Illinois Corporate Practice of Medicine Rules (2026 Guide)

Illinois has one of the strongest corporate practice of medicine doctrines in the country, and it comes from the state's highest court. In Berlin v. Sarah Bush Lincoln Health Center (1997), the Illinois Supreme Court reaffirmed that a general corporation cannot employ physicians to practice medicine. It carved out only licensed hospitals. A later Illinois Supreme Court case is reported to have voided a physician's employment contract with a non-hospital not-for-profit. Add the Medical Corporation Act's licensed-ownership rule and a statutory fee-splitting ban, and the bottom line for a non-physician founder is plain. You cannot own an Illinois medical practice or employ its physicians. You can own the management company that supports one. NP and PA founders may be in a better spot: legislative materials indicate Illinois law lets them hold shares in a medical corporation alongside physicians, though the current text should be confirmed.

This is general information, not legal advice. Confirm the current rules with a healthcare attorney licensed in Illinois. Last reviewed October 2026. State rules change often; statute and case references are summaries, not quotations.

Key takeaways

• As of October 2026, Illinois enforces the corporate practice of medicine doctrine through Illinois Supreme Court case law, with an exception for licensed hospitals recognized in Berlin v. Sarah Bush Lincoln Health Center, 179 Ill. 2d 1 (1997).
• The Medical Corporation Act, 805 ILCS 15, is reported to require every shareholder, officer, and director of an Illinois medical corporation to be a licensed professional and to bar unlicensed persons from ownership, management, or control; confirm the current text.
• The Medical Practice Act's fee-splitting section, 225 ILCS 60/22.2, bars sharing professional fees except as the section allows; the exceptions are reported to include a fair-market-value percentage fee for billing and collection services, so confirm the current text.
• The Illinois Supreme Court held in Vine Street Clinic v. HealthLink, 222 Ill. 2d 276 (2006), that a percentage-based administrative fee violated the fee-splitting prohibition.
• Illinois requires covered provider organizations and health care facilities to notify the Illinois Attorney General in advance of certain mergers, acquisitions, and contracting affiliations; confirm the current notice period and thresholds.

Does Illinois have a corporate practice of medicine doctrine?

Yes, and it is court-made. Illinois has no single statute that says "corporations may not practice medicine." The doctrine comes from Illinois Supreme Court decisions that read the Medical Practice Act's licensing requirements as barring unlicensed entities from practicing through employed physicians.

Berlin v. Sarah Bush Lincoln Health Center, 179 Ill. 2d 1 (1997). The lower courts struck a hospital's physician non-compete as illegal corporate practice. The Supreme Court reversed on a narrow ground: the doctrine does not apply to state-licensed hospitals, which have implied legislative authority to employ physicians. The Court did not abolish the doctrine for anyone else.

Carter-Shields v. Alton Health Institute. As reported in case summaries, Alton Health Institute was a general not-for-profit corporation, not a licensed hospital, that employed a primary care physician under a non-compete. The appellate court is reported to have held the agreement void under the doctrine and Berlin, and the Illinois Supreme Court's decision is reported as reaching the same result. If that reading holds, non-profit status alone does not create an exception. Confirm the holding with counsel before relying on it.

The lesson: Illinois courts have treated contracts that violate the doctrine as void, so a non-compliant deal may be unenforceable when you need it most.

Who can own a medical practice in Illinois?

Medical corporations. The Medical Corporation Act lets one or more licensed physicians form a corporation to practice medicine. The Act is reported to require that all officers, directors, and shareholders be licensed at all times. As quoted in older legislative bill texts, the list of permitted licensees includes physicians, physician assistants, podiatric physicians, and advanced practice nurses. The Act is also reported to bar unlicensed persons from any part in ownership, management, or control, to bar shareholders from giving voting proxies to unlicensed persons, and to control over the Business Corporation Act where the two conflict. Confirm the current text before forming the corporation.

Licensed hospitals and their affiliates. After Berlin, Illinois-licensed hospitals may employ physicians directly. The fee-splitting statute is also reported to carve out hospitals and hospital affiliates; confirm the current text.

Everyone else. A general business corporation, private equity fund, or lay-owned LLC cannot employ physicians to practice medicine in Illinois. That is why the MSO model exists here.

Can nurse practitioners and physician assistants own a practice in Illinois?

Illinois appears friendlier to NP and PA owners than most strong-CPOM states. The Medical Corporation Act's licensed-shareholder list, as quoted in legislative materials, includes PAs and advanced practice nurses, so an NP or PA may be able to co-own a medical corporation. Have counsel confirm the current text before setting the cap table.

Clinical authority is a separate question. Illinois has been classified as Reduced for NP practice; confirm the current classification. Most APRNs practice under a written collaborative agreement with a physician. Illinois also offers an optional full practice authority pathway for experienced APRNs who meet statutory requirements; confirm the current eligibility details. PAs practice under a collaborative agreement with a physician. Owning shares does not replace those agreements.

How does the friendly PC-MSO model work in Illinois?

The standard Illinois structure is a physician-owned medical corporation (the "friendly PC") that contracts with a lay-owned MSO for non-clinical services, while keeping control of clinical decisions. Our friendly PC-MSO explainer walks through the moving parts.

Two Illinois rules shape the management fee.

