Originally published in Healthcare News and Healthcare Michigan.
Reprinted with Permission.
One of the most lasting changes brought about by the COVID-19 pandemic has been the widespread adoption of telehealth. Between 2019 and 2021, physician use of telemedicine increased dramatically from 15.4% to 86.5%. While utilization has moderated since its pandemic peak, telehealth remains a component of healthcare delivery. For providers, investors, and acquirers, however, telehealth’s growth has created a regulatory challenge: healthcare services may be delivered virtually, but healthcare regulation remains largely state based.
As healthcare platforms continue to expand, organizations must navigate a patchwork of state licensure requirements, prescribing regulations, corporate practice restrictions, and entity formation requirements. A telehealth platform may operate as a single business from a consumer perspective, but legally it often functions across dozens of jurisdictions.
Cross-State Practice: One Platform, Multiple Licenses
A fundamental principle of telehealth regulation is that a healthcare provider is generally deemed to be practicing medicine in the state where the patient is located when the services are rendered. As a result, physicians and other practitioners must hold an active license in each state where their patients reside.
To address the administrative burden of obtaining multiple licenses, many states participate in the Interstate Medical Licensure Compact (IMLC), which streamlines the process for physicians seeking licensure in participating jurisdictions. The IMLC has significantly improved mobility for physicians and facilitated multi-state telehealth operations. However, the IMLC does not create a national license. Providers must still obtain and maintain individual licenses in each participating state.
Certain professions have seen additional flexibility. Some states have adopted telehealth registration pathways that permit out-of-state practitioners, particularly mental health providers, to deliver services remotely without obtaining a full in-state license. These pathways vary in scope, eligibility requirements, and supervision obligations, making state-by-state analysis essential. Five states have adopted their own telehealth-only registration pathways: Arizona, Florida, Delaware, Vermont, and most recently, Colorado.
For organizations evaluating platform acquisitions or geographic expansion opportunities, understanding licensure requirements early is critical. A platform’s value proposition may depend heavily on its ability to serve patients across state lines, and that capability can be significantly limited if the provider network lacks appropriate licensure coverage.
Remote Prescribing and Regulatory Scrutiny
While telehealth has become an accepted method of delivering care, regulators continue to closely scrutinize remote prescribing arrangements, particularly those involving controlled substances, weight-loss medications, behavioral health treatments, and other high-demand therapeutic areas. Federal and state regulators have devoted attention to telehealth models that rely on virtual prescribing. Recent enforcement actions have focused on issues such as inadequate patient evaluations, failure to meet applicable standards of care, questionable supervision arrangements, and prescribing practices that appear driven by commercial rather than clinical considerations.
As a result, telehealth agreements should address clinical responsibility, patient evaluation requirements, prescribing authority, practitioner supervision, and compliance with evolving federal and state requirements. Acquirers and investors conducting diligence on telehealth companies should carefully evaluate prescribing protocols and compliance infrastructure, as these areas present significant regulatory and operational risk. Although many pandemic-era waivers have expired, certain federal telemedicine prescribing flexibilities remain in effect through December 31, 2026, requiring stakeholders to monitor waiver-related developments and compliance risks.
The Rise of Hybrid Care Models
Many healthcare organizations have moved beyond virtual models and are implementing hybrid care structures that combine telehealth services with brick-and-mortar locations. These models can improve care continuity and facilitate laboratory testing and diagnostic services. From a transactional perspective, hybrid models often present both opportunities and additional regulatory complexity. Expansion may require new professional entities, facility licenses, registrations, payor enrollments, and employment arrangements. Organizations must also consider whether state laws impose restrictions on ownership structures, management arrangements, or the delegation of clinical responsibilities. The regulatory analysis extends beyond telehealth laws; a successful hybrid platform must be structured to comply with the broader healthcare regulatory framework applicable in each target state.
Entity Formation and Corporate Practice Considerations
Licensure is only one piece of the puzzle. When a telehealth company enters a new state or acquires an existing platform, entity structure becomes equally important. Many states maintain corporate practice of medicine doctrines that prohibit non-physicians from owning or controlling the practice of medicine. Consequently, telehealth businesses frequently operate through carefully structured management arrangements involving professional entities owned by licensed clinicians and management organizations that provide administrative services. Organizations considering acquisitions or market expansion should assess whether their existing structure can be replicated in the target jurisdiction.
State-specific requirements concerning professional corporations, professional limited liability companies, ownership restrictions, physician employment rules, and management service agreements can materially affect transaction structure and post-closing operations. Failure to adequately address these issues during diligence may result in costly restructuring efforts, delays in expansion, or regulatory enforcement risk after closing.
Looking Ahead
Despite continued innovation in digital health, healthcare regulation remains rooted in state authority. Some jurisdictions have embraced telehealth expansion through licensure compacts and registration pathways, while others continue to enforce strict in-state licensure requirements and closely monitor virtual care arrangements. For healthcare organizations pursuing growth through acquisitions, partnerships, or geographic expansion, telehealth compliance is not a check-the-box exercise. Successful platforms must evaluate provider licensure, prescribing practices, entity formation requirements, corporate practice restrictions, reimbursement considerations, and patient-location rules before entering new markets.
In today’s environment, telehealth may allow providers to reach patients virtually anywhere, but the regulatory landscape remains firmly divided by state lines. Careful planning and transaction structuring remain essential to building scalable and compliant telehealth platforms.
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About the Author
Allison Dolson advises healthcare providers, organizations, and institutions on a wide range of regulatory, transactional, and corporate matters. Her practice includes healthcare transactions, physician arrangements, HIPAA compliance, telemedicine, and regulatory issues involving Stark, the Anti-Kickback Statute, EKRA, and the Corporate Practice of Medicine. She also counsels clients on commercial real estate transactions, leasing, acquisitions, and development projects.. She can be reached at ADolson@dickinsonwright.com.