By: Carlos Arce, Florida Healthcare Law Firm
For nearly a century, the corporate practice of medicine (“CPOM”) has primarily been a creature of state law. Healthcare entrepreneurs operating nationally have therefore become accustomed to navigating a patchwork of state ownership and control rules, often through the familiar management services organization/professional corporation (“MSO/PC”) structure. Now, for the first time, Congress is considering legislation that would approach CPOM from a truly national perspective. The recently introduced Stop Corporate Takeovers of Physicians Act would establish a federal prohibition on certain forms of corporate ownership and control of medical practices. While the bill faces an uncertain path through Congress, its significance extends well beyond whether this particular legislation ultimately passes.
What makes this proposal particularly noteworthy for healthcare regulatory professionals is the shift in regulatory authority it represents. Historically, states have determined who may own medical practices, how professional entities must be structured, and how much control a non-clinical management company may exercise over a physician-owned practice. The result is the state-by-state CPOM framework that healthcare attorneys and multi-state operators navigate today. This bill would overlay that system with a federal CPOM standard applicable nationally, while still allowing states to impose more restrictive requirements.
There is a compelling parallel to the FTC’s recent attempt to establish a nationwide rule restricting non-competes. Non-competes, like CPOM, have traditionally been regulated principally at the state level. The FTC’s effort raised significant questions about the federal government’s authority to establish a nationwide rule in an area historically governed by state law.
Similar questions are expected to surround any attempt to federalize CPOM regulation. Congress, of course, operates under a different source of authority than an administrative agency such as the FTC, so the legal analysis would not be identical. Nevertheless, the underlying issue remains central: to what extent will the federal government establish nationwide restrictions in an area of professional regulation historically left largely to the states?
That alone makes this legislation worth watching.
The substance of the bill is equally significant.
Traditional CPOM analysis generally begins with ownership: Who owns the medical practice, and does state law permit that person or entity to own it? The proposed legislation goes considerably further. It would generally require medical practices to be majority owned and controlled by qualifying licensed providers while restricting an MSO’s ability to control areas including hiring and firing, compensation, staffing, billing practices, clinical standards, and payor contracting.
It also targets several contractual mechanisms commonly used in friendly-PC structures. Most notably, the legislation would restrict MSO control over the sale or transfer of ownership interests in a medical practice—potentially eliminating the share transfer restriction arrangements commonly used to maintain continuity between an MSO and an affiliated PC. The bill would also restrict the common model in which an MSO owns the consumer-facing brand used by affiliated professional entities and would establish detailed protections surrounding physicians’ independent clinical judgment.
For national healthcare companies, another provision deserves close attention. The legislation would require qualifying licensee owners to be licensed and present in a state where services are furnished and to be substantially engaged in delivering medical care. That could fundamentally challenge the increasingly common model in which a highly licensed physician owns professional entities across numerous jurisdictions while an MSO provides the administrative infrastructure supporting the platform.
Healthcare attorneys generally would not recommend that MSOs restructure an otherwise compliant MSO/PC setup today simply because this bill has been introduced. However, close attention should be paid to what it represents. Increasing legislative and enforcement attention is being directed toward the relationship between professional practices, MSOs, and outside investors. The federal proposal puts several concepts squarely on the national agenda: ownership, control, share-transfer restrictions, branding, clinical autonomy, and the economic relationship between an MSO and its affiliated professional practice.
For healthcare entrepreneurs, investors, and physicians, the takeaway is not that the MSO/PC model is disappearing. It is that the regulatory environment surrounding that model is evolving quickly, requiring close monitoring.And now, for the first time, that conversation is no longer occurring exclusively in state legislatures and state regulatory agencies. Congress has entered the CPOM conversation.
