> ## Documentation Index
> Fetch the complete documentation index at: https://mso.getlemma.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Enforcement, and what happens when structures fail

> Who enforces CPOM, what the actual consequences are, and a calibrated view of the 2020s scrutiny wave, without fear-mongering or false comfort.

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.

## Who enforces

| Enforcer                    | Mechanism                                               | Typical consequence                                                                              |
| --------------------------- | ------------------------------------------------------- | ------------------------------------------------------------------------------------------------ |
| **State licensing boards**  | Disciplinary action against the licensee                | License restriction, suspension, revocation; fines                                               |
| **State attorneys general** | Injunctive relief, civil enforcement, consent judgments | Injunctions, restructuring orders, penalties. California's SB 351 empowers the AG to enforce it. |
| **Insurers / payers**       | Civil suits to recover payments; contract termination   | **Clawback of paid claims**, often the largest number                                            |
| **Qui tam relators**        | False Claims Act suits, where federal money is involved | Treble damages and per-claim penalties                                                           |
| **Contract counterparties** | Defense of unenforceability                             | The MSA becomes unenforceable; fees uncollectible                                                |
| **Legislatures**            | New statutes with compliance deadlines                  | Forced restructuring                                                                             |
| **Acquirers and investors** | Diligence                                               | Repricing, escrow, or a dead deal                                                                |

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.

## What actually happens

### 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.

### 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.<sup>1</sup>

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.

### 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.

### 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.

### Forced restructuring

The newest vector. Oregon's SB 951 requires arrangements pre-dating June 9, 2025 to comply by **January 1, 2029**.<sup>2</sup> That is not an enforcement action; it is a statutory deadline to rebuild.

## 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.<sup>3</sup>

**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:

| State          | Instrument                                                    | Effect                                                                                                                                                                                                                                                                                                            |
| -------------- | ------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| **Oregon**     | SB 951 + HB 3410 (2025)                                       | Bars MSO/MSO-agent majority ownership or control of professional medical entities; restricts dual ownership and share-transfer arrangements; voids most physician noncompetes. New arrangements Jan 1, 2026; pre-existing Jan 1, 2029. Carve-outs including dental, PT/OT, veterinary, certain behavioral health. |
| **California** | SB 351 + AB 1415 (2025)                                       | Bars PE groups and hedge funds from interfering with professional judgment or controlling enumerated clinical and administrative functions. AG enforcement. Effective Jan 1, 2026.                                                                                                                                |
| **Vermont**    | Act 133 (2026)                                                | Codifies prohibition on corporate interference with clinical decision-making; PE/hedge-fund ownership disclosure to the Green Mountain Care Board from March 1, 2027.                                                                                                                                             |
| **Washington** | HB 2548 (2026) signed; 2SSB 5387 CPOM restrictions **failed** | Reporting amendments enacted; broad CPOM codification did not pass.                                                                                                                                                                                                                                               |
| **Others**     | MA, IN, NM, CT, IL, CO, ME                                    | Transaction review, notice, and ownership transparency regimes                                                                                                                                                                                                                                                    |

**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.<sup>4</sup> 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.

## 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.

<Warning>
  **The failure mode is almost never a single dramatic event.** It is a diligence finding in a fundraise, a payer audit that escalates, or a departing clinician who talks to a lawyer. Each of those starts with someone reading your MSA, which is why an annual review against current law is the highest-return compliance activity available to you.
</Warning>

## 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](/guides/compliance/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.

## Sources

1. *Allstate Insurance Co. v. Northfield Medical Center, P.C.*, 228 N.J. 596, 159 A.3d 412 (2017). [Opinion](https://www.njcourts.gov/system/files/court-opinions/2017/a_27_15.pdf).
2. Or. S.B. 951 (2025 Reg. Sess.). [Enrolled bill](https://olis.oregonlegislature.gov/liz/2025r1/Downloads/MeasureDocument/SB951); Holland & Knight, [Update on Oregon's New CPOM Laws](https://www.hklaw.com/en/insights/publications/2026/05/an-update-on-the-implementation-and-implications-of-oregons) (May 2026).
3. AAEM-PG, [Envision Lawsuit](https://www.aaemphysiciangroup.com/envision-lawsuit/); Holland & Knight, [Friendly PC Model Survives in California After Envision Healthcare Litigation Settlement](https://www.hklaw.com/en/insights/publications/2024/08/friendly-pc-model-survives-in-california-after-envision-healthcare-lit) (Aug. 2024).
4. DLA Piper, [Corporate practice of medicine enforcement: New pressure points and a path forward](https://www.dlapiper.com/en/insights/publications/2026/07/corporate-practice-of-medicine-enforcement) (July 2026).


## Related topics

- [Run a CPOM self-audit](/guides/compliance/run-a-cpom-self-audit.md)
- [Hire healthcare counsel (and use them well)](/guides/agreements/get-agreements-reviewed.md)
- [Provider identity theft and NPI misuse](/concepts/compliance/provider-identity-theft.md)
- [The corporate practice of medicine doctrine](/concepts/model/cpom.md)
- [The friendly PC, explained](/concepts/model/the-friendly-pc.md)
- [When to call a lawyer (a triage map)](/concepts/compliance/when-to-call-a-lawyer.md)
- [CPOM case law](/reference/legal/cpom-case-law.md)
- [CPOM & MSO legislation tracker](/reference/legal/cpom-legislation-tracker.md)