A proposed federal bill targets the management services organization (MSO)/friendly professional corporation (PC) structure that underpins much of physician practice investment. H.R. 10444, the Stop Corporate Takeovers of Physicians Act of 2026, was introduced on September 16, 2026, by Rep. Val Hoyle (D-OR) and 10 cosponsors. It was referred to the House Energy and Commerce and Ways and Means Committees.
Many states follow the corporate practice of medicine (CPOM) doctrine, which bars non-physicians from owning medical practices. The MSO/PC model works around that. Physicians own the PC, which employs clinicians and bills payers. The MSO with a health system or a digital health platform provides all the non-clinical services: staff, technology, billing, real estate and capital. The MSO’s economics come through a management services agreement (MSA). Its control usually comes through a stock transfer restriction agreement that lets the MSO decide who owns the PC. The MSO often is backed by venture capital or private equity.
Although H.R. 10444 contains no tax provisions, it would prohibit the control and economic rights that many MSO/PC tax and financial reporting positions rely on. Key implications include:
The bill regulates three relationships: who can own a practice, what an MSO can do for one and what a practice can require of its clinicians. Each change goes to the core of the friendly-PC model.
Licensed clinicians would have to hold a majority of the practice’s ownership and a majority of its governing body. Entities that are not controlled by licensees would not own any part of a practice or employ clinicians. Licensee owners also would have to be licensed, present in a state and substantially engaged in delivering care. That last requirement puts pressure on passive or single-physician nominee arrangements, including multistate telehealth PCs owned by one physician.
An MSO could not:
As drafted, this dual-role ban would reach physicians who hold equity in the MSO and practice through the PC.
Any management services agreement, including an amendment, renewal or termination, would have to be negotiated at arm’s length with compensation at FMV. Many arrangements already cite FMV for Stark and Anti-Kickback purposes.
Clinician non-competition agreements, NDAs and non-disparagement agreements would be void. The only exception is a noncompete with a clinician who owns at least 25% of the practice. Health care entities also could not interfere with clinicians’ judgment on patient time, admissions, treatment timing, referrals or diagnosis coding.
The U.S. Federal Trade Commission would treat violations as unfair or deceptive practices. State attorneys general and injured private parties could sue, with treble damages and attorney fees available. Courts would be required to order violators to stop, and could order divestment of the practice and disgorgement of revenue for the violation period. Violations also would be grounds for exclusion from Medicare and other federal health programs.
Nonprofits, public providers, hospitals, hospital-affiliated clinics, critical access hospitals and rural emergency hospitals are exempt. The rules would take effect one year after enactment, with no grandfathering of existing arrangements. State laws that are stricter would still apply.
If enacted, the bill could affect several aspects of MSO and PC tax structuring, including consolidation, intercompany transactions, entity choice, rollover equity and qualified small business stock treatment.
Some MSOs include the PC in a consolidated income tax return, or treat PC income as their own, based on the argument that the MSO is the PC’s beneficial owner for tax purposes. That argument depends on transfer restrictions, succession rights and MSO-funded nominee loans, all of which the bill would prohibit. Without them, PCs would be forced to leave consolidated returns. Deconsolidation can trigger deferred intercompany items and excess loss accounts, while raising short tax year and attribute allocation issues.
More income may move from the MSO back to the PC. Management fees, loans, leases and IP or brand licenses would all need FMV support, ideally backed by an independent valuation. Lower MSO income may also limit interest deductions under Section 163(j), slow NOL use and shift state apportionment.
A C corporation PC that keeps its profit faces double taxation, or pressure to pay it out as reasonable compensation. Practices should revisit whether an S corporation or partnership structure fits better. They should also check cash-method eligibility and state pass-through entity tax (PTET) elections.
Physicians often roll equity into the MSO on a tax-deferred basis or hold MSO profits interests. The ban on dual roles could force taxable unwinds of those interests.
The bill could help an MSO’s qualified small business stock (Section 1202) position. QSBS is not available to businesses in the field of health, and an MSO that controls or consolidates a PC is likely to be treated as one, unless its assets represent less than 20% of the total. A pure administrative-services MSO has a cleaner argument. The trade-off is that an MSO earning only an arm’s-length fee may be a less valuable business, so the gain being protected could be smaller.
For more information on this topic, please contact a member of our team.
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