Starting a Direct Primary Care (DPC) Practice in Texas

Legal Services for Texas Healthcare Providers Transitioning to Direct Patient Care

If you're a Texas physician or licensed healthcare professional frustrated with volume-driven medicine and exploring Direct Primary Care (DPC) or Direct Patient Care as your path back to meaningful patient relationships, you're not alone. The number of family physicians practicing DPC tripled between 2022 and 2023. 

But starting a DPC practice in Texas isn't as simple as hanging a shingle and charging membership fees. You're navigating a complex legal landscape: existing employment agreements with non-compete clauses, Medicare opt-out decisions, and Texas-specific regulations under Chapter 117 of the Occupations Code.

This guide walks you through the unique legal and regulatory requirements for starting a DPC practice in Texas – from entity formation through patient agreements.

Need help navigating DPC startup compliance? Our healthcare attorneys have guided dozens of Texas physicians through successful DPC transitions. Call (713) 783-3110 or schedule a consultation.

Step 1: Review Your Employment Contract for Non-Compete Restrictions

Before establishing your direct patient care practice in Texas, carefully examine your current employment agreement to understand any restrictions that may affect your ability to practice independently.

A healthcare attorney experienced in Texas contract law can assess the restrictions and enforceability of any non-compete provisions contained within your employment agreement and advise you on strategies to minimize legal risk as you transition to independent practice.

Legislative Update: If your contract was entered into or renewed after September 1, 2025, any non-compete provisions comply with Senate Bill 1318. This legislation modified the enforceability requirements for non-compete agreements for physicians, dentists, nurses, and PAs licensed in Texas, and newer contracts must meet more stringent standards to be valid.

Step 2: Choose Your Business Entity Structure

Your choice of entity structure should align with your practice size, ownership composition, and long-term growth plans. Solo practitioners have different needs than multi-physician groups, and practices employing or partnering with non-physician providers face additional considerations.

Legal counsel becomes especially important if you're considering a collaborative practice model that brings together licensed professionals with different scopes of practice, such as physicians, physician assistants, or nurse practitioners. These arrangements require careful structuring to comply with state law.

Our healthcare attorneys can evaluate your specific situation and recommend the optimal entity structure for your practice. 

Learn more about the entity options available to Texas healthcare professionals and the advantages of each. 

Regulatory Compliance for DPC Practices in Texas

DPC practices face all the standard healthcare regulations (HIPAA, Anti-Kickback Statute, TMB rules, etc.) – plus several unique requirements that don't apply to traditional practices. Understanding these DPC-specific rules is critical to launching and operating compliantly.

Here's what sets DPC apart:

Texas Occupations Code Chapter 117, Direct Patient Care 

Texas Occupations Code Chapter 117 explicitly protects direct patient care from insurance regulation. The law (revised June 20, 2025 via Texas HB 541) protects both licensed healthcare providers and their patients by prohibiting state agencies, insurers, and health maintenance organizations from interfering with or penalizing anyone solely for participating in direct patient care arrangements. 

However, licensed healthcare professionals must comply with certain requirements to enjoy this protection, including a written patient agreement with mandatory disclosure language.

Our healthcare attorneys help Texas physicians draft Chapter 117-compliant membership agreements that comply with the law, while also adding provisions that protects their business interests. . 

New IRS Rules Governing HSA Eligibility for Membership Fees

Effective January 1, 2026, the One Big Beautiful Bill Act made DPC membership fees payable with pre-tax HSA funds – up to $150 per month for individuals and $300 per month for families.

Previously, having a DPC membership disqualified you from HSA eligibility. Now, 61 million Americans with HSA-eligible high-deductible health plans can use tax-advantaged dollars to pay for DPC.

To ensure your patients can use HSA funds tax-free for DPC membership fees and maintain HSA contribution eligibility:

• Keep fees at or below $150/month individual, $300/month family (can be billed for periods of more than a month provided the fees do not exceed the monthly limit on an annualized basis)
• Limit covered services to primary care only (no anesthesia procedures, prescription drugs except vaccines, or lab services that are not typically administered in a primary care setting)
• Use fixed periodic fee as sole compensation (no separate billing for covered services)
• Update membership agreements to reflect IRS Notice 2026-05 requirements (see “HSA Compatibility (2026 Rules)” below)

If your DPC practice offers services beyond basic primary care (minor procedures requiring local anesthesia only, prescription dispensing, in-office lab testing), you'll need to structure those as separate billable services outside the DPC arrangement to maintain HSA compatibility.

