From Oregon to Washington DC: Federal Bill Modeled on State Law Seeks Nationwide Ban on Corporate Practice of Medicine

Newsletter
Introduction and Overview

On September 16, 2026, a bipartisan group of legislators introduced the Stop Corporate Takeovers of Physicians Act of 2026 (the “Act”), a federal legislative effort to comprehensively regulate the corporate practice of medicine (“CPOM”)—a domain historically governed exclusively by state law. Sponsored by Senators Warren, Wyden, and Merkley in the Senate, and Representatives Ocasio-Cortez, Hoyle, and Subramanyam in the House, the Act targets established and widely used investment structures in physician practice ownership and management and could disrupt billions of dollars in existing health care investments.

The legislative findings underpinning the Act reflect the bill sponsors’ stated rationale that corporate ownership of physician practices can compromise clinical autonomy, inflate costs, and reduce the quality of patient care.  Opponents of the bill argue that these findings discount the positive impacts that private equity (“PE”) investment has had on the health care industry, including introducing operational efficiencies, providing capital for growth, and expanding access to care in underserved markets.

While a majority of states currently maintain some form of CPOM prohibition or regulation, the Act’s sponsors have noted that PE firms and other corporate investors have structured investments through management services organizations (“MSOs”) and other contractual arrangements that have been commonly used and widely accepted in the industry. The Act is modeled in part on Oregon’s Senate Bill 951, which when enacted in 2025, created one of the most restrictive state CPOM doctrines in the country.

Key Provisions

Prohibition on Corporate Practice of Medicine. With few exceptions, the Act’s core prohibition makes it unlawful for any partnership or corporate entity that is not majority-owned and controlled by licensed physicians or advanced practice providers (“licensees”) to:

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

Protection of Licensees. The proposed Act broadly prohibits any MSO and health care provider (defined to include any entity that delivers health care services) from entering into non-compete, non-disclosure, and non-disparagement agreements with licensees.  Any such agreements would be deemed void and unenforceable.

The Act also prohibits health care providers from interfering with, controlling, or directing the professional judgment or clinical decisions of a licensee through discipline, punishment, threats, adverse employment actions, coercion, retaliation, or excessive pressure. Prohibited interference specifically includes:

  • Specifying the time a licensee may spend with a patient;
  • Determining the clinical status of a patient (e.g., admission, observation, palliative care, or referral decisions);
  • 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; and
  • Controlling or limiting clinical orders available to licensees or configuring medical records systems to influence clinical decision-making.

Restrictions on Management Services Organizations. The Act directly targets MSO structures, including the “Friendly PC Model”—which have been a standard and widely accepted vehicle for providing financial and operational support to physician practices—by imposing sweeping new restrictions on MSO activities and licensee ownership of medical practices. Specifically, an MSO (and its shareholders, directors, members, managers, officers, employees, or contractors) may not:

  • Control or restrict the sale, transfer, or disposition of a medical practice’s shares, interests, or assets;
  • Issue shares of stock or ownership interests in a medical practice;
  • Pay dividends from shares or ownership in a medical practice;
  • Own or control shares in, serve as a director, manager, or officer of, be an employee or contractor of, or participate in managing a medical practice;
  • Acquire or finance the acquisition of shares or ownership interests in a medical practice;
  • Advertise services of a medical practice under a name that is not the medical practice’s own name; or
  • Control or exercise de facto control over administrative, business, or clinical operations affecting the nature or quality of medical care.

The Act permits an MSO to contract with a medical practice for management services only if (a) the practice negotiated the agreement at arm’s length through legal counsel, negotiators, and financial advisors selected by the practice without MSO involvement and free from financial conflicts of interest, and (b) the compensation reflects fair market value (“FMV”) as determined by the Federal Trade Commission (“FTC”). 

The FMV requirement is a novel concept as it specifically pertains to CPOM. Outside of ensuring compliance with anti-kickback laws, including the Federal Anti-Kickback Statute (“AKS”), to the extent such laws are triggered by a management services arrangement, MSOs have typically not been centrally focused on structuring fees to be consistent with the FTC’s determination of FMV.  Even in situations where MSOs seek to ensure FMV compensation, the AKS does not specify the manner in which FMV must be substantiated, giving MSOs discretion in this regard. The Act designates the FTC as the arbiter of what constitutes FMV but importantly does not provide any detail as to how it would analyze a compensation arrangement or what factors would be considered in the FMV analysis.

