Under new management? Not so fast: Federal CPOM bill targets MSO structures, ‘friendly physician’ model

On September 16, 2026, Representatives Alexandria Ocasio-Cortez (NY-14), Val Hoyle (OR-04), and Suhas Subramanyam (VA-10), along with Senators Elizabeth Warren (D-MA), Ron Wyden (D-OR), and Jeff Merkley (D-OR), introduced HR 10444, the Stop Corporate Takeovers of Physicians Act of 2026, which would establish a federal prohibition on the corporate practice of medicine (CPOM). If enacted, the bill would prohibit partnerships and corporate entities that are not majority-owned and controlled by licensees from owning or controlling a medical practice, employing or contracting for the professional services of a licensee, or otherwise engaging in the practice of medicine, subject to limited exceptions. The bill would also impose significant restrictions on management services organizations (MSOs); void certain restrictive covenants for healthcare workers; and vest enforcement authority in the Federal Trade Commission (FTC), state attorneys general, and private litigants. The requirements would take effect one year after the date of enactment. Although the bill faces an uncertain path in the current Congress, it reflects growing legislative interest at both the state and federal levels in restricting the structural features of the MSO/affiliated practice model, and it warrants close attention from private equity sponsors, payors, and telehealth and digital health companies that rely on those structures.

Background

The CPOM doctrine has historically been a matter of state law, with more than 30 states maintaining some form of prohibition on CPOM. At its core, the doctrine provides that only licensed clinicians may own medical practices, employ physicians, or direct the practice of medicine, on the theory that medical decisions should be driven by professional judgment rather than commercial interests. In practice, these prohibitions vary considerably in scope and enforcement from state to state. HR 10444’s sponsors contend that private equity firms, insurers, and other corporate entities have exploited legal loopholes to circumvent these state-level restrictions, particularly through MSO arrangements that contract with physician practices to handle administrative tasks.

The bill is expressly modeled after Oregon’s 2025 CPOM law, SB 951, and HB 3410. Signed into law in June 2025, SB 951 codified and strengthened Oregon’s CPOM doctrine by prohibiting MSOs and their shareholders, directors, officers, and employees from owning or controlling the professional medical entities they manage; banning dual ownership across MSOs and managed practices; restricting equity transfer restriction agreements; and voiding certain noncompete and nondisclosure agreements, with compliance required by January 1, 2026, for new arrangements and January 1, 2029, for preexisting ones.

HR 10444 would go considerably further, however, by federalizing those restrictions and applying them nationwide, including in states that do not currently recognize or actively enforce a CPOM doctrine, thereby targeting structural features of the “friendly physician” or affiliated practice model, such as equity transfer restriction agreements and dual roles across practices and MSOs, that remain common in physician practice management transactions across the country. The bill also does not include the various exceptions and carve-outs of Oregon’s 2025 CPOM law, which Oregon legislators added after discussion with relevant stakeholders. These exceptions permitted equity transfer restriction agreements on a limited basis and limited dual ownership prohibitions to owners holding a majority of a professional entity’s equity.

Key definitions

• “Licensee” means a physician or other advanced practice provider, such as a physician assistant or nurse practitioner, authorized under state law to diagnose and treat patients in a clinical setting.
• “Medical practice” means a partnership or corporate entity, such as a professional corporation, limited liability company, or limited liability partnership, organized for the purpose of practicing medicine.
• “Management services organization” means an entity that has entered into an agreement with a medical practice to provide services in return for compensation, including payroll, human resources, employment screening, payer contracting, billing and collection, coding, information technology, patient scheduling, property or equipment leasing, and administrative or business services that do not constitute the practice of medicine.
• An entity is deemed to be engaged in the “practice of medicine” if its services affect the patient-licensee relationship, including by performing patient evaluations resulting in a differential diagnosis, diagnostic plan, therapeutic plan, and disposition, or by imposing an administrative or facility-based measurement or restriction on any portion of the patient-licensee relationship.
• “Non-compete clause” means a term or condition of employment (including a contractual term or workplace policy, whether written or oral) that prohibits, penalizes, or functions to prevent a worker from seeking or accepting work in the United States with a different person, or from operating a business, after the conclusion of the employment.

