Proposed Federal CPOM Legislation: What the Stop Corporate Takeovers of Physicians Act Would Mean for Private Equity and MSO-Based Transactions

Summary:

• The Stop Corporate Takeovers of Physicians Act of 2026 would create a federal prohibition on the corporate practice of medicine, marking a significant shift for physician practice ownership and management across the United States.
• The proposed legislation would sharply limit the role of management services organizations by restricting ownership, governance involvement, financing arrangements, and operational influence over physician practices.
• Physician practices, investors, and platform operators could face substantial restructuring challenges as the bill targets common management services organization arrangements, ownership models, and restrictive covenant provisions used in physician practice transactions.
• If enacted, stakeholders would need to navigate a layered compliance framework because more restrictive state corporate practice of medicine laws would remain in effect alongside the federal requirements.

On September 16, 2026, Senators Elizabeth Warren (D-Mass.), Ron Wyden (D-Ore.), and Jeff Merkley (D-Ore.), along with Representatives Val Hoyle (D-Ore.), Alexandria Ocasio-Cortez (D-N.Y.), and Suhas Subramanyam (D-Va.), introduced the Stop Corporate Takeovers of Physicians Act of 2026 (the Act).

If enacted, the legislation would establish a federal prohibition on the corporate practice of medicine and impose sweeping restrictions on management services organizations (MSOs), with significant implications for private equity-backed health care platforms, physician practice transactions, and existing MSO arrangements.

This is the latest in a series of attempts by the federal government to flex its muscle in order to control, and in this case, put severe limits on, private equity investment in health care enterprises (see our previous blog, “Private Equity: Proposed Health Over Wealth Act – What This Means for You”). Legislation of this sort could affect the economics and risk profile of physician practice transactions and, in turn, the willingness of buyers and sellers to pursue certain transactions.

This blog summarizes the bill’s key provisions, provides some additional background regarding current regulation by various states across the country, and discusses issues stakeholders should consider.

Background: Private Equity in Physician Practice Management

Private equity investment in physician practices has grown dramatically over the past decade. According to the proposed bill’s sponsors, over 80% of physicians in the United States are now employed by corporate entities, including private equity firms and insurers, up from 62 percent in 2019. The typical transaction structure involves a private equity sponsor acquiring or recapitalizing the non-clinical business associated with a physician practice through a management services organization. The MSO runs the non-clinical operations of the practice, including payroll, billing, human resources, IT, scheduling, and other administrative functions, while a physician-owned professional corporation (PC) retains control over clinical decision-making. This PC-MSO model has been widely used to navigate state laws banning or restricting the corporate practice of medicine (CPOM) which exist in over 30 states.

Critics of these arrangements argue that MSOs frequently exercise de facto control over clinical operations, staffing decisions, billing practices, and physician compensation, effectively circumventing CPOM protections through a “friendly” or “captive” physician who is the nominal practice owner but lacks true operational control over the business and, ultimately, patient care. The bill’s sponsors point to these concerns, along with broader policy debates about health care costs, patient safety, and physician autonomy, as the impetus for federal action.

Key Provisions of the Bill

The Stop Corporate Takeovers of Physicians Act is modeled on Oregon’s SB 951, a law enacted in 2025 that strengthened the state’s CPOM doctrine and restricted MSO influence over physician practices. The federal bill’s principal provisions include:

Prohibition on Corporate Practice of Medicine

The proposed bill 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 enter into a contract for the professional services of a licensee, or engage in the practice of medicine. To qualify as “majority-owned and controlled,” licensees must hold at least a majority ownership or membership interest and constitute a majority of the entity’s governing body.

As has traditionally been the case in most states with a CPOM doctrine, nonprofit and public health care providers, hospitals, hospital-affiliated clinics, critical access hospitals, and rural emergency hospitals are exempt from this prohibition.

