MyOrbitHealth
The friendly PC-MSO model is the standard way a non-physician owns the business side of a medical practice without owning the practice itself. A licensed physician owns a professional corporation (the PC) that delivers care, bills for it, and makes every clinical decision. A separate management services organization (the MSO), which anyone can own, supplies the brand, technology, staff, and back office under a management services agreement. You need it in any state that enforces the corporate practice of medicine (CPOM). As of October 2026, the model is still legal everywhere it was legal before, but Oregon's SB 951 and California's SB 351 (both 2025) turned several long-standing best practices into statutory requirements.
This is general information, not legal advice. Confirm the current rules with a healthcare attorney licensed in each state where you operate. Last reviewed October 2026. State rules change often; statute and case references are summaries, not quotations.
Key takeaways
- The friendly PC-MSO model splits a medical business into a physician-owned PC that practices medicine and a separately owned MSO that provides non-clinical services for a fee.
- The physician owner is not a figurehead: they hold the shares, sit as the PC's officer and director, and carry final authority over clinical policy, clinician hiring, and quality.
- Oregon SB 951 (2025) bars an MSO and its affiliated people from owning or controlling a majority of a professional medical entity it manages and restricts the stock transfer restriction agreements that keep most PC-MSO structures stable; confirm the final details after later 2025 amendments.
- California SB 351 (2025) codifies that private equity groups and hedge funds involved with a physician or dental practice may not interfere with clinical judgment or control matters such as coding, billing, and medical records.
- Whether you need the model depends on where your patients are, not where your company is, so a 50-state telehealth brand is effectively structured for the strictest states it serves.
What is the friendly PC-MSO model?
It is a two-entity structure connected by contracts. The PC is the medical practice. The MSO is a vendor to that practice, and usually the company founders and investors actually own.
The word "friendly" refers to the physician who owns the PC. That physician has agreed to own a practice whose operations run on the MSO's platform and whose shares are subject to transfer restrictions. Friendly does not mean passive: regulators judge the arrangement by how it operates.
Our 50-state corporate practice of medicine guide classifies each state's CPOM posture.
Why does the structure exist at all?
Three overlapping state-law rules produce it.
- CPOM itself. In states that enforce it, a business corporation owned by non-licensees cannot practice medicine or employ physicians to do so. The source is statute in some states, case law or attorney general opinions in others.
- Professional entity statutes. Most states limit who may hold shares in a medical professional corporation or member interests in a professional LLC, typically to licensees. A founder cannot simply buy into the PC.
- Fee-splitting rules. Many states bar physicians from sharing professional fees with non-licensees. That shapes how the MSO can be paid; our MSO management fee guide covers fee mechanics in detail.
The model threads all three. The PC is owned by a licensee, so it can practice. The MSO never practices, so it can be owned by anyone. The fee is paid for services, not as a cut of medical revenue.
What are the two entities and what does each one hold?
| Professional corporation (PC) | Management services organization (MSO) | |
|---|---|---|
| Owner | Licensed physician (or physicians) | Founders, investors, anyone |
| Legal role | Practices medicine | Provides non-clinical services |
| Clinicians | Employs or contracts them; credentials and supervises | May recruit candidates; does not decide |
| Patient relationship | Holds the treatment relationship and medical records | Holds the consumer brand relationship within HIPAA limits |
| Revenue | Bills and earns professional fees | Earns a management fee from the PC |
| Brand and IP | Uses under license | Owns trademarks, software, content |
| Payer and pharmacy contracts | Party to clinical contracts | Negotiates and administers as agent, where permitted |
| HIPAA status | Covered entity | Business associate under a BAA |
The contracts that tie these together (the management services agreement, stock transfer restriction agreement, IP license, BAA, and often a loan) are covered clause by clause in our management services agreement guide.
Who is the physician owner and what do they actually do?
The physician owner must hold an active license in the state where the PC is organized, and in most strict-CPOM states the PC can only practice where its owner is licensed. A national telehealth brand therefore needs either a multi-state licensed owner, several PCs, or both.
A real physician owner does more than sign formation documents. In a well-run structure, the owner:
- Holds the shares and the offices. President, director, and usually medical director of the PC.
