Healthcare PLLC compliance

Healthcare practice formation differs from standard LLC formation in three structural ways. Get these right at formation; fixing later is expensive.

1. PLLC vs LLC

Most states require licensed professionals (physicians, dentists, psychologists, physical therapists, others) to form as a Professional Limited Liability Company (PLLC) rather than a regular LLC. The PLLC must be wholly owned by licensed professionals in the same discipline.

States that require PLLC for healthcare: New York, Massachusetts, California, Florida, Texas, Illinois, and most others. States that don't require PLLC but allow standard LLC: a small minority including some western states.

If you formed as a standard LLC when you should have been a PLLC, fixing requires state-by-state amendment processes.

2. State licensure

You need an active professional license in every state where you provide care. Telehealth has not changed this · you must be licensed in the state where the patient is located at time of service. Multiple states = multiple licenses = multiple renewals = compliance overhead.

The Interstate Medical Licensure Compact (IMLC) speeds up licensure across 39 member states for physicians. PSYPACT does similar for psychologists across 40+ states.

3. HIPAA

If you handle patient-identifying medical information, HIPAA applies. Practical implications:

• Business Associate Agreements (BAAs) with every vendor that touches patient data (EHR, billing service, IT support, cloud hosting)
• Encryption of data at rest and in transit
• Access logging, audit trails
• Breach notification within 60 days of discovery
• Annual risk assessment

HIPAA violations are tiered up to $1.5M per category per year. Most enforcement is for repeat or willful violations, not first-time good-faith mistakes.

4. Payor credentialing

To bill insurance, you need to be credentialed with each payor (Blue Cross, Aetna, United, Medicare, Medicaid). Credentialing typically takes 90-150 days. Start the process at the same time as formation.

NPI (National Provider Identifier) numbers are free, instant, and federal. You need both Type 1 (individual provider) and Type 2 (organization, the PLLC itself).

5. Malpractice insurance

State-by-state requirements. Massachusetts and a few others require malpractice as a condition of license. Most don't require it but it is practically necessary. Annual premiums vary $5,000-$50,000+ depending on specialty, claims history, and state.

Need help with this?

Our team handles formation, EIN, banking, and compliance across the situations described above. Our accountant directory has specialists for the tax side.