Why It Matters: Companion bills, each titled the Stop Corporate Takeovers of Physicians Act of 2026, were introduced in the House and Senate on September 16, 2026. Most early commentary has treated the legislation as a private equity (PE) problem, focused on management services organizations (MSOs) and "friendly" professional corporation structures. Less attention has been paid to how the legislation could affect hospitals and health systems. The bill's hospital exemption reaches only the corporate practice prohibition, which covers practice ownership and physician employment. As drafted, the MSO restrictions, the clinical-interference limits, and the non-compete and non-disclosure agreement (NDA) ban could apply to the way many health systems run their employed physician enterprises.
The Bill in Brief:
The Senate bill (S. 5419) was introduced by Senator Elizabeth Warren with Senators Ron Wyden and Jeff Merkley and referred to the Committee on Commerce, Science, and Transportation. The House bill (H.R. 10444) was introduced by Representative Val Hoyle and ten cosponsors and referred to the Committees on Energy and Commerce and Ways and Means. The bill would:
- Ban the corporate practice of medicine (CPOM) federally. Subject to the limited hospital and non-profit exception described in more detail below, entities not majority-owned and governed by physicians or other licensed clinicians (such as physician assistants and nurse practitioners) could not own or control a medical practice, employ or contract for the professional services of a licensee, or practice medicine (Sec. 2(a)).
- Protect licensees. It would make it unlawful for any licensee, health care provider, or MSO to enter into a non-compete clause or a non-disclosure or non-disparagement agreement, and would void any such agreement. The only exception is for non-competes between a practice and licensees who are partial owners of the practice. The text refers to a 25 percent threshold, but its drafting leaves room to argue that any shareholder qualifies. The bill would also bar any health care provider from using discipline, punishment, threats, adverse employment actions, retaliation, coercion, or "excessive pressure" to interfere with clinicians' professional judgment (Sec. 2(b)(1)).
- Restrict MSOs. MSOs and their owners, officers, employees, and contractors could not control the sale of practice equity or assets, own or finance the acquisition of practice interests, serve as a practice's officers or contractors, or exercise ultimate decision-making authority over hiring, staffing, licensee compensation and schedules, degrees or credentials required for licensees, revenue targets, revenue disbursement, coding, clinical standards, billing policies, pricing, or payer contracting. Management agreements would have to be negotiated at arm's length through advisors selected by the practice without MSO involvement and reflect fair market value compensation "as determined by" the Federal Trade Commission (FTC) (Sec. 2(b)(2)).
- Provide multiple enforcement mechanisms. A violation would be treated as a violation of an FTC trade regulation rule, which exposes violators to civil penalties, and the FTC could enforce against non-profits. State attorneys general could sue, and any person injured by a violation could bring a private action for treble damages and attorney's fees. Courts would be required to order cessation, divestiture where applicable, and disgorgement, and either party could demand a jury. Violators could also face permissive exclusion from federal health care programs (Secs. 2(e) and 3).
The requirements would take effect one year after enactment, allowing time for parties to review and assess any necessary changes to existing structures, agreements, and governance (Sec. 2(f)).
Hospital and Health System Exposure
The bill provides an express exception for hospitals and non-profits, but it is narrow in scope. Hospitals, critical access hospitals, rural emergency hospitals, hospital-affiliated clinics, and non-profit or public health care providers are exempt from the corporate practice prohibition in Section 2(a), meaning they may continue to own practices and employ physicians. Hospitals remain subject to the licensee protections and the MSO restrictions, however, and those two sets of rules are the primary source of exposure and risk for hospitals and health systems. The bill also does not define "hospital-affiliated clinic," "non-profit," or "public" provider, and it does not address health system parents or non-hospital affiliates. As a result, it is unclear whether a health system's physician enterprise subsidiary is exempt from the corporate practice prohibition (Sec. 2(a)(3)).
Clinical-interference limits directly apply to hospitals. The bill defines "health care provider" as any entity that delivers health care services, which would include hospitals (Sec. 2(d)(2)). Hospitals could not use discipline, punishment, threats, adverse employment actions, coercion, retaliation, or "excessive pressure" to interfere with a licensee's clinical judgment. Prohibited interference includes specifying how long a clinician spends with a patient (including emergency department and inpatient evaluation times); determining a patient's clinical status, such as inpatient versus observation or referral to a skilled nursing facility; controlling where patients are referred upon discharge; holding final decision-making authority over diagnoses or diagnosis codes; and limiting the range of clinical orders available, including through electronic health record (EHR) configuration. The bill also authorizes the FTC to identify additional forms of prohibited interference. Many of these functions, such as utilization review and discharge planning, are required by the Medicare Conditions of Participation (42 C.F.R. §§ 482.30, 482.43), but the bill has no exception for actions required by other federal law.