Lastly, any licensee owners of a medical practice must be licensed and physically present in a state where the practice furnishes services to patients be substantially engaged in delivering medical care.  These requirements could disqualify physician-owners who serve legitimate governance and oversight roles but are not full-time clinicians and could mandate the restructuring of arrangements that have operated under the Friendly PC Model without issue under current state law.

Enforcement Mechanisms. The Act establishes an aggressive, multi-layered enforcement framework that creates significant litigation and financial exposure for non-compliant entities.

  • FTC Enforcement. Violations of the Act are treated as unfair or deceptive acts or practices under Section 18(a)(1)(B) of the FTC Act. The FTC is granted enforcement jurisdiction, powers, and duties consistent with the FTC Act, with the notable expansion that this jurisdiction extends to nonprofit organizations.
  • Private Right of Action. Any person injured by a violation may bring a civil action and may recover treble damages, reasonable attorneys’ fees and litigation costs, and any other equitable or declaratory relief a court deems appropriate.
  • State Attorney General Enforcement. State attorneys general may bring civil actions as parens patriae on behalf of state residents in either state or federal court, seeking equitable relief and monetary damages.
  • Injunctive and Equitable Relief. Courts are directed to order cease-and-desist relief and, where applicable, divestiture. Additionally, courts must order disgorgement of revenue received from the entity subject to divestment for the entire period of the violation.
  • Federal Health Program Exclusion. The Act amends Section 1128(b) of the Social Security Act to permit the exclusion of violating entities from participation in federal health care programs, including Medicare and Medicaid. (See Act § 3.)

Interaction with State Laws. The Act's preemption framework is designed to establish a federal floor rather than a federal ceiling. Specifically, the Act does not preempt state laws that impose equal or more stringent ownership or control requirements on medical practices, afford equal or greater protections to licensees, or impose equal or more stringent restrictions on MSOs.

This framework means that existing state CPOM laws remain in full force and effect to the extent they provide protections at least as robust as the Act. States remain free to adopt more restrictive requirements. However, states with weaker or no CPOM regimes would be required to comply with the Act’s baseline requirements upon its effective date. This dual federal-state framework means that PE-backed platforms operating across multiple states would be required to continue to monitor compliance on a jurisdiction-by-jurisdiction basis, which presents significant regulatory burden and legal costs.

Questions remain, however, with regard to how the Act will actually be reconciled with state analog CPOM laws.  Although the Act provides definitions for key terms—such as the “practice of medicine”—these terms may, and oftentimes do, have different meanings within certain jurisdictions that impact how the applicable CPOM laws are interpreted. 

Key Takeaways
  • While it remains to be seen what traction the Act will have as it maneuvers through both legislative bodies, it nonetheless represents an important signal of congressional intent regarding health care consolidation, and its substantive provisions may inform both future federal legislation and state-level reform efforts.
  • If enacted, the Act would take effect one year after the date of enactment, providing a short transition period for affected entities to restructure and potentially unwind complex ownership, governance, and management arrangements.
  • The Act would fundamentally alter PE and corporate investment in the health care sector by prohibiting non-licensee majority ownership and control of medical practices at the federal level. If passed, the Act would effectively halt pending PE acquisitions during the subsequent rulemaking process and could cause a significant chilling effect on deal activity.
  • The divestiture and disgorgement remedies, combined with the treble damages available through the private right of action, create an existential financial risk for non-compliant entities, potentially threatening the viability of affected investments.
  • MSOs would need to fundamentally restructure their relationships with medical practices. The Act’s detailed restrictions on de facto control effectively prohibit the Friendly PC Model in which an MSO exercises operational control while a nominally independent physician entity holds the practice license.
  • MSOs would need to supplement their compliance procedures to ensure all management agreements with medical practices satisfy arm’s-length negotiation and FMV requirements, with the FTC serving as the arbiter of what constitutes FMV.
  • PE and corporate investors in the health care space should continue to monitor the Act and other developments seeking to strengthen CPOM restrictions at the state level and consider potential contingency plans should similar initiatives arise in the future.

For any questions, contact your Quarles attorney or:

Follow Quarles

Subscribe Media Contact
Back to Main Content

We use cookies to provide you with the best user experience on our website and to analyze statistics related to our website. To understand more about how we use cookies, or for instructions to change your preference and browser settings, please see our Privacy Notice. Please note that if you choose to reject cookies, doing so may impair some of our website's functionality.