Restrictions on Management Services Organizations

The proposed bill imposes extensive restrictions on MSOs and their personnel. MSOs would be prohibited from owning, controlling, acquiring, or financing ownership interests in a medical practice, as well as having individual representatives of the MSO from serving in governance or employee roles within a managed medical practice. MSO management contracts would be permitted only if negotiated at arm’s length through independent legal counsel and financial advisors, with compensation reflecting fair market value as determined by the Federal Trade Commission (FTC).

Critically, the bill would prohibit MSOs from exercising de facto control over a medical practice’s operations in a manner affecting the nature or quality of care — including through ultimate decision-making authority over hiring, compensation, staffing, scheduling, revenue targets, coding, billing, pricing, and payor contracting. Any agreement violating these restrictions would be void, unenforceable, and against public policy. This provision gets at the heart of what sponsors of the bill argue is wrong with private equity investment in medical practices.

Protections for Physician Autonomy and Restrictive Covenant Bans

The proposed bill would prohibit health care providers from interfering with the professional judgment or clinical decisions of licensees — whether through discipline, threats, adverse employment actions, or excessive pressure — including by dictating patient visit times, clinical status determinations, treatment timelines, referral patterns, diagnostic terminology, or the range of clinical orders available to physicians.

The proposed bill also would ban non-compete clauses, non-disclosure agreements, and non-disparagement agreements involving licensees, health care providers, or MSOs, with limited exceptions. Non-compete clauses would remain enforceable only for licensees who are shareholders or members with 25 percent or greater ownership in the medical practice. All other such agreements would be void and unenforceable. A growing number of States, including California, Colorado, Indiana, New Hampshire, Oregon and Washington already impose restrictions on physician non-compete agreements, although the scope of those restrictions varies State to State.

Licensee Ownership Requirements

Under the bill, licensee owners of a medical practice must be licensed and present in a state where services are furnished by the practice and must be “substantially engaged in delivering medical care”. This provision is aimed at limiting the pervasive “friendly physician” model, where a physician-owner may hold nominal ownership across multiple states without meaningful clinical involvement.

Enforcement

The proposed bill would provide for multiple layers of enforcement. Violations would be treated as unfair or deceptive acts or practices under the Federal Trade Commission Act, with the FTC empowered to enforce the statute. The proposed bill also would create a private right of action under which a court may award treble damages, reasonable attorneys’ fees, and equitable relief, and authorizes state attorneys general to bring civil actions as parens patriae on behalf of residents. Courts finding a violation must order the violator to cease and desist and, if applicable divest. If divestiture is ordered, the court also must require disgorgement of revenue received from the entity subject to divestment during the period of the violation. Violating entities would also be subject to permissive exclusion from federal health care programs.

Effective Date and Preemption

The proposed bill’s requirements would take effect one year after the date of enactment. Importantly, the proposed bill includes a non-preemption clause preserving state laws that impose equal or more stringent ownership and control requirements, afford equal or greater protections to licensees, or impose equal or more stringent restrictions on MSOs.

Potential Implications for Stakeholders

If enacted, the proposed bill, would fundamentally disrupt the prevailing PC-MSO model used by private equity sponsors to invest in physician practices. (For background on how these transactions are typically structured, see our prior blog, “Physician Practice Private Equity Transactions – A Refresher.”) MSOs would be prohibited from exercising the types of operational and financial controls that are common in many of these arrangements, and the requirement that management contracts reflect arm’s-length terms with FTC-determined fair market value would substantially constrain deal structuring and purchase prices paid by private equity acquirors, which (as designed) would reduce the appetites of both buyers and sellers for these types of deals. The availability of treble damages and private right of action also would introduce significant litigation exposure for investors and platform operators.

Should the Act be enacted in its current form, a significant number of existing physician practice transactions involving private equity sponsors and MSO-based structures would likely require either substantial restructuring to achieve compliance or unwinding entirely. The Act would render common deal structures non-compliant through multiple independent provisions. Taken together, the provisions of the Act would create substantial legal and economic pressure for parties to existing transactions to restructure or unwind arrangements that do not comply with the Act’s requirements, even where such arrangements were lawfully structured at the time of execution.

