Texas Corporate Practice of Medicine Rules (2026 Guide)

Texas enforces a strong corporate practice of medicine (CPOM) ban. Only individuals licensed by the Texas Medical Board (TMB) may practice medicine, physicians who help an unlicensed corporation do it face discipline, and Texas courts have refused to enforce management deals that handed a lay company a large share of a practice's profits.

Two things make Texas distinctive. It has a unique exception: the TMB-certified nonprofit health organization under Occupations Code section 162.001(b), still called a "5.01(a)" by many Texas lawyers. And it closed its out-of-state telemedicine license, so telehealth physicians need a full Texas license.

For a non-physician founder, the answer is a physician-owned professional association or PLLC plus an MSO you own. NPs cannot own a medical practice entity and need a prescriptive authority agreement to prescribe. PAs can co-own with physicians, but only as minority owners.

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

Key takeaways

Texas Occupations Code section 155.001 lets only TMB-licensed individuals practice medicine, and section 164.052(a)(17) allows discipline of a physician who aids practice by an unlicensed corporation.
In Flynn Bros., Inc. v. First Medical Associates, a Texas appeals court refused to enforce a management agreement that sent a large share of a physician corporation's net profits to a lay company.
A nonprofit health organization certified under section 162.001(b) may employ physicians, but it must be organized solely by TMB licensees and governed by actively practicing physicians.
Physicians delegate prescribing to NPs and PAs through written prescriptive authority agreements, generally capped at seven APRNs and PAs (or full-time equivalents) per physician.
Texas no longer issues out-of-state telemedicine licenses, so telehealth physicians treating Texas patients need a full Texas license.

Does Texas have a corporate practice of medicine doctrine?

Yes. It comes from the Medical Practice Act (Title 3, Subtitle B of the Occupations Code), TMB rules, and case law.

Licensure. Section 155.001 bars practicing medicine in Texas without a TMB license. Only an individual can meet the licensing requirements, so a business corporation cannot practice medicine through employed physicians. The Texas Medical Association's CPOM white paper walks through this reasoning.

Discipline. Section 164.052(a)(17) lets the TMB discipline a physician who directly or indirectly aids or abets the practice of medicine by an unlicensed person, partnership, association, or corporation. The physician lending a license carries real risk. Section 157.001 lets physicians delegate medical acts, but delegates cannot hold themselves out as practicing medicine.

Case law. Flynn Bros., Inc. v. First Medical Associates, a Texas Court of Appeals decision, remains the leading Texas case. A lay company managing a physician's professional corporation was to receive a large share of its net profits; confirm the exact terms and citation against the opinion. The court looked past the labels, held the company was practicing medicine indirectly through the physician's license, and refused to enforce the deal. Commentators flag four facts: the profit share, commingled funds, pledged practice assets, and the manager's say over medical staff. Avoid all four.

Who can own a medical practice in Texas?

Professional associations and PLLCs. Physicians practice through a professional association (PA) or professional limited liability company (PLLC) under Title 7 of the Business Organizations Code. Under section 301.012, MDs, DOs, and podiatrists may jointly own one, each practicing within their own scope. Physicians and physician assistants may also co-own, with limits covered below. Unlicensed investors cannot hold equity in these entities.

Nonprofit health organizations ("5.01(a)" entities). This is the most distinctive Texas exception. Section 162.001(b), recodified from former Medical Practice Act section 5.01(a), lets the TMB certify a nonprofit health organization (NPHO) that may employ physicians. The "5.01(a)" label is the old statute number, not an IRS code section. Requirements include:

a nonprofit corporation organized for a qualifying purpose such as research, medical education, or delivering health care to the public;
organized and incorporated solely by TMB licensees;
directors and trustees who are TMB licensees actively practicing medicine;
biennial reports and recertification.

Non-physician officers may run administration, but physicians make medical decisions and set medical policy. Sections 162.0021 through 162.0023 protect physicians' independent medical judgment. If you plan to use a nonprofit organized outside Texas, confirm with counsel whether it can qualify. Section 162.001(c) separately covers 501(c)(3) community, migrant, and homeless health centers and FQHCs.

An NPHO can contract with an MSO, but control sits with a physician board, and that board's independence is what the TMB certifies.

Other exceptions. TMB rules have recognized that certain hospitals and nonprofit medical schools may employ physicians; the TMB has reorganized its rules, so confirm the current rule location. These rarely help startups.

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

Texas NP practice authority is classified as restricted.

