Ketamine Clinic Acquisitions: Get the Law Right BEFORE the LOI

We often receive calls from potential ketamine clinic clients that just signed a letter of intent (“LOI”) or term sheet to acquire entire medical practices that are undertaking ketamine treatments. In the psychedelics space, many companies are starting off with off-label ketamine treatments while building towards a bigger suite of psychedelic services as the laws change at the federal and state levels (ketamine is a hallucinogen in the classical dissociative category of drugs). We’ve written many times about how hot ketamine clinics have become. See here, for example.

When potential clients sign these LOIs, they don’t even question whether or not there might be some kind of issue directly venturing with a licensed physician in the U.S. Unfortunately, in most instances, we have to break the news to the client that the proposed form of their transaction will not work under a given state’s health care laws. Among other things, the corporate practice of medicine doctrine (“CPOM”), which varies from state to state (see here, for example, in California) prohibits a layperson or lay entity from directly owning a medical practice or even employing a physician. The brain damage then ensues of what business model will work that the client

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