The Stop Corporate Takeovers of Physicians Act of 2026: What Health Care Operators Need to Know

Congress introduced the Stop Corporate Takeovers of Physicians Act of 2026 (SCTAPA), a sweeping bill expressly designed to protect physicians and other licensed clinicians from corporate control over medical practice.

It is the broadest federal proposal to date targeting non-physician influence in health care delivery. And whether the bill advances or not, health care operators, investors and physician groups, particularly those with exposure to practice-management structures, should be paying attention.

The bill captures a national policy trend of increased regulatory scrutiny on health care management services organizations (MSOs), physician noncompetes and health care consolidation.

Drawing heavily from Oregon’s recent corporate practice of medicine prohibition framework, the bill would:

• • Restrict non-physician ownership and control of medical practices
  • Ban nearly all noncompetes on physicians and mid-level providers
  • Sharply limit management services organization (MSO) activities
  • Add powerful enforcement tools, including a private right of action with treble damages and potential exclusion from federal health care program participation

And while the bill exempts hospitals and certain nonprofit providers from certain physician practice ownership and employment restrictions, it does not exempt them from the proposed noncompete ban or the broad limits on controlling clinical activity.

Key Takeaways 

• • The bill reflects a broader policy trend against health care consolidation and corporate control over medicine. It comes on the heels of aggressive state activity in Oregon, California, Washington, Indiana and other states, as well as bipartisan federal proposals such as the Warren-Hawley Break Up Big Medicine Act, which targets vertical integration involving insurers, PBMs, pharmacies, physician practices and other health care entities.
  • The bill would federalize the prohibition on the corporate practice of medicine (CPOM). It would codify a historically state-law doctrine found in a little more than half the states and establish a nationwide floor for physician-practice ownership and control requirements.
  • MSO structures would face significant scrutiny. The bill targets a number of common structural and operational prohibitions beyond lay ownership prohibitions, including stock transfer restrictions, ensuring physician owners have counsel or advisors when negotiating contracts with MSOs, fair market value requirements on MSO management fees, hiring, compensation, scheduling, control over revenue disbursement, noncompetes, and payor contracting.
  • The bill also reaches beyond physicians. Many of its core restrictions apply to “licensees,” which would include advanced practice providers. The proposal could affect employment, noncompete, clinical-control, and practice-management arrangements across a broader clinician workforce.
  • The bill’s sweeping clinical decision-making restrictions are somewhat novel and could create uncertainty with existing federal law and value-based care policy. Although the bill’s prohibition of control over discharge referrals is only one example of its restrictions on clinical interference, the framework could create tension with the current federal rules and policy allowing referral coordination and certain types of directed referrals within integrated systems.
  • The bill would broadly restrict noncompetes and certain protective agreements. It would make noncompete clauses with licensees void and unenforceable, with a limited exception for certain physician owners. It would also restrict nondisclosure and nondisparagement provisions affecting licensees. The prohibition appears to apply across hospitals, health systems, physician groups, MSOs, and other health care employers, with no express sale-of-practice exception.
  • Hospitals and certain nonprofits receive a meaningful but limited carve-out. They are exempt from some subsection 2(a) restrictions on owning or controlling practices and employing or contracting with licensees. But they remain subject to the bill’s noncompete ban and clinical-interference rules, meaning large health systems could still face limits on productivity expectations, referral management, coding oversight, EHR configuration, and other tools that affect clinical judgment.
  • The bill would create a broad enforcement toolkit. The Federal Trade Commission (FTC) and state attorneys general could pursue violators, and private plaintiffs could seek treble damages. The bill also authorizes divestment, disgorgement and exclusion from federal health care programs — potentially tying state-style CPOM conduct to federal program participation.
  • The policy trend will likely outlast this bill or at least this version of it. Organizations building or investing in physician-practice platforms should evaluate their structures against a tightening regulatory trajectory, not only against the specifics of this proposed legislation.

What Is Driving This Scrutiny?

Corporate practice of medicine restrictions and limits on physician noncompetes are not new. More than 30 states maintain some form of CPOM restriction, reflecting the longstanding principle that medical decision-making should remain in the hands of licensed professionals. Many states also have adopted statutes, regulations or judicial doctrines that limit physician noncompetes more than ordinary commercial restrictive covenants.

What is different now is the pace and intensity of the regulatory response: states are adopting new limits, regulators are showing greater willingness to enforce existing CPOM doctrines, and the policy debate is expanding beyond ownership to include restrictions and regulation on consolidation, health care costs, patient access, and the working conditions of physicians and other clinicians.

