The Federal “Stop Corporate Takeovers Of Physicians Act” Introduced, Targeting MSO And Friendly-PC Structures

Key Takeaways

• Taking cues from several state legislatures, the Stop Corporate Takeovers of Physicians Act would, for the first time, establish a federal restriction on the corporate practice of medicine, prohibiting entities not majority-owned and controlled by licensees from owning or controlling medical practices.
• The Act would also impose restrictions on management services organizations, targeting the “friendly PC” structures commonly used by MSOs in the healthcare industry.
• The bill includes robust enforcement mechanisms, including Federal Trade Commission enforcement, a private right of action with treble damages and attorney’s fees, state attorney general enforcement, mandatory divestiture and disgorgement, and potential exclusion from federal healthcare programs.
• The likelihood that the Act will pass this late in the 2026 legislative session seems relatively low. Nonetheless, stakeholders—including private equity-backed healthcare platforms, management services organizations, physician groups, and others who utilize friendly PC structures—should monitor this proposed legislation alongside the recent wave of state-level CPOM regulation.

Overview of the Proposed Legislation

Democrat members of Congress, with no Republican co-sponsors, introduced the Stop Corporate Takeovers of Physicians Act (the Act) on September 14. If enacted, the Act would establish the first federal corporate practice of medicine (CPOM) prohibition and impose new requirements across several areas of physician practice ownership and management services organization (MSO) arrangements. Key provisions of the Act include:

CPOM Prohibition

The Act would make it unlawful for any partnership or corporate entity that is not “majority-owned and controlled” by “one or more licensees” to own or control a medical practice, employ or contract for the professional services of a licensee, or otherwise engage in the practice of medicine. The Act broadly defines “licensee” as a physician or other advanced practice provider such as a physician assistant or nurse practitioner who is authorized under state law to diagnose and treat patients in a clinical setting. As proposed, “majority-owned and controlled” means that one or more licensees hold a majority of the ownership interest and constitute a majority of the governing body of the partnership or corporate entity. Licensee owners would be required to be licensed and present in a state where the practice provides services and would need to be substantially engaged in delivering medical care. The only exceptions to the CPOM prohibition are for nonprofit and public healthcare providers, hospitals, hospital-affiliated clinics, critical access hospitals, and rural emergency hospitals.

Interference with Clinical Judgment

In addition to the prohibition on corporate ownership of medical practices, the Act would prohibit any “health care provider” (defined as any entity that delivers healthcare services, including medical practices) from interfering with, controlling or otherwise directing the professional judgment or clinical decisions of a licensee—directly or indirectly through discipline, punishments, threats, adverse employment actions, coercion, retaliation, or excessive pressure—including specifying time spent with patients, determining clinical status , specifying treatment timing, controlling discharge referrals, having final decision-making authority over diagnoses, diagnostic terminology or diagnosis codes, and controlling or limiting the range of clinical orders available to licensees.

MSO Restrictions

The Act would also prohibit MSOs and their shareholders, directors, members, managers, officers, employees, and contractors from all of the following:

• Controlling or entering into an agreement to control, or restricting the sale or transfer of a medical practice’s shares, interests, or assets, or otherwise permit a person other than a licensee to control or restrict the sale or transfer the shares, interests, or assets of a medical practice (e.g., through stock transfer restriction agreements, succession agreements, nominee agreements or continuity agreements).
• Issuing shares of stock or other ownership interest in a medical practice or cause a medical practice to issue shares of stock or other ownership interest in such practice, in a subsidiary of such practice, or in an affiliate of such practice.
• Paying dividends from shares or an ownership interest in a medical practice.
• Owning or controlling shares or other ownership interest in, serving as a director, manager, or officer of, being an employee of, being a contractor with, or otherwise participating in managing a medical practice.
• Acquiring, causing the acquisition of, or financing the acquisition of shares or other ownership interest in a medical practice.
• Contracting with, or amending, renewing, or terminating 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 independently selected by such practice with no financial conflict of interest and at compensation at fair market value as determined by the Federal Trade Commission (FTC). It remains unclear how the fair market value compensation requirement for management services contracts would be determined, regulated, or enforced by the FTC.
• Advertising the services of a medical practice under the name of an entity that is not the medical practice.
• Controlling or exercising 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.

As proposed, MSOs would be prohibited from exercising ultimate decision-making authority over the hiring and termination of employees; work schedules, compensation, or other terms of employment for licensees; staffing levels; the period of time a licensee may see a patient; revenue disbursement; required degrees or credentials for a licensee; revenue targets; diagnostic coding; clinical standards or policies; policies regarding billing, price, rates, or amounts charged for services; or negotiation, execution, performance, enforcement or termination of contracts with third-party payors or individuals that are not employees of the medical practice.

