Federal CPOM Ban Implications for Management Services Organizations
Last month, Senators Elizabeth Warren, Ron Wyden, and Jeff Merkley, along with Representatives Val Hoyle, Alexandria Ocasio-Cortez, and Suhas Subramanyam, introduced the Stop Corporate Takeovers of Physicians Act, the first-of-its-kind bill at the federal level to ban the corporate practice of medicine (“CPOM”) [1]. The implications this bill would have on common private equity-backed MSO- “Friendly PC” arrangements cannot be overstated. The bill enjoys support from several medical associations and advocacy groups, including the Alliance of Independent Dentists, American Academy of Emergency Medicine, American Economic Liberties Project, Association for Independent Medicine, Bull Moose Project, Center for Health and Democracy, Coalition for Patient Centered Care, ONCare Alliance, OrthoForum, and the Private Equity Stakeholder Project [2],[3]. Currently, about two-thirds of states have some form of prohibition on non-licensed individuals or entities owning, operating, or controlling medical practices, and employing or engaging physicians to provide professional medical services [4]. The bill’s text includes a non-preemption clause that would preserve equal or more stringent provisions in their respective state’s law. The proposed legislation aims to drastically curb the role of management services organizations (“MSOs”) in our healthcare system by restricting avenues for ownership, financing machinations, and control over physician practices and the practice of medicine.
Protections for Clinicians
In addition to reducing the influence of MSOs, the bill also makes it unlawful for health care providers, licensees, or MSOs to enter into non-compete, non-disclosure, or non-disparagement agreements. According to the bill’s text, the term “licensees” includes physicians and advanced practice providers such as nurse practitioners and physician assistants. The bill includes an exception for non-compete agreements with licensees who are shareholders or members of the medical practice and who own or control at least 25% of the ownership interest [1].
The bill’s text prohibits a health care provider from directly or indirectly interfering with, controlling, or otherwise directing a licensee's professional judgment or clinical decision-making through discipline, punishment, threats, adverse employment actions, coercion, retaliation, or excessive pressure. Specifically, health care providers may not specify period of time spent with patients, determine the clinical status of the patient, influence referral patterns, have final decision-making authority over diagnoses, diagnostic terminology, or diagnosis codes that are entered into medical record, control or limit the range of clinical orders available to licensees including by controlling the medical record in a way that could influence the clinical decision-making of licensee.
Ownership and Financing Restrictions on MSOs
As it relates to MSOs, the bill outlines restrictions on the financial arrangements MSOs may engage in, including prohibitions on controlling, or entering into an agreement to control or restrict, the sale or transfer of a medical practice's shares, interests, or assets. MSOs may not acquire or finance the acquisition of shares of stock or other ownership interests in a medical practice, including by establishing or causing the establishment of a medical practice with which the MSO or affiliate intends to contract. MSOs may not pay dividends from shares of ownership interests in a medical practice or serve as a director, manager, or officer of, be an employee of, be a contractor with, or otherwise participate in managing a medical practice [1].
Operational Restrictions on MSOs
Beyond the ownership and financing restrictions for MSOs, the bill also outlines operational limitations. MSOs may not [1]:
Contract with, or amend, renew, or terminate a contract with a medical practice for management services unless:
The medical practice negotiated the contract at arm’s length through legal counsel, negotiators, and financial advisors selected by such practice without the involvement of the MSO and free from any financial conflict of interest with the MSO and;
Any compensation under the contract reflects fair market value as determined by the FTC
Advertise the services of a medical practice under the name of an entity that is not the medical practice
Control or exercise de facto control over the administrative, business, or clinical operations of a medical practice in a manner that affects the nature or quality of medical care that the medical practice furnishes, including through exercising ultimate decision-making authority over:
Hiring or terminating employees of a medical practice
The work schedules, compensation, or other terms of employment for licensees of a medical practice
Staffing levels of a medical practice
The period of time a licensee of a medical practice may see a patient
The disbursement of revenue generated from licensee fees and other revenue generated by services furnished by licensees of a medical practice
Required degrees or credentials for a licensee of a medical practice to see a patient
The establishment of revenue targets for licensees or other incentives for licensees of a medical practice
Decisions regarding the diagnostic coding used by a medical practice
Clinical standards or policies of a medical practice
Policies regarding billing for services furnished by a medical practice
The price, rates, or amounts charged for services furnished by licensees of a medical practice or
The negotiation, execution, performance, enforcement, or termination of contracts with third-party payors or individuals that are not employees of a medical practice
Where the Bill Goes Beyond Most State CPOM Laws
Many of the bill’s prohibitions on MSOs align closely with CPOM laws already adopted by many states. However, a few terms outlined above go beyond traditional CPOM restrictions. One such provision is the prohibition on MSOs exercising ultimate decision-making authority over the disbursement of revenue generated by the practice’s licensees, where that control affects the nature or quality of care. Few state CPOM laws address revenue disbursement directly, although Oregon’s SB 951, on which the federal bill is modeled, takes a similar approach. How this provision would apply to priority-of-payment waterfalls is unclear. A waterfall that dictates the order in which practice collections fund expenses, physician compensation, and the management fee could be viewed as giving the MSO de facto control over disbursement, particularly where the MSO also controls the practice’s bank accounts. On the other hand, a payment waterfall that the practice negotiated at arm’s length, with independent advisors and the authority to amend it, may be defensible as the practice’s own decision. FTC rulemaking would likely determine where that line falls. If regulators adopt the broader reading, the provision could restrict a key risk-sharing mechanism common in turnkey management services agreements. All else equal, that would reduce the value of the management fee, because formalized risk shifting from the PC to the MSO is one of its main value drivers.