Physician-practice consolidation is one important driver. Private equity firms, health systems, insurance companies, pharmaceutical and medical supply companies and others have directly or indirectly acquired or employed a growing share of physicians. The bill’s supporting materials report that more than 80% of U.S. physicians are now employed by corporate entities, up from about 62% in 2019.

But the concern is not consolidation alone. Policymakers are also asking whether those structures affect rising health care costs, are reducing access to care, or are placing operational and economic pressure on physicians in ways that affect clinical autonomy.

Many states have or are moving toward a more restrictive environment. Some of the most aggressive activity has come from states such as California, Washington and Oregon, but the trend is not limited to those jurisdictions.

California has increased attorney general scrutiny of corporate-controlled medical practices and MSO structures. Washington has devoted growing legislative attention to private equity and health care consolidation. And Oregon — the federal bill’s most direct state-law precursor — has enacted what many view as the country’s most restrictive CPOM framework.

Other states have moved in more targeted ways. Indiana, for example, has adopted physician noncompete restrictions and health care transaction notice requirements, underscoring that this is not simply a red-state or blue-state issue. Across jurisdictions, the common thread is a growing willingness to regulate physician employment, practice-management structures, health care transactions, and the role of corporate actors in clinical delivery.

What Are the Core Provisions of the Act?

Ownership and Control Prohibition

The bill would bar any partnership or corporation not “majority-owned and controlled” by licensed physicians or advanced practice providers from owning or controlling a medical practice, employing licensees for professional services, or practicing medicine.

“Majority-owned and controlled” requires licensees to hold at least a majority of ownership or membership interests and a majority of governing body seats. Targeting certain nominal physician owners who may be effectively “lending” their licenses to corporate-controlled structures, the bill requires that licensee-owners be physically present in the state where the practice provides services and be “substantially engaged in delivering medical care.”

MSO Restrictions

The MSO provisions would be among the bill’s most impactful. They regulate the specific activities MSOs would be allowed to perform for affiliated practices, going well beyond traditional CPOM rules.

Prohibited activities for non-licensee persons and entities include:

• • Controlling practice-share sales or transfers
  • Issuing stock or ownership interests
  • Owning or controlling practice shares
  • Serving as a practice officer or director or otherwise participating in managing a practice
  • Acquiring or financing the acquisition of practice shares
  • Exercising “de facto control” over administrative, business or clinical operations, including negotiation of contracts with third-party payers and the establishment of revenue targets or other incentives for licensees of a medical practice

In addition, management contracts must be negotiated at arm’s length through counsel selected without MSO involvement, and compensation must reflect fair market value as determined by the FTC. MSOs also could not advertise services under a name other than the practice’s.

These restrictions would require fundamental changes to common MSO practice models. Payor contracting, billing, scheduling, credentialing and revenue-cycle management are routine MSO functions. The bill would recast them as potential control points in every market using these structures.

Noncompete and Protective Agreement Ban

The bill would void noncompete clauses applicable to licensees (physicians and mid-level providers), with only a narrow exception for physicians holding 25% or more ownership in the practice. It would also render non-disclosure and non-disparagement agreements void and unenforceable.

The definition of “noncompete clause” is broad: it covers any “term or condition of employment” — whether written or oral, contractual or workplace policy — that prohibits, penalizes or “functions to prevent” a worker from seeking or accepting work or operating a business after their employment concludes.

Unlike many state laws, there is also no carve-out for sale of a practice or business. The absence of a sale-of-practice exception would significantly disrupt current market dynamics. Buyers would lose a key tool for protecting the value of their investment, and physicians selling their practices would lose the ability to command premium pricing supported by noncompete protections.

Transaction structures would need to be reconsidered. Contingent purchase price provisions, retention bonuses and other economic mechanisms would likely need to replace noncompetes as the primary tool for aligning physician incentives post-closing — but those mechanisms carry different risk profiles and may not provide equivalent protection.

For private equity sponsors, health systems and strategic acquirers with existing portfolios of affiliated physician practices, a retroactive invalidation of noncompetes could impair the value of investments made in reliance on those agreements. It could affect the bargaining dynamics in physician practice transactions and employment negotiations.

