California Corporate Practice Doctrines After the Carbon Health Settlement: Enforcement Is Evolving, Not the Law

Healthcare attorney Shalyn Watkins wrote an article for the Daily Journal analyzing a recent settlement involving California's corporate practice of medicine (CPOM) laws and providing key takeaways for healthcare companies and investors. California Attorney General Rob Bonta's $4.5 billion settlement with Carbon Health Technologies Inc., its affiliated medical groups and its co-founder resolves allegations that the company violated the state's prohibition on the corporate practice of medicine but requires a complete restructuring of its friendly professional corporation (PC) model. Ms. Watkins explains that, despite some headlines to the contrary, the settlement marks an evolution not in the law itself but rather in its enforcement. She points to two other enforcement actions that together indicate state regulators are turning their attention toward potential CPOM violations and cracking down on overt acts of unlawful corporate control. Her article identifies the practices most likely to invite government scrutiny, highlighting that settlements such as the one with Carbon Health offer concrete examples of what compliance actually means. The piece concludes by reiterating that the rules have not changed but the consequences of ignoring them have, advising organizations to conduct proactive compliance reviews, retain experienced legal counsel and implement disciplined corporate governance to avoid attracting regulatory scrutiny and maintain profitable operations.

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