Corporate Practice of Medicine Doctrine Compliance

Texas prohibits non-physicians from employing physicians to provide healthcare services. This restriction affects ownership structures, management arrangements, and investor relationships. 

If you're considering bringing in non-physician investors, forming a management service organization (MSO), or partnering with business entities to support your DPC practice, these arrangements must be carefully structured to comply with Texas CPOM doctrine. 

Before finalizing any ownership or management agreements, consult with a healthcare attorney experienced in Texas medical practice law.

Step 3: Make Your Medicare Decision (Opt-Out vs. Participate)

Providers who collect retainer fees under a DPC model and also bill Medicare for enrolled patients could be committing False Claims Act violations. For this reason, it is important to carefully evaluate how – and if – you will serve Medicare beneficiaries. 

Texas DPC providers generally have two primary options when it comes to Medicare, each with distinct advantages and risks:

1. Option 1: Opt Out of Medicare Entirely (Most Common). File an opt-out affidavit with your Medicare Administrative Contractor requiring a two-year commitment that auto-renews unless you opt back in. In addition to a direct care agreement, you must also execute a private contract with each Medicare patient that includes mandatory disclosures regarding their rights and payment obligations. This option works best for pure DPC practices.
2. Option 2: Exclude Medicare Patients from Your DPC Panel. Remain a Medicare-participating provider for traditional fee-for-service patients while choosing not to accept Medicare beneficiaries as DPC members. This approach works best for hybrid practices transitioning gradually into the DPC model or maintaining both practice types.

If you opt out of Medicare, you must execute a separate private contract with each Medicare beneficiary. This contract must meet specific federal requirements for private contracts, including language that the patient understands Medicare won't pay for your services and that they agree to pay out-of-pocket.

Medicare opt-out involves strict timing and procedural requirements. Talk to a healthcare attorney who handles Medicare compliance daily.

Step 4: Draft Your DPC Patient Agreement

Beyond the mandatory elements required by Texas Occupations Code Chapter 117, a well-crafted DPC agreement protects both your practice and your patients by clearly defining the relationship, services, and expectations.

Chapter 117 Mandatory Elements

Texas law requires every DPC agreement to include specific disclosures and terms. Your agreement must clearly state that the arrangement for direct patient care is not insurance. Texas law permits direct primary care agreements to include fee-for-service arrangements, however such arrangements may not qualify for HSA reimbursement.

HSA Compatibility (2026 Rules)

To allow patients to pay DPC fees from Health Savings Accounts, your agreement must meet IRS requirements. The services must be limited to "primary care services" as defined by the IRS. The fee must be fixed in amount, charged on a periodic basis, and comprise the sole compensation paid for primary care services delivered under the agreement. The fees cannot be contingent upon the delivery of specific services, like a fee-for-service model. Include clear language stating that the agreement qualifies for HSA payment under current IRS guidance.

Additional Recommended Provisions

Your healthcare attorney may recommend including these additional terms:

• Scope of Services: Define what's included (primary care visits, virtual care, care coordination, preventive services, basic procedures, medication consultation) and explicitly exclude emergency care, hospital care, specialist referrals, surgery, advanced imaging, and complex diagnostics to prevent scope creep and patient confusion.
• Fee Structure: Specify monthly, quarterly, or annual payment options; identify accepted payment methods; disclose fees for non-covered services; include fee adjustment provisions for future years; and establish late payment terms.
• Term and Termination: Set the initial term (typically one year with automatic renewal), establish termination notice requirements (30-60 days is standard), define your refund policy for prepaid fees, and include patient abandonment prevention measures ensuring continuity of care during the termination period.
• Medicare-Specific Language (If Opted Out): Confirm in writing you are excluded from Medicare, Medicare won't reimburse for your services, the patient accepts full responsibility for payment for your services, among other requirements.
• Telehealth Consent: Acknowledge that telehealth services are included in the membership, specify technology requirements for virtual visits, and identify limitations on telehealth for certain services requiring in-person evaluation.
• Other Standard Provisions: Incorporate your HIPAA Notice of Privacy Practices by reference, establish dispute resolution procedures (mediation or arbitration), and specify that Texas law governs the agreement.

Work with experienced counsel. While Chapter 117 establishes minimum requirements for DPC agreements, your attorney can help you develop additional provisions that address common operational issues, reduce misunderstandings, and strengthen your legal position.

Set Up Your Direct Patient Care Practice with Confidence

This legal guide covers the essentials, but every DPC transition is unique. Whether you're six months from launch or just starting to explore the model, we can help you build a compliant foundation. 

Contact Hendershot Cowart P.C. online or call (713) 783-3110 to discuss your specific situation.