Any MSO agreement that violates the above provisions would be void, unenforceable, and against public policy.

Prohibitions on Non-Compete, Non-Disclosure, and Non-Disparagement Provisions

The Act would prohibit, at a federal level for the first time, any licensee, healthcare provider or MSO from entering into any non-compete clause or any non-disclosure or non-disparagement agreement. A limited exception would exist for a non-compete clause between a licensee of a medical practice and the medical practice if the licensee is a shareholder or member of the medical practice or otherwise owns or controls an ownership or membership interest that is equivalent to 25% or more of the entire ownership or membership interest that exists in the medical practice. Any agreement entered into in violation of the prohibition would be void and unenforceable. The Act would not limit or otherwise affect any cause of action that a party to, or third-party beneficiary of, an agreement described in such a clause may have with respect to a statement of a licensee that constitutes libel, slander, a tortious interference with contractual relations, or another tort for which a party has a cause of action against the licensee; or does not depend upon or derive from a breach or violation of an agreement described in such clause.

Enforcement Mechanisms

The Act also includes several enforcement mechanisms. Violations would be treated as unfair or deceptive acts under the Federal Trade Commission Act (FTC Act). The Act also creates a private right of action with treble damages, attorneys’ fees and litigation costs, and any other relief (including equitable or declaratory relief) that the court determines appropriate, as well as state attorney general enforcement through parens patriae actions. There would be a right to a jury trial for any action brought under the Act and mandatory remedies include cease-and-desist orders, divestiture, and disgorgement of revenue. In addition, the Act would amend the Social Security Act (42 U.S.C. 10 1320a–7(b)) to permit exclusion from federal healthcare programs for persons or entities found in violation of Act.

Effective Date and Preemption

The Act would take effect one year after enactment. It would not preempt state laws that impose equal or more stringent requirements regarding ownership and control, licensee protections, or MSO restrictions.

The Evolving CPOM Landscape

CPOM has long been regulated at the state level, with more than 30 states imposing some form of prohibition. The industry has nevertheless used “friendly-PC” and MSO structures to help facilitate corporate investment in infrastructure, technology, and expertise. As cited in the Act’s one-page overview, more than 80% of U.S. physicians are now employed by corporate entities, up from 62% in 2019. If enacted, the Act would establish the first federal CPOM floor, and also significantly disrupt the industry, substantially curtailing the ability of physicians to leverage others to focus on the business of medicine while they focus on the practice of medicine.

Several states have recently enacted legislation setting guardrails for or limiting “friendly PC” and MSO structures, including California’s SB 351 (discussed in a prior alert), Oregon’s SB 951 (which the Act is modeled after, and is easily the most restrictive state law) and HB 3410, and Vermont’s Act 133 (effective July 2026). Similar measures have also been proposed in other states, such as Washington (SB 5387) and Rhode Island (S 2459 / H 7721), but these measures have failed to pass. The legislative activity is coupled with recent enforcement actions, namely in California, where the Attorney General recently entered into settlements with Aspen Dental Management (as discussed in a prior alert) and Carbon Health Technologies, following allegations that each company exercised undue control over its managed practices in violation of California’s CPOM prohibition. Meanwhile, the Second Appellate Division of the California Courts of Appeal has pending before it the matter of Art Center Holdings, Inc. v. WCE CA Art, LLC, where the court will decide the enforceability of continuity and similar agreements affording MSOs discretion to transfer the ownership of their managed practices.

What to Watch

The proposed Stop Corporate Takeovers of Physicians Act is in the early stages of the legislative process, and significant additional congressional action is needed before its enactment.

In the meantime, we note the following developments that may be of interest:

• Congressional Interest: The themes in this bill—physician ownership requirements, MSO restrictions, and enhanced enforcement—are likely to recur in future legislative sessions, whether through this bill or other proposals. Given the limited time remaining in the current legislative cycle, the bill is best viewed as a policy marker that may shape future federal and state efforts. The likelihood of similar proposals being advanced in the near term may be impacted by the composition of the legislature following the midterm elections and the policy priorities of the resulting legislative leadership.
• Continuing State-Level Activity: State legislatures and attorneys general continue to refine CPOM frameworks, and the pace of activity has picked up noticeably over the past few years. How state requirements interact with any future federal framework will matter for compliance planning.
• Existing Enforcement Tools: As the settlements with Aspen Dental and Carbon Health illustrate, regulators have tools under existing laws to address concerns about MSO structures, even absent new legislation.

Private equity-backed platforms, MSOs, and physician groups should keep an eye on these developments as part of their regular compliance monitoring. We will continue to monitor federal and state developments in this area. If you have questions about the proposed legislation or the broader CPOM regulatory environment, please contact the authors.