Enforcement, and what happens when structures fail

CPOM is enforced by licensing boards, state attorneys general, insurers suing to recover paid claims, qui tam relators, and, increasingly, by legislatures writing prohibitions directly into statute. The consequences range from contract unenforceability to clawback of claims already paid, and the largest financial exposure usually comes from the payer, not the regulator.

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Who enforces

That last row is the one most groups actually encounter. A CPOM problem surfaces most often not through an enforcement action but during a fundraise or a sale, where it reduces the price or kills the transaction.

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What actually happens

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Contract unenforceability

If the MSA is held to violate CPOM or fee-splitting law, courts may decline to enforce it. Practically: the MSO cannot sue to collect unpaid fees, the transfer restriction may not be enforceable, and the party the doctrine was designed to protect, the clinician, may keep the practice. This cuts against the MSO specifically. The clinician can walk with the entity that holds the payer contracts.

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Clawback of paid claims

The exposure that dwarfs the others. If a payer concludes it paid claims to an unlawfully structured practice, it may sue to recover them. Allstate Insurance Co. v. Northfield Medical Center, P.C., 228 N.J. 596, 159 A.3d 412 (2017), is the case to understand. An insurer pursued recovery under New Jersey’s Insurance Fraud Prevention Act against a practice whose paper structure masked lay control, and the New Jersey Supreme Court adopted a broad reading of the knowledge element the insurer had to prove.¹ Note what this is: not a fine calibrated to a violation, but the return of revenue you have already earned, spent, and reported. For a practice operating for several years, it can exceed the enterprise’s value.

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License discipline

The clinician-owner’s license is the exposed asset. Board action reaches the individual, not the MSO, which is precisely why a friendly owner needs independent counsel and why the asymmetry of risk in these arrangements deserves to be stated plainly.

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False Claims Act exposure

Where federal healthcare program dollars are involved, theories exist that claims submitted by an unlawfully structured entity are false claims. FCA damages are trebled with per-claim civil penalties, and qui tam relators, often former employees, can bring suit.

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Forced restructuring

The newest vector. Oregon’s SB 951 requires arrangements pre-dating June 9, 2025 to comply by January 1, 2029.² That is not an enforcement action; it is a statutory deadline to rebuild.

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The 2020s scrutiny wave

Calibrated, not alarmist. Here is what actually happened. Litigation. AAEM Physician Group v. Envision Healthcare, filed in California in December 2021, challenged a national staffing model as unlawful corporate practice. The court denied Envision’s motion to dismiss in June 2022, and AAEM-PG voluntarily dismissed in July 2024 after Envision agreed to withdraw from emergency department operations in California, on confidential terms including partial fee reimbursement and commitments not to enforce restrictive covenants.³ Read that outcome carefully in both directions. No court held the friendly PC model unlawful — commentators noted the model survived California litigation intact. And a national company exited an entire state’s line of business rather than litigate to judgment. Both facts are true. Legislation. The substantive change: Enforcement posture. California’s Attorney General filed an amicus brief in 2026 attacking friendly-PC stock-transfer and MSA-termination provisions, and announced a CPOM settlement with a dental MSO.⁴ That is an AG treating the standard structural toolkit as the problem, which is a meaningful shift from enforcement aimed at obvious sham arrangements. What did not happen. No federal CPOM law. No wave of judgments invalidating the model. Several proposed state bills failed, North Carolina’s SB 570 in June 2026, and prior-session bills in Maine, Minnesota, New Hampshire, and Washington. The structure remains standard and remains financeable.

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A calibrated risk picture

Low risk, a group with a genuinely practicing clinician-owner, an FMV-supported flat or cost-plus fee, clinical authority actually exercised, clean bank separation, and an MSA reviewed against current state law. Moderate risk, nominee owners with documented duties they actually perform; percentage fees in states that tolerate them; MSAs three or more years old and unreviewed; operating in a state that just changed its law. High risk, owners who never practice and cannot describe the entity; at-will removal by the MSO; fees sweeping essentially all PC profit; MSO controlling coding, clinical staffing, or patient volume; MSO controlling the PC’s bank account; percentage fees in New York or Florida; med spa structures with a nominal medical director.

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What reduces risk, in order of effect

1. A clinician-owner with genuine authority who actually exercises it. Nothing else substitutes for this.
2. An MSA reviewed annually against your states’ current law, not the law when it was drafted.
3. A fee that is FMV-supported, documented, and actually paid in cash.
4. Clean bank separation with the PC controlling its own receipts.
5. Documented decisions, board minutes showing the PC deciding clinical matters.
6. An annual CPOM self-audit with findings remediated. See Run a CPOM self-audit.
7. Independent counsel for the clinician-owner, which also protects the MSO by making the arrangement harder to characterize as coerced.

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Sources

1. Allstate Insurance Co. v. Northfield Medical Center, P.C., 228 N.J. 596, 159 A.3d 412 (2017). Opinion.
2. Or. S.B. 951 (2025 Reg. Sess.). Enrolled bill; Holland & Knight, Update on Oregon’s New CPOM Laws (May 2026).
3. AAEM-PG, Envision Lawsuit; Holland & Knight, Friendly PC Model Survives in California After Envision Healthcare Litigation Settlement (Aug. 2024).
4. DLA Piper, Corporate practice of medicine enforcement: New pressure points and a path forward (July 2026).