3 Ways Healthcare & Telemedicine Companies Can Trigger Unlicensed and Corporate Practice of Medicine Legal Tripwires


This is the typical story of someone who achieves success with a particular therapy—let’s call it Therapy X—and then builds a healthcare business around it, not realizing they are running afoul of unlicensed practice of medicine and corporate practice of medicine (or psychology).

Joe Smith plays competitive squash and one day he injures his rotator cuff.  Joe tries everything – medical doctor, osteopathic physician, chiropractor, nurse practitioner who specializes in functional medicine, integrative medicine, his anti-aging medical guru, meditation, Reiki, pranic healing, special herbs and diets and exercises.

Nothing really helped.

Luckily, Joe found Rick, who worked special healing magic with the aid of a machine, let’s call it Machine X.  Maybe Machine X read Rick’s energy, maybe it transmitted bioelectrical impulses through the meridians, maybe it rotated all his molecules in some proprietary way … we’re making this part up, we’ve seen it all … the point of the story is that Machine X, applied twice to Rick’s rotator cuff, and his condition is cleared.

Joe happens to have some millionaires at hand; he forms a company and his business model is getting salespeople trained in Machine X and they will go out and perform the Machine X magic on clients and get great results and testimonials.

A million dollars in revenue later, Joe calls our Firm.  There are some things Joe hadn’t yet considered, including:

  • Is Machine X a medical device and what are the FDA enforcement issues here? The manufacturer insisted anyone could buy the machine and after all, it’s non-invasive, so how could it be a medical device?
  • Joe’s company has been repeating on its website the very same claims the manufacturer has been making. Will these claims create FDA exposure, FTC liability, or liability exposure to private plaintiffs?
  • Does Joe’s company get any added protection by the fact that the salespeople are independent practitioners?
  • If Joe has the wrong legal structure underpinning his entire business model, what can he do to mitigate his legal risk?

See our prior post:


Does FDA deem your product to be a medical device, or is it just a consumer product that would not be regulated by FDA? Here are basic steps you can take to work through the puzzle.

Navigating FDA Medical Device Issues

Step 1: Medical Device?

FDA medical device issues loom whenever a machine, instrument, apparatus is used, among other things, to diagnose or treat disease.

These are similar words to those used in statutes defining unlicensed practice of medicine.  The difference is that in FDA medical device territory, the diagnosis, prescription, operation or treatment is being done by the machine; whereas until state medical licensing statutes, the diagnosis, prescription, operation or treatment of the patient is being done by an individual.

Step 2: How is the product regulated, if a device?

A good way in to the FDA regulatory rabbit hole is to try find out whether there is Code of Federal Regulations (CFR) provision regulating the machine.

For example, in the holistic health arena, many products will fall into the “biofeedback” device category.

It’s a good idea to look at the definition in the CFR for the device and figure out exactly what claims can be made for the device.  Often, manufacturers themselves make more expansive claims than have been cleared by the FDA 510(k) submission process.

As well, the FDA attorney can look to prior 510(k)s so as to see what claims are allowed.  A medical device cannot be lawfully marketed beyond its cleared claims.

As a corollary, the FDA attorney should look to see whether the medical device is classified as a prescription vs. over-the-counter medical device.

As an overarching principle, FDA looks to the “intended use” of the product, to determine whether it should be regulated as a medical device, and to decide how to classify the device.

State law may also regulate medical devices and their distribution to the public.

This all gets a bit circular, because federal law and FDA decide whether a medical device is prescription or not; but federal law and FDA also defer to state law as to who can write a valid prescription for a medical device.

State law also controls the definition of the practice of medicine.  The definition of practicing medicine can include not only diagnosing, treating, operating, and prescribing, but also doing so “by appliance, test, drug, operation, or treatment.”  So diagnosing or treating with a product that FDA would regulate as a medical device would be considered the practice of medicine.

See our prior post: 


Today’s legal strategy sessions involved a healthcare business that is really a healthcare practice in disguise. Let’s look at what legal strategy lessons we can learn here.

How Healthcare Companies Trip Over Unlicensed and Corporate Practice of Medicine Wires

Joe here is in serious legal jeopardy and doesn’t know it.  He is having non-licensed salespeople run around with this machine, trying to create the “same great results” he got (in his big story about his treatment on the About page, with the “hero” shot of himself before and after), and his website itself makes claims about cure, treatment.

Even though the website doesn’t use these specific words, a fair implication of what Joe is saying on the website is that his non-licensed hires will in fact treat rotator cuff and a host of symptoms, illnesses, aches, pains, disease issues.

Unlicensed & Corporate Practice of Medicine Tripwire # 1: Making claims about a product and the way your practitioners will use it, that make it clear to regulators that diagnosis or treatment is going on—be it of actual disease, or simply of “ailments” or “pain.”

