Seller guide
MSOs and the Corporate Practice of Medicine: How Investors Buy Practices
In many states, investors cannot own a medical practice. Here is the structure they use instead, and what it means for the physicians who sell.
Short answer
Many states bar companies that are not owned by physicians from practicing medicine or employing physicians, a doctrine called the corporate practice of medicine. So private equity buyers usually purchase a management services organization (MSO) that runs the business side of the practice, while a physician-owned professional corporation keeps control of clinical care. Oregon and California tightened these rules for deals starting in 2026.
What the corporate practice of medicine is
The corporate practice of medicine (CPOM) doctrine limits who can own a medical practice or employ physicians. The idea is that clinical decisions should be made by licensed physicians, not by investors. Foley & Lardner describes CPOM laws as existing "in over 30 states," though how strictly they apply varies widely.
How the MSO structure works
Foley & Lardner describes the typical private equity transaction this way: the investor acquires "the non-clinical business associated with a physician practice through a management services organization." The MSO handles payroll, billing, human resources, IT, scheduling and other administration, "while a physician-owned professional corporation (PC) retains control over clinical decision-making."
In practice, that usually means:
- The professional corporation stays owned by a physician and employs the clinicians.
- The MSO owns the non-clinical assets and provides management services for a fee.
- Agreements between them govern fees and often restrict how the PC's ownership can change.
- You are paid for the business you sell into the MSO, often partly in rollover equity in the MSO or its parent.
What changed in 2025 and 2026
Oregon
Oregon's SB 951, signed June 9, 2025, applies from January 1, 2026 to MSOs formed after the law passed, and from 2029 to existing ones. It bars MSO owners and managers from owning or controlling a majority of the medical practice they manage, limits agreements that restrict transfers of practice ownership, and limits non-competes. Nixon Peabody calls these "the strictest limits in the nation."
California
California's SB 351, effective January 1, 2026, bars private equity groups and hedge funds from interfering in clinical matters, such as which tests are ordered or how many patients a physician sees, and reserves functions like control of medical records, payer contracting decisions and billing and coding decisions. It keeps sale-of-business non-competes. AB 1415 expands California's advance-notice rules so private equity groups and MSOs must notify the state's Office of Health Care Affordability before certain transactions.
Federal
A federal bill, the Stop Corporate Takeovers of Physicians Act, was introduced in September 2026 and is modeled on Oregon's law. As of this writing it is a proposal, not law.
What this means if you are selling
- Your state matters. Deal structure, timing and even which buyers are interested can depend on where your practice is.
- Read the management agreement. The MSO fee and its terms decide how much of the practice's earnings stay with the physicians.
- Clinical control should stay with physicians. In states with new laws, it is a legal requirement; everywhere, it is worth negotiating.
- Allow time for notices. Some states now require advance notice of healthcare transactions.
Have a healthcare attorney in your state review any MSO structure. For how the payment side works, see rollover equity and earnouts.
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Get a Free Practice ValuationCommon questions
What is an MSO in a medical practice sale?
A management services organization owns the non-clinical side of a practice, such as billing, staffing and IT, while a physician-owned professional corporation keeps control of clinical care. Private equity buyers usually buy the MSO.
Which states have the corporate practice of medicine?
Foley & Lardner describes CPOM laws as existing in over 30 states, with strictness varying widely. Oregon and California tightened their rules for transactions starting in 2026.
Is there a federal corporate practice of medicine law?
Not currently. A federal bill was introduced in September 2026, but it is a proposal, not law.
Related reading
Sources
Figures are attributed to their source and date. Ranges are published estimates, not a valuation of any practice.
- Foley & Lardner, "Proposed Federal CPOM Legislation: What the Stop Corporate Takeovers of Physicians Act Would Mean for Private Equity and MSO-Based Transactions," September 25, 2026. Link
- Nixon Peabody, "Oregon SB 951: Corporate practice of medicine law explained," July 11, 2025. Link
- Morgan Lewis, "Double Dose of Regulation: The Impact of SB 351 and AB 1415 on California Healthcare Transactions," October 28, 2025. Link