By Scott Wells, CFA

For the better part of the past decade, the standard architecture for private investment in physician practices has been the management services organization (“MSO”) structure. Instead of owning a physician practice, which is not allowed if the owner does not hold a current medical license, investors have created MSOs to handle billing, real estate, HR, and back-office operations. On the other side, the actual practice would be a professional corporation with a medical license holder controlling the medical activities. Under these structures, investors get exposure to the healthcare services sector by creating a workaround for corporate-practice-of-medicine (CPOM) laws. Until recently, most states only loosely enforced these laws, if at all.

That’s changing fast, and the changes are landing unevenly across specialties. This matters a great deal when valuing a physician-group platform, a dental service organization (DSO), a dermatology roll-up, or a veterinary consolidator today.

The State of California was the first to move. In October 2025, Governor Gavin Newsom signed two bills that meaningfully expanded oversight of outside investment in the California healthcare sector. Both of these bills took effect January 1, 2026.

AB 1415 extends California’s existing pre-transaction notice regime. Prior to this, traditional healthcare entities like hospitals and insurers were only required to provide notice. Now the “noticing entities” category explicitly includes private equity groups, hedge funds, MSOs, and newly formed entities created to do a healthcare deal.

The parties involved must give the state’s Office of Health Care Affordability (OHCA) at least 90 days’ written notice before closing a material transaction: e.g., sale, transfer, or change of control involving a healthcare entity or MSO. It should be noted that the law doesn’t include MSOs as part of its formal definition of “healthcare entity.” As such, the materiality thresholds that apply to MSO-only transactions are still being written and reviewed by OHCA.

SB 351, also signed in October 2025, takes the state’s existing CPOM doctrine and hones it in a few specific ways:

• The Attorney General has explicit enforcement authority against PE groups and hedge funds that interfere with a licensed provider’s clinical judgment; and
• The law narrows the enforceability of post-transaction non-compete and non-disparagement clauses commonly used in MSO agreements.

While the two laws don’t effectively ban the investor model, they do add real friction to potential transactions, including the 90-day notice window and the ability of the Attorney General to enforce clinical control issues.

The State of Oregon actually goes further than California. Governor Tina Kotek signed SB 951 on June 9, 2025, which has been described as the strictest CPOM law in the country. It goes beyond notice requirements into structural prohibition:

• MSOs and their owners, directors, or employees are now barred from owning a controlling stake in the professional entity they manage, from sitting on that entity’s governance board, or from using equity-transfer-restriction agreements to control who can hold shares in the Professional Corporation (“PC”).
• The law also voids many non-compete and non-disparagement provisions tied to these arrangements.

The interesting thing about this new Oregon law is that any MSO relationship established prior to the effective date (June 9, 2025) must restructure in order to comply with these procedures. This restructuring is required to be completed before January 1, 2029. Any new MSOs must comply with the procedures immediately.

Where things get confusing is that SB 951 applies only to “medical entities.” For this purpose, medical entities include physicians, nurse practitioners, physician associates, and naturopathic practitioners. This means that DSOs and MSOs for veterinary, physical/occupational therapy, or certain behavioral health practices are exempt. The Oregon lawmakers ultimately built the overhaul aimed at physician practices while leaving dental and veterinary ownership structures largely the same.

This is not unique to Oregon either, as the CPOM doctrine has always been narrower and less consistently applied outside of medicine. Many states never extended it to dentistry or veterinary medicine with the same force. Currently, there are bills in process in Massachusetts, Indiana, New Mexico, and Washington. While I have not read these, I anticipate that they will follow the Oregon approach and target only physician practices while omitting dental and vet-adjacent roll-ups.

If you’re valuing a physician-group MSO/PC structure versus a dental or veterinary roll-up today, the previous regulatory risk profile no longer applies, even if the underlying deal architecture looks identical on paper.

Specifically, this shows up in:

• Control premiums need to assess where control actually sits. Historically, valuation professionals modeled MSOs as the de facto controlling economic interest, with the PC treated as a pass-through clinical shell. Laws like SB 951 make that assumption legally fraught in states following Oregon’s model, especially if an MSO can no longer hold governance rights or equity-transfer control over the PC. The control premium historically allocated to the MSO side may need to be reassessed, and some of that value may need to shift toward the physician-held PC, however illiquid and non-transferable that interest remains in practice.
• MSO/PC value allocation is now a compliance question instead of just a tax-structuring one. The MSO-PC split has always required some allocation of enterprise value between the two entities. With AB 1415-style notice regimes and SB 351/SB 951-style clinical-independence rules now backed by Attorney General enforcement authority, allocation is being increasingly scrutinized by regulators and not just by the IRS or state licensing boards. A valuation that leans heavily on management-fee cash flows to the MSO, without addressing whether those fee structures could be challenged as disguised control, is a weaker valuation than it was just two years ago.
• Buyers are pricing restructuring risk into multiples, unevenly. Anecdotally and in deal commentary, buyers evaluating California- or Oregon-based physician platforms are underwriting the cost and timeline of restructuring existing friendly-PC arrangements to comply with the new rules. This is either a quantifiable adjustment to projected cash flows or a discrete deduction from indicated value, instead of a qualitative risk factor. Meanwhile, comparable dental or veterinary platforms face materially less of this specific risk. Comp sets that don’t distinguish between “physician practice, CPOM-exposed” and “dental/vet practice, CPOM-exempt” targets risk conflating two different risk profiles under one multiple.
• The three-to-four-year compliance runway matters for DCF and terminal-value assumptions. Oregon’s 2029 deadline for existing MSOs gives dealmakers a defined window to restructure, which is a very different valuation problem than an open-ended regulatory overhang. Appraisers modeling cash flows for an Oregon physician-practice platform should treat the restructuring cost and timing as a discrete, dated event in the forecast period, not fold it vaguely into a higher discount rate.

These changes are moving quickly, with several of these laws having implementing regulations still being written, including California’s OHCA rule on MSO materiality thresholds. As noted above, other states are actively considering similar bills.

Anyone using this post to inform a live valuation engagement should confirm current statutory language and enforcement posture with healthcare regulatory counsel, not rely on a blog summary.

The specific carve-outs, as well as the valuation drivers, will vary from state to state. The open question is whether this divide holds, or whether Oregon, California, and other states extend the CPOM-style restrictions to dental and veterinary practices as well.

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