Nurse practitioners. Texas NPs (APRNs) prescribe under a written prescriptive authority agreement with a physician under Occupations Code section 157.0512. The agreement covers consultation and emergency plans and quality assurance, and requires regular meetings and annual review. A physician may generally hold agreements with no more than seven APRNs and PAs, or full-time equivalents, with exceptions for medically underserved and hospital facility-based practices. An NP cannot own a medical practice entity. NP founders typically own the MSO and contract with a physician-owned PLLC. See our collaborating physician guide.

Physician assistants. Texas is unusual in letting PAs co-own with physicians. Under Business Organizations Code section 301.012(a-1), no PA may own as much as any individual physician owner, a PA cannot be an officer, and physicians must control the entity.

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

The friendly PC-MSO model is the standard Texas structure: a physician-owned PLLC employs or contracts with clinicians and bills, and a lay-owned MSO provides space, staff, technology, marketing, and revenue-cycle support.

Fee-splitting. We are not aware of a broad Texas physician fee-splitting statute of the New York type; confirm with Texas counsel. The main limits are the Patient Solicitation Act (Occupations Code chapter 102), a criminal ban on paying or accepting remuneration for soliciting or securing patients, and the Medical Practice Act's solicitation and aiding-and-abetting provisions. Percentage MSO fees do not appear to be banned outright, but Flynn Bros. shows how a large profit share plus control can make a deal unenforceable. Most Texas counsel prefer a fixed or cost-plus fair-market-value fee.

MSA terms to get right.

The physician owner controls clinical policy, clinician hiring, and the medical record.
Revenue lands in an account in the PLLC's name.
Prescriptive authority agreements and standing orders are signed by the physician, not the MSO.

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

CPOM and licensure apply where the patient is. A patient in Texas means Texas law applies.

Licensure. Texas no longer issues out-of-state telemedicine licenses, and the Center for Connected Health Policy reports that some existing holders were grandfathered; confirm the current status of any such license. Everyone else needs a full Texas license. Section 151.056(b) keeps narrow exceptions, such as episodic consultations requested by a Texas physician in the same specialty. See telehealth licensing by state.
Entity. Clinical services should run through a Texas PLLC or professional association owned by Texas-licensed physicians, or a certified NPHO.
NP-led care. Each NP prescribing to Texas patients needs a prescriptive authority agreement with a Texas-licensed physician, within the seven-FTE cap.

Texas CPOM at a glance

Topic	Texas (as of October 2026)
CPOM enforcement	Strong
Primary legal basis	Occ. Code 155.001, 157.001, 164.052(a)(17); TMB rules; Flynn Bros.
Professional entity options	Professional association or PLLC; physician-PA and physician-podiatrist joint ownership; 162.001(b) nonprofit health organization
Fee-splitting rule	No general fee-splitting statute found; Patient Solicitation Act (Occ. Code ch. 102) and Medical Practice Act limits
NP practice authority	Restricted (prescriptive authority agreement; seven-FTE cap)
Out-of-state telehealth licensing	No; out-of-state telemedicine license closed to new applicants
Typical structure for non-physician founders	Physician-owned PLLC plus MSO, or certified nonprofit health organization plus MSO

Frequently asked questions

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

No. Only TMB-licensed physicians, plus podiatrists and physician assistants in limited joint arrangements, can own a professional entity that practices medicine. Non-physicians usually own an MSO that contracts with a physician-owned PLLC or professional association.

What is a 5.01(a) corporation in Texas?

It is the common name for a nonprofit health organization certified by the Texas Medical Board under Occupations Code section 162.001(b), after the former statute number. It can employ physicians, but it must be organized by TMB licensees, governed by actively practicing physicians, and recertified every two years.

Can a nurse practitioner own a clinic in Texas?

An NP can own the business side, typically through an MSO, but not a medical practice entity. To prescribe, an NP needs a written prescriptive authority agreement with a Texas physician, who is generally limited to seven APRNs and PAs or full-time equivalents.

Can an MSO take a percentage of revenue in Texas?

We are not aware of a broad Texas fee-splitting statute, but percentage fees are risky when paired with control. In Flynn Bros., a Texas appeals court refused to enforce a deal that sent a large share of net profits to a lay manager. A documented fair-market-value fee is safer.

Can out-of-state physicians treat Texas patients by telehealth?

Generally only with a full Texas license. The TMB no longer issues out-of-state telemedicine licenses, and only narrow exceptions such as certain specialist consultations remain.

Sources

For the other 49 states, see our 50-state corporate practice of medicine guide.

Launch in Texas 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, where licensed providers make every clinical decision. See PC-MSO formation and physician PC owner services, or book a call.