Physician practices currently in or contemplating PE-backed transactions should consider how the proposed bill’s restrictions — particularly the majority-ownership requirement, the “substantially engaged” standard for licensee owners, and the ban on restrictive covenants — could affect existing and planned arrangements. Practices that have structured transactions through MSOs with rollover equity, management service agreements, or stock transfer restriction agreements may need to reevaluate these arrangements if the legislation advances. The proposed bill’s restrictive covenant bans may be welcomed by employed physicians who have faced limitations on mobility, but practices relying on non-competes as part of their retention strategies will need to reassess those tools.

State-Level CPOM Considerations: A Patchwork That Will Persist

The proposed bill’s non-preemption clause means that state CPOM laws, which vary widely across jurisdictions, would continue to apply where they are equally or more restrictive. This creates a layered compliance environment that stakeholders would need to navigate carefully:

• California has been at the forefront of CPOM enforcement. The state enacted SB 351 effective January 2026, which codified CPOM restrictions and explicitly prohibited non-physician investors from influencing clinical decision-making. The California Attorney General has also taken aggressive enforcement action against PC-MSO structures, including a $4.5 million settlement with a digital health company announced in June 2026, targeting “friendly PC” arrangements and imposing personal liability against a corporate executive. The Attorney General alleged that the company’s MSO used a “friendly professional corporation” model that gave it impermissible control over affiliated medical practices.
• Oregon, the model for the proposed federal bill, enacted SB 951 in 2025, which restricts specified forms of MSO ownership and control over professional medical entities and has already been invoked by physicians to challenge corporate takeovers.
• Other states, including Connecticut, Pennsylvania, and Rhode Island, have introduced or enacted legislation expanding oversight of private equity-backed health care transactions and MSO structures.

Entities operating across multiple states will need to assess compliance obligations at both the federal and state levels if the proposed bill advances.

What to Watch

The Stop Corporate Takeovers of Physicians Act has been introduced in the Senate and referred to committee. The proposed bill has attracted endorsements from several physician and advocacy organizations, including the American Academy of Emergency Medicine, the ONCare Alliance, and the American Economic Liberties Project, among others. It is also part of a broader legislative agenda from the proposed bill’s sponsors, who have simultaneously introduced related legislation addressing corporate accountability in health care, including the Stop Corporate Crimes Against Health Care Act of 2026. (For additional context on the evolving regulatory landscape for PE investment in health care, see our prior posts on the Proposed Health Over Wealth Act and Growing Scrutiny of Private Equity in Health Care.)

The Act’s sponsors are exclusively Democratic members of Congress, and no Republican members have joined as co-sponsors. The bill’s prospects for advancement will depend significantly on whether it can attract bipartisan support which does not appear likely in the current political environment. The involvement of prominent Democratic legislators, however, signals growing political attention to corporate ownership and private equity investment in physician practices.

Stakeholders, whether private equity sponsors, PE-backed platforms, MSOs, or physician practices, should consider the following as the legislation develops:

• Monitor the bill’s progress through committee action and markup. The proposed bill’s prospects will depend on whether it gains traction in committee and attracts bipartisan support, particularly in the current Congress.
• Track state-level developments in parallel. As the non-preemption clause preserves state CPOM laws, the continued proliferation of state-level legislation and enforcement activity,  particularly in California, Oregon, Washington and other jurisdictions with active CPOM regimes, will be relevant regardless of the proposed federal bill’s trajectory.

Foley is here to help you address the short- and long-term impacts in the wake of regulatory changes. We have the resources to help you navigate these and other important legal considerations related to business operations and industry-specific issues. Please reach out to the authors, your Foley relationship partner, our Health Care & Life Sciences Sector, or our Health Care Practice Group with any questions.