Shared services entities likely qualify as MSOs. The bill defines an MSO as any entity that has an agreement with a medical practice to provide services for compensation, including payroll, HR, payer contracting, billing and collection, coding, IT, scheduling, and property or equipment leasing (Sec. 2(d)(4)). Many health systems provide these services to separately organized physician groups under management or services agreements, and nothing in the definition exempts hospital-affiliated entities. An entity that meets the definition would face the same restrictions as a PE-backed MSO. These include the bar on ultimate decision-making authority over staffing, compensation, revenue targets, coding, billing policies, pricing, and payer contracting, as well as the arm's-length and fair market value requirements. The MSO restrictions also bar an MSO from owning or financing the acquisition of practice interests, which could prevent a health system affiliate from owning the practices despite the hospital exemption that would otherwise allow such ownership. By contrast, where physicians are employed directly by a hospital or a single integrated entity, there may be no separate "medical practice" and no MSO agreement.
Physician non-competes would be void. The non-compete and NDA prohibitions apply to any licensee, health care provider, or MSO, and any covered agreement would be void. As a result, covenants with hospital-employed physicians who hold no ownership interest in their practice would be unenforceable. The bill does not say whether it applies to agreements signed before its effective date. Beyond non-competes, the NDA ban is not limited to clinician speech about care and, as drafted, could extend to ordinary confidentiality terms.
How Hospital Exposure Compares to PE-Backed MSO Risk
Most commentary assumes PE-backed MSOs are the bill's intended target with hospitals as innocent bystanders. The text supports a different reading, however. Apart from practice ownership and employment, a health system with a separately organized physician enterprise stands in a similar position to a PE-backed platform and, in one respect, arguably a worse one.
Practice ownership and physician employment. On this point, the two diverge. A PE-backed MSO or other lay investor could not own or control a practice or employ physicians, while hospitals and non-profit providers could. This is the principal area where hospitals are treated more favorably.
MSO restrictions. Hospitals and PE-backed MSOs are treated the same. A health system shared services entity that bills, codes, contracts with payers, or runs HR and IT for a separately organized physician group seemingly fits the MSO definition just as a PE platform does. It would face the same bar on ultimate decision-making authority over staffing, compensation, revenue targets, coding, billing, pricing, and payer contracting, and the same arm's-length and fair market value requirements for the services agreement. For a PE platform, these are limits on an investor. For a health system, they are limits on how an integrated enterprise is run.
Clinical-interference limits. Hospital exposure here is arguably greater. These limits apply to any "health care provider," not only MSOs, so they reach hospitals regardless of whether a shared services entity or arrangement is involved. The restricted functions – including inpatient and observation decisions, discharge referrals, coding authority, and EHR order configuration – are core hospital operations. A PE-backed physician group touches only some of them.
Non-competes and NDAs. Hospitals and PE-backed MSOs are treated the same. The ban applies to any licensee, health care provider, or MSO. The 25 percent owner exception will rarely help a hospital, because its employed physicians typically hold no equity.
Enforcement. Hospitals and PE-backed MSOs are treated the same. The FTC's authority expressly extends to non-profits, and civil penalties, state attorney general actions, private suits for treble damages by any injured person, mandatory disgorgement, and potential program exclusion apply to both. The bottom line: The ownership and employment exemption removes one risk for hospitals but leaves them exposed to the operational restrictions that matter most day to day.
Federalizing the CPOM Prohibition
CPOM restrictions are currently a matter of state law that varies widely. Some states strictly prohibit lay ownership and physician employment, others carve out hospitals, and many have little or no enforced doctrine. This bill would set a national floor. It expressly preserves state laws that are equal or more stringent, including state laws that apply ownership and control requirements to entities the federal bill exempts (Sec. 4). For multistate systems, the practical effect would be a two-layer regime: hospital-employment structures permitted in a lenient state would still face federal clinical-interference, MSO, and non-compete rules, while strict-CPOM states could continue to impose additional, more stringent rules. Oregon enacted CPOM and MSO legislation in 2025 (SB 951) that closely resembles the federal bill, and California and several other states have enacted or considered similar measures. Policy efforts to restrict CPOM are moving at both the state and federal levels.
