A newly introduced federal bill aimed at prohibiting the corporate practice of medicine, titled the “Stop Corporate Takeovers of Physicians Act,” was introduced on September 16 by several Democratic lawmakers in the Senate and House. The bill would impose sweeping restrictions on corporate ownership and control of medical practices and could significantly affect management services organization (MSO) structures, private equity-backed physician practice platforms, insurer-affiliated models, and other arrangements involving non-physician control over medical practices.
Historically, regulations concerning the corporate practice of medicine have been enacted only at the state level, with more than 30 states having established some form of the prohibition. Despite these regulations, private equity firms, insurers and other corporate entities have used MSO structures as “workarounds” to allow them to invest in medical practices. Some have argued that these investments have been detrimental to clinicians and patients.
The Stop Corporate Takeovers of Physicians Act would limit corporate influence over clinical decision-making and close perceived loopholes in state corporate practice of medicine laws, including so-called “friendly physician” arrangements used in connection with MSO models. Although the bill is only proposed legislation and may be revised, it reflects continued federal and state scrutiny of investor-backed healthcare transactions and medical practice management arrangements. The bill is modeled on legislation enacted by Oregon in 2025 that is viewed as the strictest corporate practice of medicine legislation in the U.S.
In general terms, the legislation is intended to:
- Ban the corporate practice of medicine by making it illegal for private equity funds, insurance companies, and other for-profit entities to own or control medical practices;
- Close the “friendly physician” loophole that has allowed investor-backed entities to evade state-level bans on the corporate practice of medicine and control medical practices through MSOs;
- Prohibit an MSO from controlling a medical practice through a “friendly” or “captive” physician, or by taking over business, administrative, and clinical functions such as hiring and firing, work schedules, compensation, disbursement of revenue or setting of revenue targets, billing practices, contracting, and other services;
- Ensure that physicians retain ultimate control of medical practices by requiring that physician owners are licensed and present in the state where the medical services are being provided and “substantially engaged” in delivering such medical care; and
- Protect physician independence by prohibiting corporate interference with clinical decisions, including generally banning restrictive covenant terms, such as noncompete agreements, nondisclosure agreements, and non-disparagement agreements.
The Federal Trade Commission would be authorized to enforce the Act, including through rulemaking. The Act would also create a private right of action for injured persons, with potential recovery of treble damages, attorneys’ fees, litigation costs, and equitable or declaratory relief. In addition, state attorneys general could bring civil actions on behalf of residents, and courts finding a violation would be required to order cessation of the violation and, where applicable, divestiture and disgorgement of revenue.
The bill would take effect one year after enactment. If enacted, the Act could require parties to reassess existing and proposed physician practice transactions, MSO agreements, governance arrangements, restrictive covenants, compensation methodologies, revenue-control provisions, and reserved rights held by non-licensees. However, it would not preempt state laws that impose equal or more stringent ownership, control, licensee-protection, or MSO restrictions.
Healthcare providers, MSOs, investors, lenders, and physician owners should monitor the bill’s progress and consider whether current or contemplated arrangements would remain compliant if the bill or similar federal restrictions were enacted.
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