- Approves clinical policy. Treatment protocols, prescribing guidelines, asynchronous versus synchronous visit rules, and escalation pathways are adopted by the PC, not handed down by the MSO.
- Controls clinician hiring and discipline. The MSO can source candidates and run payroll. The PC decides who practices under its name.
- Runs quality oversight. Chart audits, peer review, adverse event review, and complaint handling.
- Signs clinical contracts. Payer agreements, pharmacy relationships, and lab arrangements are signed by the PC.
- Handles supervision or collaboration duties. Where state law requires a collaborating or supervising physician for nurse practitioners or PAs, the owner or a physician the PC engages fills that role. See our guide on whether NPs and PAs can own a practice and our existing overview of the collaborating physician role.
The owner is paid for this work under a separate agreement with the PC, at a rate that reflects actual time and responsibility.
How much control can the MSO have?
The working line is clinical versus business, but the line is not where most founders assume.
Generally safe for the MSO: marketing, website and app, scheduling software, EMR hosting, billing and collections as the PC's agent, payroll processing, bookkeeping, real estate, non-clinical staffing, compliance program administration, and recommending (not imposing) operational policies.
Contested or prohibited in strict states: hiring and firing clinicians, setting clinician compensation and schedules, deciding which payers to contract with, setting the fees patients are charged, final say over coding and billing policy, and control of medical records. Oregon SB 951 now lists several of these by statute, and California SB 351 lists others for private equity and hedge fund owners.
Never the MSO's call: diagnosis, treatment, what to prescribe, how many patients a clinician must see, and which tests to order.
The practical test is simple: if the PC and MSO disagree on the item, who wins? If the MSO wins on a clinical or quasi-clinical matter, the arrangement is exposed.
When do you need a friendly PC, and when don't you?
| Your situation | Friendly PC usually needed? | Why |
|---|---|---|
| Non-physician founder delivering care in a strict CPOM state | Yes | The founder's company cannot own the practice or employ physicians there |
| Telehealth brand serving all 50 states | Yes, at least for strict states | CPOM applies based on where the patient is located |
| Physician founder practicing only in their own licensed state | Often no | They can own the PC directly; an MSO may still help raise capital |
| Non-physician founder only in states classified "None" | Sometimes no | Other rules still apply, such as clinic licensure, fee-splitting, and supervision rules |
| NP founder in a full practice authority state | Depends | Ownership rules differ from practice authority; physician employment may still need a PC |
| Selling software or services to existing practices | No | You are a vendor, not a practice owner |
How did Oregon SB 951 and California SB 351 change the landscape?
Oregon SB 951 (2025)
Oregon enacted SB 951 in 2025, and a follow-up bill, HB 3410, amended it the same year. Based on the legislature's bill summary and the enrolled text, the law:
- Bars an MSO, and its shareholders, directors, officers, and employees, from owning or controlling a majority of a professional medical entity the MSO manages, and generally from serving as that entity's directors or officers. Confirm any dual-role exceptions in the final, amended text.
- Prohibits the MSO from holding final decision-making authority over listed business matters, including hiring physicians, setting clinician schedules and compensation, setting billing and collection policies, and negotiating payer contracts.
- Restricts stock transfer restriction agreements, the tool most PC-MSO structures use to replace a departing physician owner. Confirm which triggering events and exemptions survived the HB 3410 amendments.
- Limits noncompetition agreements for medical licensees.
According to law-firm analyses, the core restrictions phase in, applying first to newer structures and later to existing ones; confirm the effective dates that apply to your structure with Oregon counsel. Analyses also describe a narrow exemption for out-of-state telehealth entities without a physical presence in Oregon. Confirm its current scope after the HB 3410 amendments before relying on it. For the state-specific detail, see our Oregon CPOM guide.
