If you’re a stakeholder in the healthcare industry, then you are likely familiar with state corporate practice of medicine or CPOM statutes which restrict or ban non-physician ownership of entities which provide medical services to the public. To date, about 33 states have adopted CPOM laws and industry stakeholders operating in these jurisdictions have largely focused their CPOM compliance efforts on state regulatory frameworks. However, a new federal law introduced by federal lawmakers on September 16, 2026, may completely alter how industry stakeholders navigate healthcare investments.
If adopted, the Stop Corporate Takeovers of Physicians Act of 2026 (the “Federal CPOM Act”) would be the first regulation to restrict the corporate practice of medicine across all 50 states. Further, while the Act will likely face congressional pushback regarding its scope, the proposed legislation offers meaningful insight into the federal government's enforcement priorities with respect to the healthcare industry. Accordingly, industry stakeholders should consider how the Federal CPOM Act would alter their regulatory compliance burden and access to capital to determine whether changes to their business operations will be required.
In this alert, we discuss the existing landscape and the potential effects of a Federal CPOM Act on healthcare investments and industry stakeholders who provide services to providers.
EXISTING LANDSCAPE
All 50 states restrict the practice of medicine to qualified individuals who are licensed to provide medical services in the state in which they operate. Notwithstanding such limitations, a general business entity is deemed to engage in the practice of medicine if the entity is owned by non-physicians and employs physicians to provide medical services on behalf of the business entity. CPOM arrangements often conflict with state licensure requirements for the practice of medicine since non-physician owners maintain control over the actions of their employees and therefore could unduly influence a physician employe’s medical judgement. To mitigate the risk of unqualified individuals engaging in the practice of medicine, many states impose restrictions on non-physician ownership of entities which provide medical services and fee splitting between physicians and non-physicians.
PROPOSED CHANGES TO EXISTING LANDSCAPE
The Federal CPOM Act is modeled after Oregon’s CPOM regulations and targets corporate influence over clinical care (see the full Senate Press Release & One-Pager). Notwithstanding, we note that the regulatory language currently included therein could reach far beyond private equity investments to affect management service organizations which provide services to healthcare entities (“MSOs”), digital health platforms, and independent medical groups. Federal oversight of non-physician investments in healthcare entities would require industry stakeholders to evaluate CPOM compliance across all 50 states. More specifically, the Federal CPOM Act would impose the following restrictions on corporate influence over clinical care:
1. Federal Prohibition on Non-Physician Ownership
Like many state CPOM laws, the Federal CPOM bill would require business entities which provide medical services to be majority-owned and controlled by licensed health professionals, including physicians, nurse practitioners and physician assistants. If enacted, these regulations would render all healthcare entities which are majority owned by non-physicians unlawful. This change is perhaps most significant for healthcare entities operating in states lacking CPOM oversight because non-physician ownership of healthcare entities is not restricted. Moreover, while many state CPOM laws carve-out exceptions to the prohibition of non-physician ownership for strategic investments, the current draft of the Federal CPOM Act includes exemptions only for non-profit providers, public health entities, and hospitals/rural emergency clinics.
CONSIDERATIONS: Adoption of the Federal CPOM Act as currently drafted will require healthcare entities which are majority owned or controlled by non-physicians to consider restructuring efforts that prevent non-physicians from owning or controlling a medical practice, employing physicians, or engaging in clinical care.
2. Strict Operations & Governance Limits for MSOs
To comply with state CPOM restrictions, industry stakeholders have traditionally adapted their operations to conform to the “friendly physician” model (the “Friendly PC Framework”). Under the Friendly PC Framework, the clinical and administrative services of a healthcare entity are treated as distinct and separate functions allowing a provider owned entity to contract with non-physician owned management services organization (“MSOs”) for the provision of administrative services. The Friendly PC Framework has become a staple mechanism for scaling independent medical practices because it allows providers to gain access to non-physician capital while maintaining compliance with state CPOM restrictions by contractually limiting control over clinical care to providers.
The Federal CPOM Act would significantly disrupt the Friendly PC Framework by restricting MSOs and their affiliates from:
- Holding option agreements or restricting the transfer of a practice’s equity or assets;
- Holding officer and/or director roles within the professional entity;
- Maintaining ultimate decision-making authority over practice operations, including staffing levels, employee compensation, revenue targets, billing policies, fee schedules, or third-party payor contracting;
- Utilizing the MSO brand name rather than a practice’s legal name to market patient-facing services;
- Establishing management fees which are not fair market value as determined by the Federal Trade Commission (FTC).
CONSIDERATIONS: If the Federal CPOM Act is adopted as currently drafted, then MSOs and other industry stakeholders who provide incidental services to healthcare entities would be required to confirm that their existing compensation frameworks comply with new fee standards set by the FTC.