Fee splitting under 225 ILCS 60/22.2. The Medical Practice Act's fee-splitting section says a licensee may not directly or indirectly divide, share, or split any professional fee with anyone, for a referral or otherwise, except as the section provides. As summarized from the statute, the exceptions are reported to include the following; confirm the current text:

• practicing through a legal entity owned by licensees and pooling fees within it;
• paying a billing, administrative preparation, or collection provider a fair-market-value fee that may be a percentage of fees billed or collected, as long as the licensee or practice controls the amount of fees charged and collected at all times;
• granting a security interest in accounts receivable for bona fide advances, with the licensee keeping control of collections.

Vine Street Clinic v. HealthLink. In Vine Street Clinic v. HealthLink, 222 Ill. 2d 276 (2006), a clinic paid a provider network a 5% administrative fee. The Illinois Supreme Court held that the percentage-based fee violated the fee-splitting prohibition then in force, reasoning that a share of a professional's fee could motivate a non-professional to steer patients for its own benefit. Section 22.2 is now reported to contain a narrow billing exception. Foley & Lardner covered the related litigation.

The practical rule is that a percentage fee is most defensible, if at all, for billing and collection under the statute's reported conditions. A percentage of revenue for the full MSO bundle, especially marketing, is the arrangement Vine Street condemned. Most Illinois MSAs use a flat or cost-plus fee.

Transaction notice. Under 740 ILCS 10/7.2a, covered provider organizations and health care facilities must give the Attorney General advance notice of certain mergers, acquisitions, and contracting affiliations. Coverage of physician groups depends on size and health plan contracting thresholds; confirm the current thresholds and notice period. See the Attorney General's notice page. Reed Smith reports that recent legislation would make the law permanent and broaden it; check whether and when those changes took effect.

What does this mean for a telehealth brand serving Illinois patients?

Illinois applies its rules based on where the patient is. Under 225 ILCS 60/49.5, practicing telemedicine on Illinois patients without an Illinois license is subject to the Act's penalties. Out-of-state providers who treat Illinois residents by telemedicine also submit themselves to the jurisdiction of Illinois courts. We did not confirm any out-of-state relief pathway, so plan on full Illinois licensure for providers who will see Illinois patients on an ongoing basis. Our telehealth licensing by state guide compares the options.

The Medical Practice Act also carries a sunset date, so check its current status before relying on any section long term.

The workable Illinois structure for a telehealth brand is an Illinois medical corporation owned by Illinois-licensed physicians, a lay-owned MSO paid a flat fair-market-value fee, Illinois-licensed clinicians with collaborative agreements in place, and clinical protocols and records controlled by the medical corporation. The same structure works in permissive states like Florida, so building to Illinois standards first avoids a rebuild later.

Illinois CPOM at a glance

Frequently asked questions

Can a non-physician own a medical practice in Illinois?

No, not directly. Illinois courts enforce the corporate practice of medicine doctrine, and the Medical Corporation Act is reported to require every shareholder, officer, and director to be licensed. A non-physician founder typically owns an MSO that contracts with a physician-owned medical corporation.

Can a hospital or nonprofit employ physicians in Illinois?

A licensed hospital can, under Berlin v. Sarah Bush Lincoln Health Center. A not-for-profit that is not a licensed hospital is generally understood not to get the same exception. In Carter-Shields v. Alton Health Institute, a physician's employment agreement with such an entity is reported to have been held void; confirm the holding with counsel.

Can an Illinois MSO charge a percentage of revenue?

Only in narrow circumstances. 225 ILCS 60/22.2 is reported to allow a fair-market-value percentage fee for billing and collection services if the practice controls the fees charged and collected. A percentage of revenue for broader management or marketing services carries the risk the Illinois Supreme Court identified in Vine Street Clinic v. HealthLink.

Can nurse practitioners own a medical corporation in Illinois?

The Medical Corporation Act's list of permitted shareholders, as quoted in legislative materials, includes advanced practice nurses and physician assistants alongside physicians; confirm the current text. Clinical practice still requires a collaborative agreement unless the APRN qualifies for full practice authority.

Do I have to tell the Illinois Attorney General about an MSO deal?

Possibly. Covered provider organizations and health care facilities must notify the Attorney General in advance of covered mergers, acquisitions, and contracting affiliations under 740 ILCS 10/7.2a. The law has been amended, so confirm current coverage and timing before signing.

Sources

• Berlin v. Sarah Bush Lincoln Health Center, 179 Ill. 2d 1 (1997)
• Carter-Shields v. Alton Health Institute (Illinois Supreme Court)
• Vine Street Clinic v. HealthLink, Inc., 222 Ill. 2d 276 (2006)
• 225 ILCS 60/22.2, Prohibition against fee splitting (Illinois General Assembly)
• Medical Corporation Act, 805 ILCS 15 (Illinois General Assembly)
• 740 ILCS 10/7.2a, Health care transaction notice (Illinois General Assembly)
• Notifying the Attorney General of Covered Health Care Transactions (Illinois Attorney General)
• Illinois Law Prohibits Percentage-Based Compensation (Foley & Lardner)

Launch in Illinois on a structure that is already built

Illinois does not leave room for shortcuts. The medical corporation, the MSA, and the collaborative agreements all have to hold up. MyOrbitHealth can handle PC-MSO formation for your brand, supply physician PC owner services or a collaborating physician, or let you launch on its existing MSO / friendly-PC structure with 2,400+ board-certified providers. For every other state, see our corporate practice of medicine 50-state guide, or book a call.