A Federal Ban on the Corporate Practice of Medicine?

What the Stop Corporate Takeovers of Physicians Act Would Mean for Health Care Entities, Investors, and Physician Practices

On September 16, 2026, Senators Elizabeth Warren (D-MA), Ron Wyden (D-OR), and Jeff Merkley (D-OR), along with Representatives Val Hoyle (D-OR), Alexandria Ocasio-Cortez (D-NY), and Suhas Subramanyam (D-VA), introduced the Stop Corporate Takeovers of Physicians Act of 2026 (SCTP Bill). The SCTP Bill is arguably the most ambitious federal legislative effort to date to target the corporate practice of medicine (CPOM). If enacted, it would reshape the operating landscape for management services organizations (MSOs), investors, and physician practices nationwide. In particular, digital health companies that leverage physicians licensed in multiple states should pay close attention.

The Enforcement Landscape

The SCTP Bill coincides with accelerating state and federal initiatives targeting corporate involvement in the delivery of health care.

More than 30 states already maintain some form of CPOM prohibition, and several states have recently enacted or proposed legislation aimed at strengthening those restrictions.

• As we discussed in a prior post, Massachusetts amended its False Claims Act, effective April 8, 2025, to explicitly extend liability to private equity firms and other investors that hold an ownership or investment interest in an entity that violates the statute, provided the investor knows of the violation and fails to disclose it within 60 days.

• As also discussed in a prior post, Oregon enacted Senate Bill 951 in June 2025, imposing some of the nation’s strictest limits on MSO control of physician practices, with phased compliance deadlines running through 2029. Physicians have already used Senate Bill 951 to challenge corporate takeovers in Oregon.

• California’s Senate Bill 351, signed in October 2025 and effective January 1, 2026, codified restrictions on private equity and hedge funds with respect to physician and dental practices and empowered the state attorney general to seek injunctive relief for violations.

• Several other states, including Vermont, Indiana, New Mexico, and Washington have all advanced legislation implicating oversight of corporate consolidation in health care.¹

As detailed in a recent Dentons blog post, in June 2026 California Attorney General Rob Bonta announced a $4.5 million settlement with Carbon Health Technologies and its affiliated professional corporations (PCs), resolving allegations that the company’s MSO-PC structure resulted in the corporate practice of medicine. The California AG alleged that Carbon Health used contractual mechanisms to render its physician-owned PCs “captive,” including management services agreement provisions granting the MSO consent rights over routine corporate and financial decisions, security interests in physician shares, and assignable option agreements that effectively allowed Carbon Health to replace physician owners at-will. The settlement required Carbon Health to restructure its friendly PC arrangements to ensure the physician-owned PCs have independent control over medical decisions and practice operations.

At the federal level, DOJ, HHS, and the FTC jointly issued a Request for Information in 2024 to assess the impacts of corporate ownership on health care delivery, with HHS concluding that the agencies “must continue to monitor and address these issues” and “welcome partnerships with states and Congress to prevent harm from further consolidation.” Following on this coordinated agency effort, the FTC secured a settlement with a private equity firm over its “anticompetitive acquisitions” of anesthesia practices in Texas, which the agency argued suppressed competition and drove up prices for anesthesia services across the state.

SCTP Bill

The SCTP Bill is modeled on Oregon’s Senate Bill 951. If enacted, the SCTP Bill would prohibit corporate ownership in medical practices, restrict MSO control over medical practices, and include several affirmative protections for physicians and other persons licensed to practice medicine.

Ownership Restrictions

The SCTP Bill would make it unlawful for any partnership or corporate entity that is not majority-owned and controlled by one or more “licensees” to (i) “own or control” a medical practice, whether in whole or in part, (ii) “employ, or enter into a contract for the professional services of, a licensee,” or (iii) engage in the practice of medicine, subject to limited exceptions.

A “licensee” is defined as a physician or other advanced practice provider (e.g., a physician assistant or nurse practitioner) who is authorized under state law to diagnose and treat patients in a clinical setting. To qualify as “majority-owned and controlled,” licensees must hold at least a majority of the ownership or membership interest and constitute a majority of the entity’s governing body.

