--- title: "Washington Corporate Practice of Medicine Rules (2026 Guide)" description: "Washington corporate practice of medicine rules: what Morelli v. Ehsan means for lay owners, NP founders, and telehealth brands serving the state." slug: washington-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 Washington: What Telehealth and Clinic Founders Need to Know Yes, Washington enforces the corporate practice of medicine doctrine, and it does so through its highest court rather than a single statute. As of October 2026, the controlling case is *Morelli v. Ehsan* (Wash. 1988), where the Washington Supreme Court held that a clinic partnership between a physician and an unlicensed person was illegal and refused to help the non-physician recover. The practical rule: a lay founder cannot own or share in the profits of a medical practice directly. Washington's Professional Service Corporation Act is a narrow exception for licensed owners, not a door for investors. Non-physician founders use a management services organization (MSO) paired with a physician-owned entity. NP founders are in a stronger spot than in most states, because Washington is generally classified as granting nurse practitioners full practice authority. This is general information, not legal advice. Confirm the current rules with a healthcare attorney licensed in Washington. *Last reviewed October 2026. State rules change often; statute and case references are summaries, not quotations.* ## Key takeaways - Washington's corporate practice of medicine doctrine is judge-made and was applied by the Washington Supreme Court in *Morelli v. Ehsan* (1988). - In *Morelli*, the court treated an unlicensed partner's participation in a medical clinic partnership as the unlicensed practice of medicine and declined to order an accounting of profits. - The court described Washington's Professional Service Corporation Act as a narrow statutory exception to the common-law rule. - The biggest commercial risk for a lay investor in Washington is unenforceability: a court may leave the parties where it finds them, with no remedy for the non-physician. - Washington is generally classified as a full practice authority state for nurse practitioners, which gives NP founders more room than physician-dependent models in neighboring restrictive states. ## Does Washington have a corporate practice of medicine doctrine? Yes. In [*Morelli v. Ehsan*](https://law.justia.com/cases/washington/supreme-court/1988/54234-1-1.html), a physician and a nurse organized a clinic in Everett as a limited partnership. When the relationship broke down, the non-physician partner sued for an accounting. The trial court granted summary judgment for the physician, holding that the non-physician's participation in the partnership amounted to the unlicensed practice of medicine. The Washington Supreme Court agreed the partnership agreement was illegal as a matter of law. Three points from the opinion matter for founders today: 1. **The rule is common law.** The court relied on an earlier Washington Supreme Court decision involving Standard Optical, which held that neither a corporation nor any unlicensed person or entity may practice a learned profession through licensed employees. 2. **The statutory exception is narrow.** The court read the Professional Service Corporation Act as a limited exception that did not authorize lay participation in a professional partnership. 3. **The remedy is harsh.** Because the agreement was illegal, the court left the parties where it found them. For an investor, that means a profit share or buyout right in a noncompliant deal may simply be unenforceable. The doctrine has also been discussed in Washington legal scholarship, including a [1996 Washington Law Review article](https://digitalcommons.law.uw.edu/cgi/viewcontent.cgi?article=4133&context=wlr), and the legislature has considered bills to abrogate it for physicians, including a [1997-98 House bill](https://lawfilesext.leg.wa.gov/biennium/1997-98/Htm/Bill%20Reports/House/2867.HBA.htm). We have not confirmed that any such bill was enacted, so treat *Morelli* as the governing rule. Also check for recent Washington legislation on corporate practice of health care or private-equity health transactions before you finalize a structure. Our classification is **Moderate**: the doctrine is real and backed by the state's highest court, but hospitals and other recognized entities employ physicians widely, and the MSO model is commonly used. ## Who can own a medical practice in Washington? Licensed physicians, through a professional entity. Washington's Professional Service Corporation Act generally allows licensed professionals to incorporate to render their professional services. Confirm the current shareholder and multi-profession rules with Washington counsel. Under *Morelli*, that statute is an exception for licensed owners, so a non-physician should not expect to hold equity in an entity that practices medicine. Common ownership models in Washington: - **Physician-owned professional service corporation or professional LLC** that employs or contracts with clinicians. - **Hospital and health-system employment**, which is widespread in the state. - **MSO plus physician-owned entity**, where the lay founder owns the MSO and the physician owns the clinical entity. ## Can nurse practitioners and physician assistants own a practice in Washington? Washington is generally classified as a **Full** practice authority state for nurse practitioners. Washington NPs can generally evaluate, diagnose, treat, and prescribe without a physician collaboration agreement; confirm the current rules with the nursing commission. That makes an NP-led telehealth or primary care practice viable without a physician partner for the nursing services themselves. The ownership question is separate: an NP-owned entity should be organized to provide nursing services and should not hold itself out as practicing medicine. Physician assistants in Washington generally practice