A wave of state-level legislation is zeroing in on the corporate ownership models that power direct-to-consumer telehealth companies, according to a report from STAT News. These laws challenge the longstanding corporate practice of medicine doctrine, which restricts non-physician entities from employing doctors. The new measures threaten to upend the business structures of prominent online care platforms.
The corporate practice of medicine prohibitions, historically enforced in roughly half of U.S. states, were largely waived during the pandemic to expand virtual care access. Now, lawmakers in several states argue that telehealth startups prioritize investor returns over patient safety. This regulatory pushback could fundamentally reshape how digital health companies operate.
The report notes that states like Texas and California are actively considering or advancing bills that would scrutinize ownership and control arrangements. Telehealth firms often rely on corporate entities to hire clinicians, a structure that critics claim undermines medical decision-making. The legislation could force these companies to restructure or exit certain markets entirely.
For the direct-to-consumer telehealth sector, which saw explosive growth during Covid-19, the impact could be severe. Investors who poured capital into virtual care startups now face uncertainty over the viability of their business models. Smaller platforms may lack the resources to comply with varying state regulations, potentially leading to consolidation.
Proponents of the crackdown argue it is necessary to preserve physician autonomy and patient trust. They contend that separating clinical judgment from corporate influence is a fundamental tenet of medical ethics.