Washington Aims at Private Equity and Misses the Real Target

Mike Rawaan

9 hours ago

9 min read

September 29, 2026 | Healthcare Providers, Private Equity

Mike Rawaan, Founder and Managing Director

Sep 28, 2026 · @Mike

Most of the U.S. healthcare industry reads the recently proposed Stop Corporate Takeovers of Physicians Act as a referendum on private equity, but I have a different take. The bill picks a fight with the smallest buyer in the market and leaves the largest one alone.

Senators Elizabeth Warren, Ron Wyden, and Jeff Merkley, along with Representatives Val Hoyle, Alexandria Ocasio-Cortez, and Suhas Subramanyam, introduced the bill on September 16, 2026. It would make it illegal for private equity funds, insurers, and other for-profit corporations to own or control medical practices, according to Seyfarth Shaw's summary of the sponsors' press release. Supporters frame it as a rescue for independent medicine. Physicians who want to stay independent should look hard at what this proposal fixes and what it ignores.

Picture a sports league that bans one owner but leaves the salary cap, the broadcast contracts, and the draft rules untouched. The rules of the game barely move, and the biggest franchise keeps winning.

What the Bill Actually Does

The bill establishes a federal ban on the corporate practice of medicine and puts management services organizations (MSOs) squarely in its sights. Foley & Lardner reports that it would sharply limit MSO ownership, governance involvement, financing arrangements, and operational influence over practices. It also targets the restrictive covenants that appear in many physician transactions.

The enforcement provisions carry real weight. According to one law firm's analysis, the bill requires in-state, practicing owners, subjects management fees to a federal fair market value standard, and adds treble damages (3X of actual damages). A court that finds a violation would have to order divestiture and disgorgement of revenue from the violation period, and violators could face exclusion from Medicare and Medicaid. The requirements would take effect one year after enactment, and stricter state laws would stay in force.

The bill borrows its architecture from Oregon. Oregon's SB 951 became the template, which California and Vermont followed with their own restrictions. Seyfarth describes Oregon's law as the most aggressive limit on private equity involvement in medical practice management in the country.

Passage looks unlikely this session. All of the sponsors sit in the minority party in a Republican-controlled Congress, and Holland & Knight points to the limited legislative runway left in 2026. That does not make the bill irrelevant. The direction of travel matters more than the vote count, because states keep moving whether Congress does or not.

The Case for the Bill

Supporters have real evidence on their side, and I would not dismiss it. Start with the contracts. The Commonwealth Fund warns that salary caps, noncompete agreements, and other common features of private equity deals require physicians to read the fine print carefully. The bill goes after the friendly-physician and MSO structures that let investors direct a practice without owning it on paper.

Next, let's look at the coalition. The sponsors' announcement lists endorsements from the American Academy of Emergency Medicine, OrthoForum, the Association for Independent Medicine, and the Alliance of Independent Dentists. It also lists the Bull Moose Project, a group that does not usually line up behind a Warren bill. When clinicians and an unlikely political ally push in the same direction, the bill deserves a serious read.

Finally, consider the trend line. Avalere data compiled for the Physicians Advocacy Institute shows that 82% of practicing physicians worked for hospitals or corporate entities at the start of 2026. Just 18% practiced in physician-owned settings, which is a new low. Independently owned practices fell by 81,100 over eight years. Supporters argue that voluntary market forces will not reverse a trend that steep, and the numbers give that argument a lot of weight.

The Case Against the Bill

The strongest objection comes down to proportion. The Government Accountability Office found that private equity ownership or investment covered about 6.5% of physicians in 2024, while at least 47% had consolidated with hospital systems, up from less than 30% in 2012. The bill takes aim at the small number and skips the large one.

The second objection concerns capital. Troutman Pepper Locke argues that private equity gives practices the capital to buy new technology, which independent practices often cannot find elsewhere. It cites a 2022 JAMA Health Forum study that found internal spending, especially on equipment, rose significantly at PE-owned practices between 2016 and 2020. Cardiology and urology lean on that capital most heavily.

The third objection lands on the physicians the bill claims to protect. In Medscape's coverage, one commentator predicted that the bill could force doctors to take on payroll, human resources, procurement, and vendor management again. Many physicians who join an MSO do so to spend their time on patients rather than on back-office operations, and the bill could reverse that trade.

The Unintended Consequences

Five consequences worry me most. The first two rest on published evidence. The last three reflect my read of how markets respond to rules like this one.

Divested practices flow to health systems. A recent KevinMD analysis asks who buys a practice that a court forces a PE-backed owner to divest. Its answer: almost certainly the regional health system, which has the capital, dominates the local market, and, as a "nonprofit," sits outside the bill. The same piece cites a KFF analysis showing that 97% of metropolitan areas had highly concentrated inpatient markets in 2024. It also cites a federal review finding that hospital mergers in concentrated markets can raise prices by 6% to 65%. The bill could move physicians from a smaller buyer to a larger one and call the result independence.

The payment gap will continue to fuel the roll-up. The Bipartisan Policy Center notes that Medicare pays two to four times more for many identical outpatient procedures in a hospital outpatient department than in a physician's office. That differential encourages hospitals to acquire independent practices and reclassify them. The bill removes one buyer and leaves the incentive for the other fully intact.

Retirement exits get harder. Many founders plan to sell their practice to a platform at the end of a career. Shrink the buyer pool and valuations drop. The physicians closest to retirement would carry that loss.

Compliance layers stack. The bill preserves stricter state laws, so a multi-state group would answer to a federal standard and a patchwork of state rules at once. Lawyers would collect the difference.