Licensee owners of a medical practice would be required to be “licensed and present” in a state where the practice furnishes services, and to be “substantially engaged in delivering medical care.” The “substantially engaged” requirement appears to be aimed at eliminating nominal physician owners; however, the presence requirement raises significant questions. In particular, the SCTP Bill contains no telehealth carve-out, a notable omission given that Oregon’s Senate Bill 951, on which this bill is modeled, explicitly exempts telemedicine entities with no physical location in the state. A physical presence requirement would impose serious structuring obstacles for digital health models that rely on physicians licensed in multiple jurisdictions (e.g., models that use a single physician as the majority owner across multiple state entities).

Notably, the SCTP Bill would exempt nonprofit and public health care providers, hospitals, hospital-affiliated clinics, critical access hospitals, and rural emergency hospitals from the federal CPOM prohibition (though, as discussed below, the SCTP Bill would impose other restrictions on health care providers). Those exemptions suggest the ownership prohibition is focused squarely on for-profit corporate and investor ownership. That inference appears to be confirmed by the bill’s one-pager, which is filled with references to “private equity funds, insurance companies, and other for-profit corporations.”

MSO Restrictions

One of the SCTP Bill’s most significant features is its direct targeting of MSO structures, which have been criticized for allowing corporate entities to exercise undue control over physician practices while technically complying with existing state CPOM rules.

Among other things, the SCTP Bill would make it illegal for an MSO (or any of its shareholders, directors, officers, employees, or contractors) to:

• “control” or “restrict” the “sale or transfer of a medical practice’s shares, interests, or assets;”
• “issue shares of stock or other ownership interest in a medical practice” or “cause a medical practice to issue shares of stock or other ownership interest” in the practice, including by “establishing or causing the establishment of a medical practice” with which the MSO “intends to contract;”
• “own or control shares or other ownership interest in” a medical practice;
• “serve as a director, manager, or officer” of a medical practice; and
• “control or exercise de facto control over the administrative, business, or clinical operations in a manner that affects the nature or quality of medical care that the medical practice furnishes,” including through “exercising ultimate decision-making authority” over hiring and firing, compensation, staffing levels, patient visit times, revenue disbursement, billing practices, diagnostic coding, clinical standards, payor contracting, and pricing.

The SCTP Bill also would prohibit an MSO from contracting with a medical practice for management services, unless (i) “the medical practice negotiated the contract at arm’s length” through representatives that were selected by the practice without the MSO’s involvement and were “free from any financial conflict of interest” with the MSO, and (ii) the compensation under the agreement “reflects fair market value,” as determined by the FTC.

Any agreement between an MSO and medical practice that violates the restrictions in the SCTP Bill would be deemed “void, unenforceable, and against public policy.”

For stakeholders familiar with “friendly PC” or “captive PC” arrangements, these provisions will be immediately recognizable as a direct response to the kinds of structural controls that have drawn regulatory fire at the state level in recent years, such as those scrutinized by the California AG in the Carbon Health settlement noted above. These restrictions carry particular implications for digital health platforms, where an MSO may facilitate the technology infrastructure, patient acquisition channels, scheduling systems, and billing operations that are central to the practice’s functioning. The breadth of the SCTP Bill’s prohibition on “de facto control over the administrative, business, or clinical operations” of a medical practice could capture many of these core platform functions.

Licensee Protections

In addition to restricting ownership and MSO control over medical practices, the SCTP Bill also includes affirmative protections for licensees.

If enacted, the SCTP Bill would generally prohibit any licensee, health care provider, or MSO from entering into a “non-compete clause” or a “non-disclosure or non-disparagement agreement,” and any such clause or agreement would be deemed “void and unenforceable.” The prohibition on non-competes would include a narrow exception for a non-compete clause between a licensee and a medical practice, but only if the licensee is a “shareholder or member of the medical practice” or otherwise owns or controls at least 25% of the ownership or membership interests in the practice. The non-disclosure/non-disparagement prohibition would not “limit or otherwise affect” any causes of action based on libel, slander, tortious interference with contractual relations, or other independent torts, meaning that licensees would remain subject to generally applicable defamation and tort law even as the contractual gag provisions are stripped away.