Retroactivity and Existing Agreements

The bill’s operative language states that covered agreements “shall be void and unenforceable.” It does not limit this prohibition to agreements entered into after enactment. The bill’s effective date — one year after enactment — establishes when the prohibition takes effect. But the “void and unenforceable” language suggests that existing noncompete, non-disclosure and non-disparagement agreements would be invalidated upon that date, not merely that new agreements would be prohibited going forward.

The bill does not include a grandfathering provision or transition period for agreements executed before enactment. If enacted as drafted, organizations would have 12 months to restructure or abandon existing restrictive covenant arrangements. This timeline could prove disruptive for practices, physician groups and investors with significant portfolios of physician employment agreements containing noncompetes.

Clinical Interference Prohibitions 

The bill would apply its clinical interference rules to any “health care provider,” including hospitals, medical practices and health systems, and would broadly restrict direct or indirect conduct by health care providers that “interferes with” or controls clinical judgment, relating to:

• • Patient time, including appointment length and the time allocated for evaluation and treatment
  • Determinations regarding inpatient admission or observation status
  • The timing, duration or sequencing of treatment
  • Discharge planning and referrals to post-acute, ancillary or other providers
  • Diagnoses, clinical documentation, coding and level-of-service determinations
  • Clinical orders, including tests, medications, procedures and consultations
  • EHR templates, prompts, alerts, defaults, order sets, and other medical-record configurations that may influence clinical decision-making

The breadth of these restrictions could potentially impact a wide range of common clinical and operational practices. Hospitals and integrated systems routinely use care pathways, utilization-management protocols, EHR prompts and order sets, risk-stratification tools, and other clinical-support and care-coordination systems to improve consistency, quality and efficiency. Many health systems have also developed — or are developing — technology- and AI-enabled tools that support clinical decision-making and coordinate care across settings. The bill raises questions about whether and when those systems could be viewed as indirectly interfering with clinical judgment.

The resulting uncertainty could also extend to federal fraud and abuse exceptions and safe harbors that permit certain directed-referral, care-coordination, patient-engagement, and value-based-care arrangements when patient choice and other safeguards are preserved. Future revisions or regulations may need to clarify how the bill would apply not only to referral requirements, but also to broader clinical-support, quality-improvement, utilization-management and technology-enabled care models.

Enforcement Mechanisms

The bill would treat violations as unfair or deceptive acts under the FTC Act, giving the FTC enforcement and rulemaking authority. State attorneys general could sue as parens patriae, and private plaintiffs could seek treble damages, attorney’s fees and costs. Remedies would include cease-and-desist orders, divestment and disgorgement. Jury trial rights would remain.

While much of the attention will focus on the bill’s ownership and governance restrictions, its federal-program consequences may prove just as important. The bill would amend Section 1128(b) of the Social Security Act to create a new basis for permissive exclusion from Medicare, Medicaid and other federal health care programs for certain violations. As a result, conduct historically analyzed as a matter of state corporate-practice-of-medicine law could become tied to federal health care program participation and enforcement. For organizations dependent on government payors, that consequence alone makes the bill impossible to ignore if enacted.

What Should Organizations Be Evaluating Now?

The SCTAPA is a useful stress test for the direction state and federal policy may be continuing to head. State legislatures, attorneys general, consumer advocates, lobbyists and regulators now have another detailed template for future activity and the knowledge that many prominent federal lawmakers have endorsed this bill.

Organizations best positioned for this environment should focus on a few high-impact areas rather than trying to solve every issue now: physician restrictive covenants, clinical-control points, MSO viability, and flexibility in physician relationships and transactions.

Priority Issues for Health Care Operators

• • Review and evaluate both physician and advanced practice provider restrictive covenants and sale-related covenants, and non-disclosure and non-disparagement contracts, compensation and revenue targets.
  • Identify potential clinical control points, including productivity expectations, referral protocols, discharge planning, coding oversight, clinical standards, EHR configuration, AI-assisted decision support, and utilization-management tools to determine levels of physician control.
  • Evaluate whether MSO-based platforms would remain viable if common functions such as payor contracting, revenue-cycle management, staffing, compensation, scheduling, and operational controls were treated as de facto control.
  • Build flexibility and develop multiple layers of physician alignment and retention across transactions and ongoing relationships, including contingent purchase-price payments, retention and tenure bonuses, rollover equity, deferred compensation and other retention arrangements, together with expansion of physician-led clinical governance models and joint operating committee structures.

Please contact Doug Wolford, David Garcia, Jason Brace or any member of the Phelps health care team with questions or for advice and guidance.