Stop Corporate Takeovers of Physicians Act provisions

Prohibitions on Ownership

If enacted, HR 10444 would make it unlawful for any partnership or corporate entity (such as a professional corporation, limited liability company, or limited liability partnership) that is not majority-owned and controlled by one or more licensees to:

• Own or control, in whole or in part, a medical practice.
• Employ, or enter into a contract for the professional services of, a licensee.
• Engage in the practice of medicine.

For these purposes, an entity would be considered majority-owned and controlled by licensees only if licensees hold not less than a majority of the ownership or membership interest in the entity and constitute a majority of the entity’s governing body.

The ownership prohibition would not apply to:

• Any nonprofit or public healthcare provider.
• Hospitals (as defined under the Social Security Act), hospital-affiliated clinics, critical access hospitals, and rural emergency hospitals.

The bill would further institute an active practice requirement. Licensee owners of a medical practice would be required to be licensed and present in a state where the practice furnishes services to patients and be substantially engaged in delivering medical care. This requirement would have particular significance for multistate telehealth platforms. Read literally, it would preclude the common practice of using a single physician owner to hold the equity of state-specific affiliated practices across several jurisdictions, because that owner would need to be licensed and physically present in a state in which each such practice furnishes services. The “substantially engaged” standard would likewise foreclose the use of nominal owners who do not actively deliver care, although the bill does not define that term. Notably, although the bill is modeled on SB 951, it omits SB 951’s limited dual-ownership carve-out for practices that furnish only telemedicine services and have no physical location in the state.

Prohibitions on Restrictive Covenants

The bill would make it unlawful for any licensee, healthcare provider, or MSO to enter into:

• A noncompete clause.
• A nondisclosure or nondisparagement agreement.

Any such agreement would be void and unenforceable. The bill contains a single exception: a noncompete between a licensee and a medical practice would remain valid only where the licensee is a shareholder or member of the practice or otherwise owns or controls an ownership or membership interest equivalent to 25% or more of the practice. As drafted, the exception is ambiguous. Read literally, it could preserve noncompetes with any licensee who holds shares or a membership interest in the practice, regardless of percentage. The language likely would be tightened if the bill advances. In any event, the 25% threshold is notably higher than the 10% ownership threshold under SB 951. HR 10444 clarifies that the nondisclosure and nondisparagement prohibition does not affect causes of action for libel, slander, tortious interference, or other torts, or claims that do not derive from a breach of such an agreement.

Two further points bear emphasis. First, because “non-compete clause” is defined by reference to “workers” generally, the prohibition is not limited to clinicians and would appear to bar healthcare providers and MSOs from entering into noncompetes with any of their employees. Second, unlike SB 951, the bill contains no carve-out permitting nondisclosure agreements that protect trade secrets or other proprietary information – an omission that likely would be of significant concern to MSOs and their investors.

Prohibitions on Interference With Clinical Judgment

Similar to recent state legislation, the bill would prohibit laypersons from interfering with, controlling, or otherwise directing the professional judgment or clinical decisions of a licensee, whether directly or indirectly, through discipline, punishment, threats, adverse employment actions, coercion, retaliation, or excessive pressure, including by:

• Specifying the period of time a licensee may spend with a patient, including time to begin or complete evaluations in an emergency department.
• Determining the clinical status of a patient, including inpatient admission, observation status, palliative care, or referral to an alternative treatment center such as a skilled nursing facility.
• Specifying how quickly treatment should be initiated.
• Controlling where a patient is referred upon discharge.
• Exercising final decision-making authority over diagnoses, diagnostic terminology, or diagnosis codes entered into the medical record.
• Controlling or limiting the range of clinical orders available to licensees, including by configuring the medical record in a manner that influences clinical decision-making.
• Any other action that the FTC determines, in consultation with the US Department of Health and Human Services, interferes with or controls the clinical judgment of a licensee.