The SCTP Bill also would make it illegal for a health care provider to “interfere with, control, or otherwise direct 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.” A health care provider could implicate this prohibition by, among other things, “specifying the period of time a licensee may spend with a patient,” “determining the clinical status of a patient” (e.g., whether a patient should be admitted as an inpatient or kept in observation status), “controlling where a patient is referred to upon discharge,” or “having final decision-making authority over diagnoses, diagnostic terminology, or diagnosis codes that are entered into the medical record by the licensee.”

Enforcement With Sharp Teeth

The SCTP Bill includes a layered enforcement regime that is significantly more aggressive than most existing state CPOM frameworks.

The FTC would be responsible for regulatory enforcement of the SCTP Bill. Violations of the SCTP Bill or regulations promulgated thereunder would be treated as an “unfair or deceptive act or practice.”

The SCTP Bill also would authorize civil actions by both private citizens and the state. Under the private right of action currently included, injured parties could be awarded “treble damages,” “reasonable attorney’s fees and litigation costs,” and “any other relief, including equitable or declaratory relief that the court deems appropriate.” State attorneys general also would be authorized to bring civil actions as parens patriae on behalf of state residents to “obtain appropriate relief, including equitable relief and monetary damages.”

If a court finds that a person has violated the SCTP Bill, the court would be required to issue an order to the person to (i) “cease and desist” from the violation, (ii) if applicable, divest the relevant entity, and (iii) “disgorge any revenue received from an entity subject to divestment” for the period of the violation.

Finally, the SCTP Bill would amend the Exclusion Statute to authorize HHS-OIG to exclude any MSO that has violated the SCTP Bill’s MSO restrictions from participating in federal health programs.

What This Means Going Forward

While it is highly unlikely that the SCTP Bill itself will become law as written, the bill provides a clear directional signal to the health care industry about increasing oversight of corporate involvement in the delivery of health care. We can anticipate further policy conversation in this area, particularly if the House or Senate changes majority control as a result of the upcoming midterm elections.

Health care entities, MSOs, and private equity investors operating in physician practice markets would be well advised to assess their current risks and look for ways to shape the conversation. For example:

• Health care entities, MSOs, and investors should consider reviewing agreements, ownership, and management models through the lens of the strictest possible enforcement regimes as part of ongoing risk and compliance assessments. Particular attention should be paid to:
  • The viability of existing friendly PC structures under current state law and potential federal regulation;
  • Whether certain management services agreement provisions, assignable option agreements, share transfer restrictions, and operational controls could be characterized as de facto ownership; and
  • The adequacy of physician governance and clinical independence documentation.
• Health care providers should consider what flexibility they can build into their documentation, staffing, and care delivery models should they need to update operations to comply with new requirements.
• Investors should factor potential regulatory changes into due diligence and deal structuring for acquisitions involving physician practices.
• Digital health companies operating multi-state telehealth platforms should stress-test their physician ownership and MSO structures against both the SCTP Bill’s requirements and the accelerating state-level trend, with particular attention to physical presence requirements, the absence of a federal telehealth carve-out, and the viability of using a single physician as the majority owner across multiple state entities.
• All stakeholders should consider participating in the legislative and rulemaking processes at the federal and state level, whether directly or through trade groups or counsel. It is not difficult to envision a host of unintended consequences of the SCTP Bill, including increased costs, reduced access to care, and a downturn in innovation and funding.

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1. See, e.g., 2026 Vt. Acts & Resolves No. 133 (H.583) (eff. July 1, 2026); H.E.A. 1666, 2025 Reg. Sess. (Ind. 2025) (signed May 6, 2025; eff. July 1, 2025); H.B. 586, 57th Leg., 1st Reg. Sess. (N.M. 2025) (Ch. 50, signed Apr. 7, 2025; eff. July 1, 2025); H.B. 2548, 69th Leg., Reg. Sess. (Wash. 2026) (Ch. 222, Laws of 2026; eff. June 11, 2026). ↩︎