careful counsel still keep clinical control with physicians and document it. ## Who can own a medical practice in Arizona? Founders have three realistic paths. **Professional corporation.** Arizona's professional corporation statute is not all-or-nothing. Secondary sources report that non-licensees may hold a minority stake and that the statute also sets licensee requirements for officers and directors. Confirm the current share and governance thresholds with counsel. Majority control stays with physicians. **Licensed facility.** *Midtown* is read as letting a lay-owned entity licensed by the Arizona Department of Health Services as an outpatient treatment center employ physicians. That path brings facility licensing, inspections, and operating rules, and the licensing rules the court relied on may have changed since 2008, so confirm their current status. It fits brick-and-mortar clinics better than telehealth. **General entity employing clinicians.** The 2022 entity law supports this path. The remaining CPOM case law argues for caution with it. This is the gray zone, and it is where most disputes would arise. ## Can nurse practitioners and physician assistants own a practice in Arizona? Arizona is a full practice authority state for NPs. An Arizona-licensed NP can evaluate, diagnose, and prescribe without a physician agreement. Combined with the 2022 entity law, an NP can own and run a practice entity. PAs gained ground in 2023. Under [HB 2043](https://azmd.gov/Misc/HB2043/pa-practice-act-hb2043), a PA who meets a clinical-experience threshold can be certified for collaborative practice instead of supervision. The level of collaboration is set by the policies of the practice setting. PAs below the threshold still need a supervision agreement. Confirm the current hour threshold and effective date with the Arizona Medical Board. Board rules on written collaboration policies have been in flux, so check the current text before you staff around it. Whether an NP or PA can count as a licensed shareholder in a medical PC is a separate question. Confirm it with counsel. ## How does the friendly PC-MSO model work in Arizona? The [friendly PC-MSO model](/blog/friendly-pc-mso-model) works well in Arizona. A physician owns the PC, and your MSO provides technology, staff, marketing, and billing support under a written management agreement. Arizona has one sharp edge here, and it is the fee. [A.R.S. 32-1401](https://codes.findlaw.com/az/title-32-professions-and-occupations/az-rev-st-sect-32-1401/) lists as unprofessional conduct dividing a professional fee for patient referrals among or between health care providers or institutions, or a contractual arrangement that has the same effect. The "same effect" language is what matters for MSOs. A management fee calculated as a share of collections from patients the MSO's marketing brought in can look like a referral split. Use flat or cost-plus fees tied to services actually delivered, priced at fair market value, and keep the documentation. ## What does this mean for a telehealth brand serving Arizona patients? Arizona is one of the easiest states to enter by telehealth. Under A.R.S. 36-3606, an out-of-state clinician with an active, unrestricted license elsewhere can register with the relevant Arizona board instead of getting a full license. Registration is designed for telehealth and carries its own conditions and fees. Registrants remain subject to Arizona law and board discipline. Confirm the current registration requirements, including any additional steps for controlled-substance prescribing, with the Arizona Medical Board. CPOM still applies by patient location. A registered Texas physician treating an Arizona patient is practicing in Arizona, so the fee-splitting rule and clinical-control expectations above apply to that encounter. For other states' rules, see our [telehealth licensing by state](/blog/telehealth-licensing-by-state) guide. If you also serve Colorado, its newer registration has a controlled-substance limit; see our [Colorado CPOM guide](/blog/colorado-corporate-practice-of-medicine). ## Arizona CPOM at a glance | Topic | Arizona (as of October 2026) | |---|---| | CPOM enforcement | Moderate | | Primary legal basis | Case law (Funk Jewelry, 1935); narrowed by Midtown (2008); A.R.S. 32-3230.01 (2022) permits practice in any entity | | Professional entity options | Professional corporation with licensee majority control; licensed outpatient treatment center; general entity (gray zone) | | Fee-splitting rule | Yes: A.R.S. 32-1401, including contracts with the same effect | | NP practice authority | Full | | Out-of-state telehealth licensing | Yes: telehealth registration under A.R.S. 36-3606 | | Typical structure for non-physician founders | Friendly PC-MSO with flat FMV management fee | ## Frequently asked questions ### Does Arizona still have a corporate practice of medicine doctrine? Arguably yes. The Arizona Supreme Court's 1935 Funk Jewelry decision has never been overruled, and the 2008 Midtown decision is generally read as narrowing the doctrine rather than ending it. A 2022 law allowing health professionals to practice in any business entity has weakened it, but courts have not yet reconciled the two. ### Can a non-physician own part of an Arizona medical practice? Often yes, within limits. Arizona professional corporation rules are reported to allow non-licensees a minority stake, and case law has allowed lay owners to operate a licensed outpatient treatment center, subject to current facility licensing rules. Most telehealth founders use a physician-owned PC with an MSO instead. ### Can an out-of-state doctor treat Arizona patients by telehealth? Yes, if they register with the appropriate Arizona board under A.R.S. 36-3606. Registration is designed for telehealth and carries its own conditions, so confirm the current requirements with the board before relying on it. ### Can MSO fees be a percentage of revenue in Arizona? Be careful. Arizona's physician fee-splitting rule covers contractual arrangements that have the same effect as dividing a fee for referrals. A percentage fee tied to patients the MSO generates is the risky version, so flat fair-market-value fees are the safer design. ### Can nurse practitioners practice independently in Arizona? Yes. Arizona grants nurse practitioners full practice authority, so they can diagnose, treat, and prescribe without a physician agreement. ## Sources - [Midtown Medical Group, Inc. v. State Farm Mut. Auto. Ins. Co. (Ariz. Ct. App. 2008), FindLaw](https://caselaw.findlaw.com/court/az-court-of-appeals/1024538.html) - [A.R.S. 32-3230.01, Health professionals; business entities (Justia)](https://law.justia.com/codes/arizona/title-32/section-32-3230-01/) - [Milligan Lawless: New Arizona Business Entity Law for Health Professionals](https://www.milliganlawless.com/arizona-laws/new-arizona-business-entity-law/) - [A.R.S. 32-1401, Definitions including unprofessional conduct (FindLaw)](https://codes.findlaw.com/az/title-32-professions-and-occupations/az-rev-st-sect-32-1401/) - [Arizona Medical Board: Changes to the PA Practice Act after HB 2043](https://azmd.gov/Misc/HB2043/pa-practice-act-hb2043) - [Harris Sliwoski: The Corporate Practice of Medicine Doctrine in Arizona](https://harris-sliwoski.com/psychlawblog/the-corporate-practice-of-medicine-doctrine-dead-or-alive-for-arizona-ketamine-clinics/) Compare Arizona with every other state in our [corporate practice of medicine 50-state guide](/blog/corporate-practice-of-medicine-50-state-guide). ## Launch in Arizona on a structure that is already built MyOrbitHealth can form a PC-MSO structure for your brand, supply a physician PC owner or collaborating physician, or let you launch on its existing MSO / friendly-PC structure with 2,400+ licensed providers making every clinical decision. Start with [PC-MSO formation](/pc-mso-formation) or [physician PC owner services](/physician-pc-owner), or [book a call](https://myorbithealth.com/book). ```html ```