Transaction Considerations for Health Systems:
Although the hospital exemption preserves a health system's ability to own practices and employ physicians, the bill's other provisions could affect how health systems acquire, finance, and affiliate with physician practices.
Acquisition and financing structures. Because MSOs could not control the sale of practice equity or assets or own or finance the acquisition of practice interests, health systems that acquire or fund physician practices through a management or services affiliate may need to revisit those structures. Stock transfer restriction or succession agreements used to control ownership of captive practices could raise similar concerns.
Joint ventures and affiliations. The bill does not address health system parents, non-hospital affiliates, or entities with mixed ownership. Joint ventures among health systems, physician groups, and investors, as well as minority investments and multisystem affiliations, may not clearly fall within the exemption. Because the corporate practice prohibition turns on whether an entity is majority-owned and governed by licensees, board composition and reserved powers in venture documents could determine whether a venture may own practices.
Restrictive covenants and valuation. In a typical practice acquisition, selling physicians give up their ownership at closing and become employees. As a result, the partial-owner exception would likely not preserve their post-closing non-competes, which often underpin purchase price and valuation. Because the bill is silent on whether it applies to existing agreements, covenants in completed transactions are also uncertain.
Deal confidentiality. Read literally, the NDA ban could extend to confidentiality agreements entered into by a health care provider or MSO during diligence and in definitive transaction documents.
Post-closing risk. Mandatory divestiture and disgorgement remedies could put completed acquisitions at risk, and the one-year effective date could fall during the life of a pending deal. Buyers should consider diligence on target structures and whether transaction documents should allocate change-in-law risk through covenants, termination rights, and indemnities.
Legislative Outlook
The near-term prospects of the bill being enacted appear limited. The bill has been referred to committees on which none of its introducing members serve, it has no bipartisan cosponsors, and it will expire when the 119th Congress adjourns unless it is reintroduced. Even so, the policy concerns behind it – including corporate control of clinical decisions, consolidation, and restrictive covenants – are drawing attention in Congress and in state legislatures. They could resurface in future sessions, in amended form, or through FTC or Department of Health and Human Services action, and the bill's provisions could serve as a template for future proposals.
Key Takeaways
- The hospital exemption covers ownership and employment only. Hospitals could keep owning practices and employing physicians, but the licensee protections and MSO restrictions would still apply.
- Shared services entities look like MSOs. Centralized billing, coding, HR, payroll, contracting, and IT support for separately organized physician groups fit the bill's MSO definition.
- Clinical-interference limits directly apply to hospitals. They apply to every health care provider and cover core hospital functions such as observation status, discharge, coding, and EHR order sets.
- Non-profit status limits, but does not eliminate, exposure. Non-profits are exempt from the ownership and employment ban, but the FTC can enforce the remaining provisions against them, alongside state attorneys general and private suits for treble damages.
What to Do Now
Although enactment is not imminent, hospitals and health systems should consider the following steps.
- Review your shared services arrangements. Identify which physician groups are organized as separate entities receiving services under an agreement, since those arrangements are most likely to be treated as MSO relationships. Also note where system-level policies – such as utilization review, discharge, coding, and EHR order sets – could be viewed as directing clinical judgment.
- Conduct a state CPOM compliance checkup. Confirm that existing physician enterprise structures comply with current CPOM restrictions in each state where the system operates, since stricter state laws would remain in effect even if the federal bill is enacted.
- Evaluate pending and planned transactions. For practice acquisitions, affiliations, and joint ventures in process, consider whether the structure depends on an MSO or services affiliate, whether post-closing restrictive covenants and confidentiality terms would remain enforceable, and whether transaction documents should allocate change-in-law risk.
- Engage your trade associations. Flag the bill for relevant trade associations so that the hospital and health system perspective – including the breadth of the MSO definition and the conflict with Medicare utilization review and discharge planning requirements – is represented in any industry response.
- Monitor developments. Track committee activity, potential reintroduction in the next Congress, related state CPOM legislation, and the FTC's case-by-case non-compete enforcement following the vacatur of its 2024 nationwide non-compete rule.
How Baker Donelson Can Help
Baker Donelson's Health Law Group regularly advises hospitals, health systems, and academic medical centers on physician enterprise structures, management services arrangements, and restrictive covenants. If you have questions about how this legislation could affect your organization, please contact the authors of this alert or any member of Baker Donelson's Hospitals, Health Systems, Academic Medical Centers, Health Care Transactions or Health Care Policy teams.