Ownership Requirements of Medical Practices
The bill also imposes restrictions on medical practices that go beyond those of traditional state-level CPOM laws. The most significant is the requirement that the licensee be licensed and present in the state where professional services to patients are furnished and “substantially engaged in delivering medical care”. This would threaten the telemedicine platform model that many practices operate under, in which a physician owner holds PCs in multiple states without practicing in them. Common specialties that operate under this model include mental and behavioral health, primary and urgent care, and radiology, among others.
Enforcement and Penalties
The Federal Trade Commission (“FTC”) would have authority to enforce the legislation, and violations would be treated as unfair or deceptive acts or practices under the Federal Trade Commission Act, which can serve as a basis for exclusion from federal health programs. Courts finding violations would be required to order an end to the prohibited conduct and, where applicable, divestiture and disgorgement of revenue [1].
Outlook and Next Steps for MSOs
The bill is exclusively sponsored by Democratic members of Congress and is unlikely to pass in its current form without bipartisan support. However, it represents a significant shift in the federal political appetite to regulate the management of physician practices and could serve as a roadmap for states considering adopting CPOM laws or expanding existing ones [5]. Stakeholders in these arrangements should consider this an opportunity to review the terms of current agreements that could invite regulatory scrutiny under current and potential future CPOM laws and ensure the compensation terms are fair market value and commercially reasonable.
BFMV works with MSO entrepreneurs to structure fair market value and commercially reasonable management fees. Reach out to taylor@buckheadfmv.com to set up a consultation.
[1] Stop Corporate Takeovers of Physicians Act of 2026, S. 5419, 119th Cong. (2d Sess. 2026) (as introduced Sept. 16, 2026) (the “Federal CPOM Bill”). https://www.warren.senate.gov/wp-content/uploads/2026/09/Stop-Corporate-Takeovers-of-Physicians-Act-for-circ.-2026.pdf
[2] Seyfarth Shaw LLP. (2026). Stop Corporate Takeovers of Physicians Act: A possible shift in healthcare private equity [Legal update]. https://www.seyfarth.com/news-insights/stop-corporate-takeovers-of-physicians-act-a-possible-shift-in-healthcare-private-equity.html
[3] Gass, C. S., & Strode, R. D. (2026, September 25). Proposed federal CPOM legislation: What the Stop Corporate Takeovers of Physicians Act would mean for private equity and MSO-based transactions. Health Care Law Today, Foley & Lardner LLP. https://www.foley.com/insights/publications/2026/09/proposed-federal-cpom-legislation-what-the-stop-corporate-takeovers-of-physicians-act-would-mean-for-private-equity-and-mso-based-transactions/
[4] Permit Health. (2025, December 23). The corporate practice of medicine 50-state guide. https://www.permithealth.com/post/the-corporate-practice-of-medicine-50-state-guide
[5] Franco, M. A., Saran, J. C., & Brossi, J. K. (2026, September 17). Congressional Democrats introduce national corporate practice of medicine bill. Holland & Knight. https://www.hklaw.com/en/insights/publications/2026/09/congressional-democrats-introduce-national-corporate-practice