under an agreement with a physician, so a PA-led model likely still needs a physician relationship; confirm the current PA rules. If your model relies on PAs, plan for a [collaborating physician](/blog/collaborating-physician) and document the arrangement before launch. ## How does the friendly PC-MSO model work in Washington? The [friendly PC-MSO model](/blog/friendly-pc-mso-model) is the standard answer to *Morelli*. The physician owns the clinical entity and controls diagnosis, treatment, prescribing, and clinician hiring standards. The founder's MSO provides non-clinical services under a [management services agreement](/blog/management-services-agreement-guide): technology, marketing, billing, payer contracting support, staffing, and space. Because *Morelli* turned on the non-physician's share of a medical practice's profits, Washington counsel focus hard on economics. Practical guardrails: - Keep the MSO's fee tied to services actually delivered and set at fair market value. A flat or cost-plus fee is easier to defend than a percentage of collections. - Do not give the MSO approval rights over clinical policies, prescribing, or which patients are treated. - Treat stock-transfer restrictions and succession provisions as contract terms that a court must be willing to enforce. After *Morelli*, an agreement that looks like a disguised partnership is a real enforceability risk. Washington is also reported to have statutory limits on rebates and referral payments in health care. Review fee terms, including any percentage-based fee, against current law with counsel. ## What does this mean for a telehealth brand serving Washington patients? CPOM follows the patient. If a Washington resident is treated, Washington's licensing and corporate practice rules apply even if your company and clinicians sit elsewhere. Our state data lists Washington's out-of-state telehealth pathway as **Limited**; confirm the scope of any current pathway, and plan for Washington licenses for clinicians who treat new Washington patients. See our [telehealth licensing by state guide](/blog/telehealth-licensing-by-state). Structurally, a multistate brand should treat Washington like other doctrine states: an MSO owned by the brand, a physician-owned professional entity holding Washington-licensed clinicians, and an MSA that keeps clinical decisions with those clinicians. NP full practice authority lets you staff many visits with Washington-licensed NPs, but physician-scope services still belong in the physician-owned entity. ## Washington CPOM at a glance | Topic | Washington (as of October 2026) | |---|---| | CPOM enforcement | Moderate | | Primary legal basis | Common law; *Morelli v. Ehsan* (Wash. 1988) | | Professional entity options | Professional service corporation (licensed owners), professional LLC | | Fee-splitting rule | Reported anti-rebating and referral-payment limits (confirm with counsel); avoid profit-sharing with lay owners | | NP practice authority | Full | | Out-of-state telehealth licensing | Limited | | Typical structure for non-physician founders | MSO plus physician-owned professional entity | ## Frequently asked questions ### Can a non-physician own a medical practice in Washington? Not directly. In *Morelli v. Ehsan*, the Washington Supreme Court held a clinic partnership between a physician and an unlicensed person illegal. Non-physicians typically own an MSO that provides business services to a physician-owned practice. ### What happens if a Washington medical practice violates CPOM? In *Morelli*, the court refused to order an accounting and left the parties where it found them. That means a non-physician investor in a noncompliant arrangement may have no enforceable right to profits or a buyout, on top of licensing and regulatory exposure. ### Can a nurse practitioner own a practice in Washington? Washington is generally classified as granting NPs full practice authority, so an NP can generally provide nursing services without a physician collaboration agreement. An NP-owned entity should be organized for nursing services, and physician services should sit in a physician-owned entity. ### Is the MSO model legal in Washington? Yes, when structured correctly. The physician-owned entity must control all clinical decisions, and the MSO's fee should reflect fair market value for non-clinical services rather than a share of medical profits. ### Do I need a Washington license to treat Washington patients by telehealth? Generally yes. We classify Washington's out-of-state telehealth pathway as limited, so clinicians treating new Washington patients should generally hold a Washington license. Confirm the scope of any current pathway. ## Sources - [Morelli v. Ehsan, Washington Supreme Court (1988), via Justia](https://law.justia.com/cases/washington/supreme-court/1988/54234-1-1.html) - [Washington Law Review, Vol. 71, No. 2 (1996)](https://digitalcommons.law.uw.edu/cgi/viewcontent.cgi?article=4133&context=wlr) - [Washington House Bill Report 2867 (1997-98), regarding the corporate practice of medicine](https://lawfilesext.leg.wa.gov/biennium/1997-98/Htm/Bill%20Reports/House/2867.HBA.htm) - [Washington Business Law Blog, "Beware the Corporate Practice of Medicine"](https://wabusinesslawblog.com/beware-the-corporate-practice-of-medicine/) For how Washington compares with every other state, see our [50-state corporate practice of medicine guide](/blog/corporate-practice-of-medicine-50-state-guide). ## Launch in Washington on a structure that is already built MyOrbitHealth can [form a PC-MSO structure](/pc-mso-formation) for your brand, supply a [physician PC owner or collaborating physician](/physician-pc-owner), or let you launch on its existing MSO / friendly-PC structure with 2,400+ licensed providers making every clinical decision. MyOrbitHealth does not practice medicine, charges a flat platform fee with no revenue share, and works month-to-month. [Book a call](https://myorbithealth.com/book) to map your Washington launch. ```html ```