This post is part of a series on the corporation consolidation and financialization of health care. Read the rest of the posts here.
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Large corporations are increasingly dominating American health care, including physician practices. By 2023, nearly 80% of physicians were employed by for-profit hospitals or other corporate entities. For instance, the health insurance behemoth UnitedHealth now owns or controls around 10% of all U.S. doctors. Meanwhile, the number of independent practices has continued to shrink, and private equity firms are acquiring dominant shares of physician practices in various local markets.
This rampant corporate consolidation is harmful to both patients and providers. For one, it has contributed to the financialization of health care and growing concerns that shareholder value has superseded patient and community welfare as the primary objective. With de facto control over medical practices, lay corporations are functionally making medical decisions. However, despite the rise in corporate takeovers, lay ownership of physician practices has actually been nominally prohibited for over a century under some states’ prohibition of the “corporate practice of medicine” (CPOM).
Unfortunately, the state laws prohibiting the corporate practice of medicine have failed to prevent the corporatization of the medical profession due to weak enforcement and sophisticated contractual workarounds. However, as some states confront contemporary forms of corporatization, there has been renewed interest and debate over the doctrine’s value. If state lawmakers can successfully revitalize the CPOM doctrine, they’ll offer a roadmap for implementation and a formidable tool against corporate consolidation.
The Harmful Rise of Corporate Medicine
The current medical landscape is a far cry from the 20th century’s disconnected web of independent practitioners. Today, a small group of large, vertically integrated companies with monopoly and monopsony power pursue their financial interests, often at the cost of physicians’ professional and ethical duties. That is, corporate consolidation of the medical profession has elevated strategies that benefit investors, but cost patients, providers, and taxpayers.
For example, the insurer UnitedHealth, which also has a physician arm, sent its doctors extensive checklists of possible diagnoses that treating physicians often disagreed with. But if these diagnoses were coded, they’d earn UnitedHealth’s insurance arm lucrative payments from the government’s Medicare Advantage program. And it isn’t just massive insurers pushing for bigger payouts; private equity-backed medical firms like TeamHealth and Envision Healthcare have aggressively sent surprise medical bills to patients. These are bills for care provided by an out-of-network provider at an in-network medical facility or in an emergency. After federal legislation eliminated this practice, Envision filed for Chapter 11 bankruptcy. Still, private equity-backed providers have flooded the legislated arbitration process with out-of-network billing claims that drive up costs. In both cases, the financial investors and the physicians may have conflicting duties–to maximize shareholder value or to prioritize the patient’s best interests. When corporations control the physicians, shareholder primacy, as opposed to patient welfare, usually wins out.
These transactions are often a loss for patients and doctors alike. New research shows that private equity acquisitions of physician practices increase health care costs and spending without improvements in quality or access. Doctor turnover also increases after a medical practice is acquired by private equity. Beyond private equity, news accounts and investigations document declines in care quality at practices taken over by UnitedHealth’s Optum or Amazon. Patients report having a harder time scheduling appointments, shorter visits, virtual instead of in-person care, and physician departures.
Professional surveys and news accounts document the harm of corporatization to the medical profession. Physicians have decried the moral injury of submitting to the pressures of profit-maximization at the expense of patient care. This professional cri de coeur protests a crisis of burnout, dissatisfaction, and lost autonomy under corporate medicine.
Why CPOM Bans Failed to Stop Corporatization
Even a century ago, many state policymakers agreed that doctors, not corporations, should guide medical decision-making. They feared corporations would pressure doctors to prioritize financial incentives instead of practicing sound medicine. The resulting state laws—codified through common law, administrative opinions, and statutes—were known collectively as the corporate practice of medicine doctrine. The doctrine prohibits lay (i.e., non-physician owned) corporations from owning or controlling medical practices or employing physicians. In other words, the doctrine is intended to keep medical practice in the hands of actual medical practitioners.
In the 1935 case, Dr. Allison Dentist Inc. v. Allison, the Illinois Supreme Court articulated the CPOM doctrine. Acknowledging the dangers of corporate influence, the court reasoned that clinicians subject to non-medical management “must owe their first allegiance to their corporate employer and cannot give the patient anything better than a secondary or divided loyalty.” This, of course, is at odds with physicians’ fiduciary and ethical duties to put patient welfare above any financial interests. Furthermore, the court argued, corporations themselves cannot have “a sense of loyalty to clients or patients, even to the extent of sacrificing pecuniary profit, if necessary.”
By the mid-twentieth century, roughly two-thirds of states had adopted similar versions of the CPOM prohibition. However, in an effort to constrain rising health care costs, policymakers welcomed an increased role for private insurers to actively rein in costs through constraints on use and medical management during the so-called “managed care revolution.” As a result, CPOM prohibitions were perceived as a barrier to streamlined care, and fell by the wayside through non-enforcement, broad exemptions, and contractual evasion.
