REGULATION

Lawmakers consider major corporate medicine crackdown

The risk of Washington threatening the DSO business model appears to be growing.

What happened: Newly introduced legislation would effectively outlaw in medicine the arrangements undergirding the business model of DSOs. 

• The Stop Corporate Takeovers of Physicians Act, introduced by a group of Democratic lawmakers, including Senator Elizabeth Warren and Representative Alexandria Ocasio-Cortez, bans private equity funds, insurers, and other for-profit companies from owning or controlling medical practices and imposes much tighter restrictions on management services organizations (MSOs).

What’s in the bill: While the bill doesn’t prohibit MSOs outright, it does significantly limit what they can do, and potentially renders their business model unworkable. 

• Ownership: Any company owning a medical practice would need licensed clinicians to hold a majority of its equity and board seats. Nonprofits and hospitals are exempt.

• Operational control: MSOs couldn’t have final say over operational decisions including hiring, schedules, staffing levels, revenue targets, coding, billing, pricing, or payer contracts.

• Practicing owners: Clinician owners would have to be licensed and present in the state and substantially engaged in patient care.

• Restricting contracts: The bill bars most non-competes, nondisclosure agreements, and non-disparagement agreements for covered clinicians.

• Enforcement: The Federal Trade Commission, state attorneys general, and injured private parties could all bring cases that result in significant damages or court-ordered divestment.

Yes, but: The bill does not directly target dentistry, and the core rules around ownership and MSOs apply to medical practices, covering physicians, physician assistants, and nurse practitioners—not, by a strict reading of the text, dentists. 

• There is one gray area in the bill, which is that the ban on non-competes applies to any “health care provider,”and whether that would cover DSOs’ contracts with dentists and hygienists is unclear.

Why it matters: This proposal doesn’t target dentists, and given the makeup of and brief window remaining in the current Congress, is unlikely to pass anyway. The real risk for DSOs is what a second version of the legislation could look like after the midterms. A re-introduced bill written by the same group of Democratic legislators—now potentially with majorities in the House and Senate—could easily be tweaked to cover dentistry, which is exactly what some policy groups are now pushing for.

• The Alliance of Independent Dentists endorsed the bill, and its president, Dr. Jill Tanzi, said dentists and their patients "deserve these same protections."

• The American Economic Liberties Project, another endorser, released model state legislation last December that applies many of the same restrictions to DSOs.

Zoom out: With the primary for the 2028 Democratic presidential nomination around the corner, would-be contenders will be looking for high-profile issues to generate attention for their candidacies. As that race heats up, proposals like this are likely to grow even more aggressive.

Bottom line: Expect this bill to come back after the midterms, possibly with a longer reach—and prepare yourself accordingly.