MSOs restructure instead of disappear. I expect vendors to rebuild their arrangements as fee-for-service relationships and then test the fair market value standard in court. Never underestimate the amount of game theory used in healthcare: The industry adapts faster than legislators draft policies and bills.

What Providers Should Do Now

A bill that may never pass still rewards the practices that prepare as if it will. Independent physicians and group leaders should act on four fronts.

Stress-test your structure against the Oregon template. Read your MSO agreement the way a plaintiff's lawyer would. Ask who controls clinical decisions, who sits on the governing body, who supplies the financing, and how the management fee compares to fair market value. Review every noncompete and restrictive covenant. If you operate in Oregon, California, or Vermont, where restrictions already apply, do this first.

Rebuild your exit plan. Do not assume a private equity buyer will exist when you want to sell. Model at least three paths: a merger with another physician-owned group, an affiliation with a health system, and a physician-led partnership structure. Compare what each one pays and what each one costs you in autonomy.

Fix the revenue side. Ownership rules matter less than payment rates. CMS's proposed 2027 fee schedule would lower the conversion factor by 1.19% or 1.68%, depending on your APM (Alternative Payment Model) status. It would also cut payment by 50% when you bill a separately identifiable E/M visit on the same day as most procedures, a change the AMA opposes. Model your own coding mix now, because the final rule is expected by November 1.

Price your back office. If an MSO relationship shifts to fee-for-service or returns in-house, you need to know what payroll, HR, procurement, and vendor management cost per physician. Practices that know that number negotiate from strength. Practices that guess get a surprise.

What Investors Should Do Now

Investors who wait for Congress to act will miss the real risk. The states are already moving. Oregon's MSO restrictions took effect January 1, 2026, for newly formed entities and will reach pre-existing arrangements on January 1, 2029, according to the analysis above. The federal bill adds a second layer on top of that. Smart capital treats this as a portfolio-wide diligence exercise, not a headline to monitor.

Audit every platform for structural exposure. Map each physician practice in the portfolio to its state, its MSO agreement, and its governance terms. Flag any arrangement where the investor or platform holds financing leverage, board influence, or fee income that a fair market value test could challenge. The bill's tail risks, including treble damages, forced divestiture, and Medicare and Medicaid exclusion, deserve a line in every investment committee memo.

Underwrite exits without a control premium. If regulators limit the platform buyer, exit multiples for control-dependent structures compress. Rebuild your models with lower exit values and longer hold periods, and see which deals still clear your return threshold.

Shift toward alignment. Structures that share equity with physicians, tie fees to services actually delivered, and preserve clinical autonomy hold up better under any version of this policy. They also recruit and retain better clinicians, which protects revenue.

Follow the capital that adapts. Private equity already looks for new routes into the market. The Private Equity Stakeholder Project reports that firms increasingly use joint ventures with nonprofit health systems, which offer trusted brands and geographic reach. Fee-for-service enablement companies that help independent practices with billing, coding, and value-based care contracting may also sit further from the bill's core targets. I would study both routes closely, and I would stress-test each one against the state laws already in force.

Where Consultants Earn Their Fees

Everyone has access to the bill text. Very few people can turn it into a decision. Airlines do not cancel every flight when a storm forms. They file alternate routes before takeoff and set clear triggers for when to use them. Providers and investors need that same discipline, and a good consultant builds it.

Consultants add the most value in four places.

Translating policy into scenarios. A consultant reads the federal bill, the state laws already in force, and the CMS payment proposals as one system instead of three separate headlines. The output is a short list of scenarios, each with a trigger, a probability range, and a set of actions, which enables leadership teams to stop reacting to news and start executing a plan.

Modeling the economics. A practice needs to know what the same-day E/M proposal and the conversion factor change do to its actual coding mix. An investor needs to know what a compressed exit multiple does to a specific platform. Both questions demand real numbers, not directional guesses.

Structuring alternatives. When one path narrows, someone has to design the next one. That work includes physician-led partnerships, fee-for-service service agreements, health system affiliations, and value-based contracting arrangements. A consultant who understands both the clinical and the capital side can negotiate terms that both parties will accept.

Working alongside counsel. Consultants do not interpret statutes, and good ones say so plainly. They organize the diligence, frame the questions, and hand healthcare counsel the cleanest possible record. That coordination saves time and legal spend.

Client	The question they need answered	What a consultant delivers
Independent practice	Can we stay independent and financially healthy in 2027?	Coding-mix impact model, back-office cost benchmark, exit-path comparison
Physician group with an MSO	Does our current structure hold up under state and federal rules?	Structure review roadmap, alternative arrangement designs, counsel-ready issue list
Investor or platform	Which portfolio companies carry the most regulatory risk, and what do exits look like now?	Portfolio exposure map, revised return models, alignment-based structure options

The Bottom Line

The Stop Corporate Takeovers of Physicians Act identifies a real problem but reaches for the wrong lever. It restricts the smallest buyer, spares the largest, and leaves the payment gap that drives hospital acquisitions untouched. Independent physicians win only when reimbursement changes alongside ownership rules, and site-neutral payment would do more for independence than any ownership ban.

Whether the bill passes matters less than what it signals. States keep tightening, Washington keeps probing, and payment policy keeps squeezing. Providers and investors who model the scenarios now will move first. Those who wait for certainty will move last, and they will pay for the delay.

That is the kind of work we do at Covalence Health: turn policy noise into a plan that providers and investors can execute.