For most of the last two decades, that gap between who owns a medical practice and who runs it was not an accident. It was the design.
Most states prohibit a corporation from practicing medicine. It’s called the corporate practice of medicine doctrine. Capital wanted into medicine anyway, and a structure emerged to thread the needle. A licensed physician would own the professional entity on paper. A management services organization, owned by the investors, would sit alongside it and, through a web of agreements, a management contract, a stock transfer restriction, broad reserved powers, direct nearly everything that mattered.
The physician owned the practice. The MSO ran it. The arrangement acquired a name that was, in hindsight, both reassuring and revealing: the friendly physician model.
To be fair, for a long time, this was simply how things were done, and not always cynically. Physicians often lack the capital, the appetite for risk, or the administrative infrastructure to build at scale on their own, and well-run management partners brought all three. The structure let medicine and capital coexist in states that, on paper, forbade exactly that. It served real purposes.
But that settled understanding is now coming apart, and faster than most people in the field appreciate.
Oregon went first. Its SB 951, signed into law in June 2025, doesn’t adjust the friendly physician model at the margins. It dismantles it. An MSO and its owners can no longer hold a majority interest in the practice they manage. They can no longer use stock transfer restrictions to keep the nominal owner in place. And the practice itself, not the management company, must retain de facto control over the decisions that define a medical practice: hiring and firing clinicians, setting their schedules and their compensation, and setting clinical and billing policy. New arrangements had to comply this past January. Existing ones have until January 2029, which is less of a reprieve than it sounds when you consider how long it takes to unwind a structure of this kind.
California followed with SB 351, effective the same January 2026. It bars private equity groups and hedge funds from interfering with a physician’s professional judgment and from controlling the same familiar levers: who is hired and fired, how many patients are seen, what equipment is bought, how care is coded and billed. It also voids the noncompete and nondisparagement clauses that these arrangements have long relied on to keep departing physicians both out of the market and silent. The state attorney general enforces it, and enforcement has already begun.
My prediction is that Oregon and California are not outliers. They are the leading edge. The political appetite to look harder at corporate control of medicine is bipartisan and growing, and statutory language, once drafted, travels easily from one legislature to the next. By the end of the decade, I expect the friendly physician structure as we have known it will no longer be viable in its current form across a meaningful number of states.
None of this, I want to be clear, is a verdict on whether physicians should ever partner with outside capital. Many should, and many will continue to, productively. The point is narrower and more uncomfortable. These laws are indifferent to the labels on the org chart. They ask a single question, and they ask it plainly: who actually controls the practice of medicine? For a great many arrangements built over the last twenty years, not only private equity deals, but hospital-affiliated entities and management relationships of every description, the honest answer and the documented answer are not the same. That gap used to be a feature. Now it’s becoming a liability.
If your group’s independence is a paper independence, the ground beneath it is moving. The structure you were sold, or built, or inherited may have been engineered for a legal world that is quietly closing.
The friendly physician model is not under review.
It’s being dismantled.
And the question it was built to avoid, “who is really in charge here?”, is now being asked out loud, by people with the authority to insist on an honest answer.
If you’re wondering whether your structure reflects real independence or only the paper version of it, or how to think through the legal and business foundations of a practice as these laws spread, I welcome the conversation. You can reach me at markweiss@weisspc.com.