What California Physicians Should Know About the Laws Related to Private Practice

Running a private medical practice in California offers physicians autonomy, but significant additional responsibility. It means you must understand and comply with both the laws and regulations for medical doctors AND for businesses. Staying compliant means protecting your license, reputation, and the health of your practice.

1. Licensing and Scope of Practice

• All practicing physicians in California must maintain a current and valid license from the Medical Board of California (MDs) or the Osteopathic Medical Board of California (DOs).
• Continuing medical education (CME) requirements: currently 50 hours every 2 years
• Scope of practice limitations: especially consider scope of practice if employing or collaborating with non-physician providers like nurse practitioners or physician assistants. If your practice includes integrative or alternative treatments, confirm that all services are within the legal scope of your license and those of your staff.

2. Choosing the Right Legal Structure

Physicians in California have options when it comes to structuring their private practice, but not all entity types are legally permissible for the practice of medicine. The right choice depends on your goals, risk tolerance, and whether you plan to practice alone or with others.

• Sole proprietorship: Many physicians operate as sole proprietors, particularly when starting out. However, sole proprietorships do not offer liability protection, meaning your personal and business assets are legally one and the same. While malpractice insurance can help, many physicians choose more formal structures to separate personal and business risks.
• Professional corporation: professional corporations for physicians, aka professional medical corporations (PMCs) offer several benefits. They provide liability protection for business debts (though not for malpractice), may offer tax advantages, and allow for formal ownership structures among multiple providers. At least 51% of the shares must be owned by licensed physicians, and only certain other licensed healthcare professionals (such as nurses or physician assistants) may own the remaining 49%.
• Note: under the Moscone-Knox Professional Corporation Act, general corporations or LLCs are not allowed for the practice of medicine in California.

See more about business structures and business registration.

3. Naming the Medical Practice

In addition to the general business naming considerations, if you want to use a name for your medical practice other than your own name, you must get a fictitious name permit from the Medical Board of California (MDs) or the Osteopathic Medical Board of California (DOs).

4. Corporate Practice of Medicine Doctrine

California prohibits non-physicians from owning or controlling medical decisions, even indirectly. If you’re partnering with third parties, including a management services organization (MSO), ensure they do not influence clinical decisions, physician autonomy is protected, and fees are based on fair market value, not a percentage of revenue. Violating CPOM rules can expose both parties to regulatory enforcement.

5. Patient Referral Laws

Both federal and California law prohibit physicians from engaging in self-referral and receiving financial benefits for patient referrals. It is also prohibited to pay others to refer patients to you. These laws are known as the Stark Law, the Anti-Kickback Statute, and the California Physician Ownership and Referral Act (PORA). 

See more at our Guide to Patient Referral Laws in Healthcare.

6. Medical Records and Privacy

• California has some of the most stringent patient privacy laws in the nation, in addition to federal HIPAA laws
• Physicians must provide timely access to patient records (within 15 business days upon request), and maintain secure storage of records for a minimum of 7 years (longer for minors)
• Notify patients in the event of a data breach, under both HIPAA and California’s Confidentiality of Medical Information Act (CMIA)
• For third-party vendors for recordkeeping, ensure they sign HIPAA-compliant Business Associate Agreements (BAAs).

7. Billing, Coding, and Fraud Prevention

Mistakes in medical billing can lead to serious legal problems.

• Ensure accurate coding (especially CPT and ICD-10 codes)
• Compliance with Medi-Cal, Medicare, and private insurance billing rules
• Avoid upcoding, unbundling, and billing for medically unnecessary services. These can be considered fraud, even if accidental.
• Regular chart audits and billing reviews can help identify problems early.

8. Employment Law Compliance

As employers, physicians must comply with California labor laws.

• Onboarding and payroll
• Comply with wage and hour laws including overtime, meal/rest breaks, and mandatory sick leave
• Maintain a compliant employee handbook and required notices

See more at our Guide to Hiring Employees.

9. Informed Consent and Patient Agreements

Clear, well-drafted patient agreements are essential for managing expectations and reducing legal risk. Patient documents should include:

• Informed consent documentation: crucial in protecting against malpractice claims. California law requires that patients be properly informed of the risks, benefits, and alternatives of any proposed medical treatment.
• Payment policies, cancellation/no-show fees, and communication boundaries (e.g., email or text use).

10. Risk Management

• Physicians should also carry medical malpractice insurance, even if not legally required
• Develop clear policies and procedures for handling medical errors, difficult patients, or adverse outcomes
• Stay up to date on changes in standard of care guidelines.

11. Telemedicine Regulations

If you provide care through telemedicine, you must follow California’s Telehealth Advancement Act. This includes:

• Obtain verbal or written patient consent before initiating a telehealth visit
• Maintain the same standard of care as in-person visits
• Ensure HIPAA-compliant video platforms and secure communication
• Telemedicine also involves special rules for prescribing, especially controlled substances.

See our Guide to What Healthcare Providers Need to Know About Telehealth Laws in California

12. Good Faith Estimates

Under the federal No Surprises Act, physicians must provide Good Faith Estimates (GFEs) to uninsured or self-pay patients before services are rendered.

• These estimates must outline the expected cost of services with reasonable accuracy and be provided in writing, typically within 1–3 business days of scheduling.
• California physicians must also comply with state-specific price transparency laws.
• Failure to provide timely and accurate GFEs can lead to complaints or penalties, so it’s important to build this step into your intake or scheduling process.

See more at CMS.gov

13. Medicare Opt-Out

Some physicians choose to opt out of Medicare to avoid the program’s low reimbursement rates, complex billing rules, and regulatory burdens. Opting out allows you to work directly with Medicare-eligible patients through private contracts, setting your own fees and terms without Medicare’s interference. However, this choice comes with strict rules.

To opt out, physicians must

• File an opt-out affidavit with Medicare and renew it every two years.
• Have each Medicare patient sign a private contract stating that the patient agrees to pay out of pocket and understands that Medicare will not reimburse them.

14. Advertising and Website Compliance

As with all businesses, California physicians must avoid false, deceptive, or misleading advertising.

• Your website, social media, and marketing materials should avoid guaranteeing outcomes for treatments
• Clearly identify the credentials of all practitioners
• If you use email or text marketing, make sure you’re complying with the CAN-SPAM law and California’s Consumer Privacy Act (CCPA).

See more at our Guide to Laws Related to Marketing

Further Resources

Guide to Getting Legal Help

Guide to the Law for Business Owners

Guide to Healthcare Laws

Image credit: Image by freepik