Notably, the hospital and nonprofit exemptions would apply only to the ownership prohibition. Hospitals, health systems, and other healthcare providers would remain fully subject to these clinical judgment protections, and several of the enumerated examples (emergency department evaluation times, inpatient versus observation status determinations, and discharge referrals) are plainly directed at hospital operations.

Restrictions on Management Services Organizations

The bill sets out a series of restrictions on MSOs and their personnel. An MSO, or any shareholder, director, member, manager, officer, employee, or contractor of an MSO, would be prohibited from:

• Controlling or restricting (or agreeing to control or restrict) the sale or transfer of a medical practice’s shares, interests, or assets, or otherwise permitting a person other than a licensee to do so.
• Issuing, or causing a medical practice to issue, shares or other ownership interests in the practice, a subsidiary, or an affiliate, including by establishing a medical practice with which the MSO intends to contract.
• Paying dividends from shares or ownership interests in a medical practice.
• Owning or controlling shares in; serving as a director, manager, or officer of; being an employee or contractor of; or otherwise participating in managing a medical practice.
• Acquiring, causing the acquisition of, or financing the acquisition of ownership interests in a medical practice.
• Contracting with a medical practice for management services (or amending, renewing, or terminating such a contract) unless the practice negotiated the contract at arm’s length through counsel, negotiators, and financial advisors it selected without MSO involvement and free from financial conflicts of interest, and compensation reflects fair market value as determined by the FTC.
• Advertising the services of a medical practice under the name of an entity other than the 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 care, including by exercising ultimate decision-making authority over hiring and termination; work schedules, compensation, or other terms of employment; staffing levels; patient visit times; disbursement of practice revenue; required degrees or credentials; revenue targets or incentives; diagnostic coding; clinical standards or policies; billing policies; pricing; or payor contracting.

Any agreement between an MSO and a medical practice permitting an action in violation of these restrictions would be void, unenforceable, and against public policy.

Enforcement

The bill contains a broad, multipronged enforcement scheme:

• FTC enforcement. A violation would be treated as a violation of a rule defining an unfair or deceptive act or practice under the FTC Act. The FTC would enforce the statute (including against nonprofit organizations, notwithstanding its ordinary jurisdictional limits) and would be directed to promulgate implementing regulations.
• Private right of action. Any person injured by a violation could bring a civil action, with prevailing plaintiffs eligible for treble damages, attorneys’ fees and litigation costs, and other equitable or declaratory relief. Either party would be entitled to a jury trial on request.
• State attorneys general. State attorneys general could bring parens patriae actions on behalf of state residents in state or federal court.
• Divestiture and disgorgement. Upon a finding of violation, courts would be required to order the violator to cease and desist and, if applicable, divest an entity, and to disgorge revenue received from the entity subject to divestment for the period of the violation.
• Federal program exclusion. The bill would amend Section 1128(b) of the Social Security Act to add a new basis for permissive exclusion from federal healthcare programs.

The bill would not preempt state laws that impose equal or more stringent ownership and control requirements, licensee protections, or MSO restrictions, meaning the federal statute would operate as a floor rather than a ceiling. The savings clause expressly extends to state laws that apply ownership and control requirements to entities exempt under the federal bill, such as hospitals and nonprofit providers.

Analysis

The Stop Corporate Takeovers of Physicians Act represents the most significant effort to date to federalize the CPOM doctrine, which has to this point developed exclusively through state statutes, case law, and agency interpretation. Whereas recent state bills have sought to codify or expand existing state doctrines, this bill would layer a uniform federal prohibition – enforced by the FTC, state attorneys general, and private plaintiffs – on top of the existing patchwork, while expressly preserving more stringent state regimes.