The next piece is that Joe has no idea what his salespeople are doing or saying to the ultimate client.  SO even if Joe’s company’s marketing is clean, Joe has individuals going out and making all sorts of potential promises to the ultimate user (who in this case, may well be considered by the medical boards as “patients”).

Unlicensed & Corporate Practice of Medicine Tripwire # 2: Failing to direct and monitor employees and independent contractors regarding the statements, claims, and promises they make to the healthcare company’s customers.

By failing to reign in the practitioners, the Company could potentially be seen as either aiding and abetting unlicensed medical practice, or, as engaged in corporate practice of medicine.

These legal risks exists whether the Company is doing a brick-and-mortar or physical practice, such as Joe’s example, or involved in telemedicine or mobile and digital health.  In the telemedicine, mobile health and digital health space, the practitioners might be providing services digitally, electronically, through cellphones and mobile devices, iPads, tablets, and so on; but the question remains the same as to whether these services could be seen as practicing “medicine.”

The third piece going against Joe’s favor is that his business revolves around sending the “user” (aka “patient”) a detailed questionnaire about what they are “experiencing” (aka symptoms – the wordsmithing here is not enough to camouflage the diagnostic and therapeutic acts.

Unlicensed & Corporate Practice of Medicine Tripwire #3: Giving the user a medical history to fill out and submit.

One of the very early legal rules you will see around telemedicine in many states is the general statement that sending a questionnaire over the Internet and using that to make a medical recommendation, is unlawful.  This piece relates now primarily to prescribing via telemedicine, and the rule is gradually being liberalized in different states.  However, the skepticism around getting useful information via an online questionnaire is deeply embedded in this historical regulatory stance.  And a good read on enforcement scrutiny is that the questionnaire can look like a medical history and make the case that there is unlicensed diagnosis and treatment going on.

See our prior post:


The Corporate Practice of Medicine (CPM) doctrine continues to befuddle, beleaguer, and bewilder healthcare companies seeking to venture with physicians and non-physician entrepreneurs.

More Legal Tripwires

Additional Unlicensed and Corporate Practice of Medicine Legal Tripwires

There is one more tripwire to watch out for, and that is that the unlicensed and corporate practice issue can still occur even if the practitioners used by the Company are licensed.

This risk can occur in two ways:

(1) the licensed practitioner gives advice across state lines, thus engaging in telehealth or telemedicine (or mobile health, say, if done via the phone); and separately,

(2) the licensed practitioner has given advice or done something that exceeds the scope of practice they have under law.

For example, the Company and practitioner are in California but the user is in New York and the practitioner is not licensed there as a healthcare practitioner.

As an example of the second situation, say the practitioner is a chiropractor and they are giving medical advice.  This can happen very easily if the Company is simply trying to grab onto a particular kind of practitioner (let’s say that chiropractors are good with rotator cuffs) but the process or procedure in question (say Machine X) is something that requires an MD or DO.

How Can Healthcare Companies Get Around Corporate Practice of Medicine Issues?

This is a trick question.  As lawyers we are not actually in the business of helping clients “get around” the law.

We use “navigate” as a metaphor.  The reality is that there is a spectrum of risk and every client makes a business judgment as to how aggressive they want to be in terms of pushing the envelope, given that healthcare is a highly regulated industry.  It pays to be informed; a little of the right legal advice can inform and thus help guide a million-dollar business decision.

In this scenario, Joe really has to mind the legal tripwires discussed above so as to mitigate the risk of enforcement for unlicensed and corporate practice of medicine.

In addition, Joe should:

  • ask legal counsel to come up with a list of do’s and don’ts for the practitioners;
  • refine and structure his business model around the do’s and don’ts; and
  • contractually bind the practitioners to the do’s and don’ts.

These do’s and don’ts could, for example, help script what the practitioners say to the user so as to help mitigate potential diagnostic and therapeutic activities by the practitioners.

Navigating isn’t always easy.  The determination as to whether such an activity is or is not within the scope or practice, is not always easily made prospectively.  Many times, it occurs retrospectively—i.e., when the practitioner is under investigation or discipline for unlicensed practice of medicine.  Many of these decisions do not make their way into published databases.

That is why it’s important to have a healthcare attorney broadly experienced in unlicensed and corporate practice of medicine issues.

See our prior post:


You, MSO is my own variation on I Claudius. Poor Uncle Claudius, everyone said. Ended up becoming Emperor of Rome. Through craft and careful strategy. So you have an MSO and want to operate […]


Beware of unlicensed and corporate practice of medicine pitfalls.  Because unlicensed and corporate practice of medicine are considered crimes, it’s important before starting up any healthcare venture to consult a law firm that knows the ins and outs of the corporate practice of medicine doctrine.  Contact Cohen Healthcare Law Group to navigate your venture through the complexity of the laws of corporate practice of medicine.

Contact Us

    Book your Legal Strategy Session now
    Cohen Healthcare Law Logo

    Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.

    Start typing and press Enter to search