3. Strict Licensee Presence and Ownership Requirements
While many state CPOM laws limit ownership of healthcare entities to qualified individuals licensed by the state to practice medicine, very few of these jurisdictions require that a physician owner be physically present within the jurisdiction to maintain ownership of a medical practice. Conversely, the Federal CPOM Act would require physician owners to be licensed and physically present in the state where services are furnished and substantially engaged in the provision of medical services.
CONSIDERATION: The Federal CPOM Act would impose stricter ownership requirements than many state CPOM laws by requiring physician owners to not only be licensed in the state in which they will provide medical services, but also physically present and meaningfully engaged in the provision of services. Accordingly, multi-state practices, telemedicine networks, and digital health platforms operating across state lines would be required to evaluate their ownership structures to eliminate any nominal or "shell" physician ownership.
4. Federal Restrictive Covenant Voiding
The Federal CPOM Act includes language which would significantly restrict and/or ban healthcare entities from establishing and enforcing non-compete arrangements. Industry stakeholders may be aware of the FTC’s unsuccessful attempts to ban non-compete arrangements in healthcare settings through federal administrative proceedings. The Federal CPOM Act appears to codify the FTC’s efforts to ban restrictive covenant arrangements in the healthcare industry by establishing a statutory prohibition which would categorically void non-compete, non-disclosure, and non-disparagement agreements involving clinical providers and MSOs reserving a narrow exception only for physician owners holding 25% or greater equity in their practice. Importantly, industry stakeholders often rely on restrictive covenants in management services and provider agreements, respectively, to prevent former employee providers from solicitating patients and protect confidential information relating to the entity’s business operations. Restrictive covenants can also allow provider entities to remain competitive by temporarily restricting providers who exit the practice from providing services on behalf of a competitor entity.
CONSIDERATIONS: The Federal CPOM Act would require industry stakeholders to assess contractual arrangements by and between a provider entity and physician employees to remove any language which restricts the provider from providing medical services after the provider is no longer associated with the provider entity. Moreover, industry stakeholders would need to consider alternative methods for protecting patient lists and confidential information about a practice’s operations.
5. New Federal and Private Enforcement
States which have adopted CPOM regulations have traditionally treated non-compliance with CPOM regulations as violations of medical professional conduct standards. This enforcement approach can result in providers assuming the bulk of non-compliance liability. The enforcement provisions of the Federal CPOM Act would dramatically alter the existing enforcement approach under state laws by:
- Establishing FTC Oversight. Violations of the Federal CPOM Act would be treated as unfair or deceptive acts under the FTC Act, thereby expanding FTC oversight of healthcare entities.
- Providing a Private Right of Action. Private individuals who have been injured by a healthcare entity operating in violation of the Federal CPOM Act would be allowed to bring private lawsuits for treble damages and legal fees.
- Allowing State AGs to file federal suits. State Attorneys General would be granted standing to file federal suits against provider entities operating in violation of the Federal CPOM Act.
- Establishing Criteria for Exclusion from Federal Programs. Violations of the Federal CPOM Act could create grounds for permissive exclusion from Medicare and Medicaid programs.
CONSIDERATIONS: Federal enforcement of the Federal CPOM Act as currently drafted would require industry stakeholders to assess non-compliance risks not only as a matter of professional misconduct, but also in the context of fair market practices. The Act would also increase the severity of non-compliance by jeopardizing a practice’s eligibility under federal programs forcing stakeholders to strengthen their compliance programs.
Strategic Guidance for Healthcare Platforms & Investors
The introduction of the Federal CPOM Act by federal lawmakers represents a significant shift in how the corporate practice of medicine is regulated in the US. Further, while the federal government has not adopted the Act, the statutory language included therein reveals that federal lawmakers are prepared to heavily regulate non-physician ownership of healthcare entities. Accordingly, healthcare industry stakeholders should familiarize themselves with the Act and prepare to adapt their existing operations to comply with federal CPOM restrictions.
At Bochner PLLC, we advise healthcare platforms, physician practices, and investor groups to take proactive measures:
- Conduct MSO Agreement Audits: Review existing MSA management fees, operational controls, and approval rights to ensure clear boundaries between administrative support and clinical autonomy.
- Evaluate Telemedicine & Multi-State Governance: Review physician owner licensing and physical presence across operating states to preempt emerging state-level "active practice" requirements.
- Assess Covenants & Employment Contracts: Audit non-compete and restrictive covenant structures across clinical staff in consideration of shifting federal and state enforcement postures.
For questions regarding MSO structuring, CPOM compliance, or regulatory strategy, please reach out to Matt Shatkjes or the Bochner PLLC Corporate & Healthcare Practice Group.
