Overview:
On September 16, 2026, Congressional members (specifically, Sens. Elizabeth Warren, D-Mass., Ron Wyden, D-Ore., and Jeff Merkley, D-Ore., along with Reps. Val Hoyle, D-Ore., Alexandria Ocasio-Cortez, D-N.Y., and Suhas Subramanyam, D-Va) introduced the Stop Corporate Takeovers of Physicians Act (the “Act”). The Act would target corporate ownership structures that Congressional members say interfere with physicians’ independent judgment and clinical decisions. Private equity groups (“PEGs”) commonly use a management service organization (“MSO”) and “friendly PC” structure for acquiring and owning physician practices, especially in states with strong corporate practice of medicine (“CPOM”) laws. As such, the Act’s sponsors identified MSOs and PEGs as problematic, pointing to numerous physicians employed by corporate entities.
What Does the Act Do?
- Stop medicine dictated by corporate entities by prohibiting PEGs, insurance companies and other for-profit corporations from owning or controlling medical practices;
- Minimize corporate involvement with clinical decisions and treatments;
- Prohibit corporate use of restrictive covenants, including non-compete agreements, non-disclosure agreements and non-disparagement agreements – non-competes would remain enforceable only for physicians who hold at least 25% ownership in the practice;
- Close the “friendly PC” route to allowed investor-backed corporations to create defensible positions to state-level bans and control medical practices through MSOs;
- Require physician owners to be engaged in providing medical care at their practices; and
- Prohibit MSOs from controlling medical practices through “friendly” or “captive” physicians or by controlling functions such as staffing, operations, compensation, revenue targets, billing practices and contracting.
In its current form, the Act would compel existing physician practice transactions involving PEGs and MSO-based structures to substantial restructuring to achieve compliance or unwinding entirely. The Act would make it unlawful for any entity that is not majority-owned and controlled by licensed physicians to own or control a medical practice, employ or contract for a physician’s professional services, or practice medicine. Licensed physicians would need to hold a majority ownership interest and make up a majority of the entity’s governing body. In short, there are two primary issues – ownership and control.
Moreover, physician owners must be licensed and present in a state where the practice furnishes services and be “substantially engaged in delivering medical care.” This requirement is aimed at the “friendly PC” model, in which a physician holds less meaningful ownership of practices across multiple states without meaningful clinical involvement.
The Act’s Impact and What It Does:
The most impactful aspect of the Act will be the limitations on MSOs. MSOs would be barred from owning, controlling, acquiring or financing ownership interests in a medical practice. Also, MSO representatives could not serve in governance or employee roles at a practice they manage. Management service agreements (“MSAs”) must be negotiated at arm’s length through independent legal counsel and financial advisors, with compensation at fair market value (“FMV”) determined by the Federal Trade Commission (“FTC”).
The Act would also prohibit MSOs from final decision-making authority over hiring, compensation and staffing, scheduling, revenue targets, coding, billing and pricing, payer contracting. If the MSA violates those restrictions, it would be void and unenforceable.
How Will the Act Be Enforced?:
The FTC would be a key governmental agency with enforcement authority under the FTC Act for unfair or deceptive acts. Private lawsuits would allow for treble damages, attorneys’ fees and equitable relief and the courts may have the authority to order the violator to cease and desist, including divestiture. Other governmental actions may include state attorney generals seeking relief on behalf of its state residents and being excluded from federal healthcare programs.
The Act would take effect one year after enactment. Because there are several states (e.g. California, Colorado, Indiana, New Hampshire, Oregon and Washington) with similar state laws, the Act would not preempt state laws that are equally or more restrictive, requiring parties to comply with both. It is recommended that physician practices utilizing this type of structure review their agreements, operating consistently with the necessary provisions, and whether the organization is documenting compliance on an ongoing basis.
Conclusion:
The Act has been referred to committee for review. Its current sponsors are composed entirely of Democrats, and no Republicans have sponsored the Act.
Ritter Spencer Cheng, PLLC (“RSC”) regularly advises clients on healthcare regulatory and corporate transaction matters in Texas and throughout the country. He is certified in healthcare compliance (CHC) through the Compliance Certification Board (CCB). The RSC healthcare team will continue to monitor any changes related to EKRA. Our clients benefit from informed strategic advice, while being counseled on the regulatory burdens associated with healthcare transactions. For questions, reach out to Richard Y. Cheng, Esq., CHC, chair of RSC’s Healthcare and Mergers & Acquisitions practice groups at rcheng@ritterspencercheng.com.