Meanwhile, corporate investors developed their own strategies to circumvent CPOM prohibitions. Corporations used an intermediary company to contract with their target practices and effectively gain control over them without formally “buying” the practice or directly employing providers. On paper, this intermediary is called a “management services organization” (MSO), and it exists to provide administrative services to the physicians. But in practice, it allows corporate investors to exercise control over a practice’s financial and clinical operations through contractual terms in the management services agreement.
Alternatively, the MSO can install a “friendly physician.” This physician is paid by the MSO to serve as the owner of the practice and is licensed in the state to satisfy CPOM requirements, but they are often absent or uninvolved in patient care. Corporate MSOs may hire a physician to be listed as the straw owner of dozens or even hundreds of practices across multiple states. This so-called “MSO-PC model,” named for the management services organizations and the professional corporations they control, has been widely used by corporate lay investors to comply with the letter, but not the spirit, of the law.
A Recent Revival of the CPOM Doctrine
As enforcement declined and managed care became pervasive, commentators declared the CPOM doctrine an anachronism and called for its abandonment. In truth, the doctrine was unable to prevent the rapid corporatization of the medical profession due to the MSO-PC model’s contractual workarounds. Yet, recent litigation and legislative proposals suggest there may be ways to revitalize the doctrine to address today’s forms of corporatization.
Plaintiff physicians in at least two cases have used the CPOM doctrine to challenge the controlling influence of corporate MSOs. In AAEMPG v. Envision, a competitor emergency medical group asserted that private equity firm Kohlberg Kravis Roberts (KKR) used an MSO-PC arrangement to exert an impermissible degree of control over its affiliate Envision Healthcare in violation of California’s CPOM doctrine. Early rulings favored the plaintiffs, and ultimately, KKR-backed Envision withdrew all operations from the state of California rather than risk a judgment in the case.
In Texas, a group of hospitalists sued the private-equity backed MSO, Quantum Plus and its friendly physician group Lonestar Hospital Medical Associates, asserting that these Blackstone Group-TeamHealth subsidiaries had violated the CPOM doctrine by controlling the hospitalists’ medical practice via their staffing contract. The jury found that the defendants violated the state’s CPOM laws by exerting pressure on the physicians to put the MSO’s financial interests above patient care. After the jury awarded a $10 million verdict, the appellate court reversed a portion of the damages but affirmed the trial court’s judgment on the CPOM violation.
In the 2025 legislative session, lawmakers in several states proposed bills to strengthen their CPOM laws. The proposed legislation aims to regulate the MSO-PC arrangements that allow corporate investors to control medical practices via contract. The bills state that MSOs can continue to provide services for PCs as long as the practice and its licensed professionals retain control. These new CPOM laws seek to restore the practice as the principal and the MSO as the agent, rather than the reverse.
Some of these bills, such as those proposed in California, New Mexico, and Connecticut, would simply prohibit unlicensed lay corporations, such as private equity investors, from interfering with or exerting control over the medical practice’s professional judgment and clinical decisions. That is, MSOs could still assist with staffing, scheduling, diagnostic coding, and payer contracting, but they would be subject to oversight by the medical practice, which would always have the final say. While these bills would help address the contractual terms that MSOs use to control PCs through management services agreements, they could go further. For example, California’s bill is limited to MSOs operated by private equity and hedge funds, allowing other corporate entities such as Optum or Amazon to evade scrutiny. Another blind spot is that the proposed legislation does not prohibit the “friendly physician” model, overlooking a key avenue for corporate control over practices.
The strictest class of CPOM restriction would bar unlicensed lay entities from installing a friendly physician or using other mechanisms to contractually subordinate the physician owners of a medical practice to the interests of the MSO. Such bills would explicitly ban the physician practice owners from holding dual ownership or compensation interests in both the practice and the MSO and prohibit MSOs from dictating who can own shares of the practice. In addition, these bills would restrict the MSO’s ability to assume ultimate decision-making authority over administrative, business, and clinical decisions within the practice.
This stronger form of CPOM legislation was introduced in North Carolina and Vermont this session. And Oregon became the first state to pass a version of this stronger form of CPOM legislation, giving entities a 3-year implementation period to allow existing MSO-PC arrangements to come into compliance. Under the law, corporate MSOs are still permitted to provide services to and own minority stakes in physician groups, and there are numerous carveouts to the general ban on overlapping interests between the PC and the MSO. It thus remains to be seen whether corporate investments will continue if they cannot control the practices. Nevertheless, the structure of Oregon’s law and similar proposals in other states represent the most aggressive attempts so far to protect physician practices from corporate control.
Growing corporate influence in medicine is eroding physician autonomy, undermining physician-patient relationships, increasing costs, and potentially compromising patient care. While the nearly-forgotten CPOM doctrine failed to stop the rise of large-scale corporate takeovers in medicine, it should not be abandoned outright. Strategic litigation and innovative legislation could revive and update the CPOM doctrine to serve its intended purpose: preventing profit-seeking corporations from controlling the practice of medicine.
The views expressed here do not reflect those of Brown University, Brown University School of Public Health, or the author’s research sponsors.