If passed, the bill would prohibit core features of the affiliated practice model widely used across the industry, including equity transfer restriction agreements, MSO involvement in practice formation and acquisition financing, dual roles across practices and contracted MSOs, and MSO authority over practice staffing, compensation, billing, and payor contracting. The bill’s

The requirement that management services agreements be negotiated at arm’s length, through advisors selected without MSO involvement, and at fair market value “as determined by” the FTC would insert a federal agency into the pricing of management fees. This would be a marked departure from the fraud and abuse framework, under which parties typically substantiate fair market value through independent third-party valuation. The bill does not specify how or when the FTC would make such determinations, and its practical effect on the many thousands of management services agreements already in place is unclear. Read together with the expansive definition of the “practice of medicine” (which would deem an entity to be practicing medicine if its services “affect the patient-licensee relationship,” including by imposing an administrative or facility-based measurement or restriction), these provisions leave little room for the operational role that MSOs typically play.

The bill’s reach is also bound by its definitions. Because the prohibitions are keyed to “licensees” (physicians, physician assistants, and nurse practitioners) and “medical practices,” the bill as drafted would not appear to reach dental practices, therapy-only behavioral health practices, or other professional practices in which no physician or advanced practice provider is engaged. Those practices would remain subject to applicable state CPOM, fee-splitting, and licensure requirements, however.

The sponsors have framed the legislation as a response to private equity and insurer acquisition of physician practices. Senator Warren, for example, stated that decisions about patient care should be made by doctors, “not by Wall Street investors.” The bill has drawn additional support from Representatives Deluzio, Frost, Ansari, Tlaib, Clarke, and Holmes Norton, and endorsements from organizations including the American Academy of Emergency Medicine, the American Economic Liberties Project, and the Private Equity Stakeholder Project.

The bill’s near-term prospects are uncertain. It was introduced with exclusively Democratic sponsorship in a Republican-controlled Congress and with limited legislative time remaining before the November midterm elections. Its significance, however, lies less in its likelihood of enactment than in what it signals: the affiliated practice model is now drawing sustained scrutiny at the federal level, on the heels of a wave of state legislative activity over the past two years. The specific features the bill targets – equity transfer restrictions; dual roles across practices and MSOs; MSO control over staffing, compensation, billing, and payor contracting; and the use of nominal physician owners – are the same features on which state legislators and regulators have increasingly focused, and that focus will likely continue regardless of the bill’s fate. Companies operating under MSO structures, particularly private-equity-backed platforms and multistate telehealth providers, would be well served to assess how their existing arrangements would fare under the bill’s provisions.

McDermott Will & Schulte will continue to monitor the bill’s progression through Congress, as well as related state legislative developments, and provide updates.

If enacted, the Stop Corporate Takeovers of Physicians Act would fundamentally reshape the legal framework for physician practice ownership and management nationwide:

• A federal CPOM prohibition would apply nationwide, barring entities not majority-owned and controlled by licensed clinicians from owning medical practices, employing licensees, or engaging in the practice of medicine, subject to exceptions for nonprofit and public providers and hospitals.
• MSOs and their personnel would be prohibited from holding equity in, managing, financing the acquisition of, or exercising de facto control over contracted medical practices, and equity transfer restriction agreements would be void and unenforceable.
• Non-compete, non-disclosure, and non-disparagement agreements involving licensees, healthcare providers, or MSOs would be void, except non-competes for licensees holding at least 25% of a medical practice. Unlike Oregon’s SB 951, the bill contains no trade secret exception for non-disclosure agreements.
• Violations would carry exposure to FTC enforcement, treble-damages private litigation, state attorney general actions, mandatory divestiture and disgorgement, and potential exclusion from federal healthcare programs.
• Regardless of whether the bill advances, it targets the same features of the MSO/affiliated practice model that are drawing increasing scrutiny from state legislatures and regulators. Private equity sponsors, telehealth platforms, and other companies that rely on these structures should evaluate how their existing arrangements would fare under the bill’s provisions.