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In California, may a non-clinical owner or manager be paid a share of revenue?

Ownership · part of The Practice Perimeter

⚠️ CALIFORNIA’S BAN IS BROAD AND EXPRESSLY SURVIVES CO-OWNERSHIP. The offer, delivery, receipt or acceptance by a licensee of “ANY REBATE, REFUND, COMMISSION, PREFERENCE, PATRONAGE DIVIDEND, DISCOUNT, OR OTHER CONSIDERATION, WHETHER IN THE FORM OF MONEY OR OTHERWISE, AS COMPENSATION OR INDUCEMENT FOR REFERRING PATIENTS, CLIENTS, OR CUSTOMERS” is unlawful — “IRRESPECTIVE OF ANY MEMBERSHIP, PROPRIETARY INTEREST, OR COOWNERSHIP IN OR WITH ANY PERSON TO WHOM THESE PATIENTS … ARE REFERRED”. Shared ownership is not a defense.

Cal. Bus. & Prof. Code § 650(a) · verified Sep 2, 2026 · regulatory monitoring, not legal advice

The rest of what California says on this

Every other rule we have verified under ownership & corporate practice of medicine, each linked to its primary source.

  • ⚠️ AND THIS IS THE MSO PERCENTAGE-FEE QUESTION ANSWERED IN A SENTENCE. “The payment or receipt of consideration for SERVICES OTHER THAN THE REFERRAL OF PATIENTS that is BASED ON A PERCENTAGE OF GROSS REVENUE OR SIMILAR TYPE OF CONTRACTUAL ARRANGEMENT SHALL NOT BE UNLAWFUL IF THE CONSIDERATION IS COMMENSURATE WITH THE VALUE OF THE SERVICES FURNISHED OR WITH THE FAIR RENTAL VALUE OF ANY PREMISES OR EQUIPMENT LEASED OR PROVIDED” by the recipient to the payer. A percentage-of-revenue management fee is lawful in California where it is commensurate with value — and unlawful where it is not.

    Cal. Bus. & Prof. Code § 650(b) · verified Sep 2, 2026 · read at Public.Law — California Codes

  • Corporations and other artificial legal entities have no professional rights, privileges, or powers — laypersons and lay entities may not own any part of a medical practice or control clinical decisions.

    Cal. Bus. & Prof. Code §2400 · verified Jul 26, 2026 · read at Public.Law — California Codes

  • California builds the rule from a definition. A “licensed person” means a natural person licensed to render THE SAME professional services as the corporation is or will be rendering. A medical corporation therefore starts from the position that its shareholders, directors and officers are physicians — everything else is an exception carved out of that.

    Cal. Corp. Code §13401(d) · verified Sep 1, 2026 · read at Public.Law — California Codes

  • The exception is §13401.5, and it is closed and capped. Notwithstanding §13401(d), the licensed persons ENUMERATED in that section may be shareholders, officers, directors or professional employees of a medical corporation — so long as the sum of all shares owned by them does not exceed 49 PERCENT of the total. A profession not on the list does not qualify at any percentage, and a lay investor is not a licensed person at all.

    Cal. Corp. Code §13401.5(a) · verified Sep 1, 2026 · read at Public.Law — California Codes

  • ⚠️ There is a SECOND cap most summaries omit, and it is a headcount rather than a percentage: the number of those other licensed persons owning shares may not exceed the number of persons licensed by the governmental agency that regulates the corporation. A medical corporation with one physician shareholder cannot admit two nurse practitioners as shareholders, however small their combined stake. The 49% arithmetic is necessary and not sufficient.

    Cal. Corp. Code §13401.5(a) · verified Sep 1, 2026 · read at Public.Law — California Codes

  • A lay-owned management services organization (MSO) may provide administrative/back-office services by contract, but may not control medical records, clinical hiring/firing, coding/billing, or the selection of medical equipment or drugs — doing so is illegal corporate practice of medicine.

    Medical Board of California — Medical Spas guidance · verified Jul 26, 2026

  • Effective Jan 1, 2026, SB 351 bars a private-equity group or hedge fund from controlling or interfering with a practice’s professional judgment (diagnostics, referrals, treatment, coding/billing, clinical staffing, equipment), voids certain non-compete and non-disparagement clauses, and empowers the Attorney General to enforce.

    Cal. SB 351 (2025), Health & Safety Code §§1190–1192 · verified Jul 26, 2026 · read at Public.Law — California Codes

  • Businesses that provide management services, franchises or other models that result in any unlicensed person or entity influencing or making medical decisions are in violation of the law; as examples, businesses that control medical records, the hiring and firing of healthcare staff, decisions over coding and billing, and the approving or selection of medical equipment or drugs violate the law, and Management Service Organizations (MSOs) arranging for advertising or providing medical services, rather than only providing administrative staff and services for a physician's medical practice, are non-physicians exercising control over a physician's medical practice.

    Medical Board of California — Medical Spas guidance (Management services organizations) · verified Sep 8, 2026

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