California SB 351 (2025)
California enacted SB 351 in 2025, adding new provisions to the Health and Safety Code; confirm the codified section numbers and effective date against the chaptered text. It applies to private equity groups and hedge funds involved with a physician or dental practice. Those investors may not interfere with professional judgment, including determining diagnostic tests, making referral decisions, deciding how many patients a clinician sees, or controlling medical records, coding and billing decisions, and clinical-competency hiring. Contract provisions that violate those limits are void. Analyses also describe limits on certain noncompete and nondisparagement terms; confirm their exact scope with counsel. The Attorney General can seek injunctive relief.
Legislative analyses describe SB 351 as largely codifying existing California CPOM law and Medical Board guidance rather than banning investment. What changed is enforceability: a California PE-backed MSA with an overreaching control clause now carries a direct statutory route to an injunction. See our California CPOM guide.
What the two laws mean together
Neither law bans the PC-MSO model. Both target the version of it where the physician owner has no practical authority. Build to the stricter standard now.
Should you build your own PC-MSO or use an existing one?
| Factor | Build your own | Launch on an existing structure |
|---|---|---|
| Equity and control of the practice entity | Your physician owner, your documents | The operator's PC and documents |
| Legal work | Formation, MSA drafting, FMV support, state-by-state review | Contract review of the operator's terms |
| Physician owner | You recruit, compensate, and retain one | Already in place |
| State coverage | Expands as you license owners and clinicians | Determined by the operator's network |
| Exit and valuation | Clean if documents are strong | Depends on contract portability |
| Best fit | Brands planning a long-term, multi-state clinical operation | Brands that want to launch and validate first |
Many brands do both in sequence: launch on an existing structure, then form their own PC-MSO once the model is proven. Our existing primers on the MSO model for telehealth and starting a telehealth business without a medical license cover the launch path; this guide covers the mechanics underneath. For the strictest large markets, also read our Texas and New York guides.
Frequently asked questions
Is the friendly PC-MSO model legal?
Yes, in every state as of October 2026, when it is structured and operated correctly. The physician-owned PC must actually control clinical decisions, and the MSO must be paid for real services rather than taking a share of professional fees. Oregon and California tightened the rules in 2025 but did not ban the model.
Can the founder be an officer or director of the PC?
In strict CPOM states, generally no. Professional corporation statutes usually reserve shareholder and often officer and director roles for licensees, and Oregon SB 951 generally bars MSO-affiliated people from serving as directors or officers of a professional medical entity the MSO manages, subject to exceptions that should be confirmed in the amended text.
What happens if the physician owner leaves or loses their license?
Most structures use a stock transfer restriction or succession agreement that lets a new qualified physician acquire the shares on defined triggering events. Oregon now restricts those agreements, so the mechanics have to be checked state by state.
Does a telehealth company need a PC in every state?
Not necessarily one PC per state, but the practice entity must be allowed to practice where each patient is located and its clinicians must be licensed there. Strict CPOM states often require the PC owner to hold a license in that state, which drives many brands to use multiple PCs or multi-state licensed owners.
Does Oregon SB 951 apply to out-of-state telehealth companies?
Law-firm analyses describe a narrow exemption for telehealth entities with no physical presence in Oregon, but it does not appear to cover every provision. If you see Oregon patients, have Oregon counsel confirm the current exemption text after the HB 3410 amendments.
Is a friendly PC the same as a collaborating physician arrangement?
No. A friendly PC owner owns the practice entity. A collaborating or supervising physician oversees nurse practitioners or PAs as state law requires, and may or may not have any ownership. One physician can fill both roles, but they are separate legal relationships with separate agreements.
Sources
- Oregon Legislature: SB 951 (2025) measure overview
- Oregon Legislature: SB 951 enrolled text
- Oregon Legislature: HB 3410 (2025) session law
- California Legislative Information: SB 351 bill text
- California Legislative Information: SB 351 bill status
- California Senate Judiciary Committee analysis of SB 351
- Hooper Lundy & Bookman: Oregon imposes major restrictions on PC-MSO models
- Nixon Peabody: Oregon SB 951 corporate practice of medicine law explained
Get a PC-MSO structure built correctly
MyOrbitHealth does not practice medicine. Licensed providers make every clinical decision on its MSO / friendly-PC structure, which already supports brands in all 50 states with 2,400+ board-certified providers across 38+ specialties. If you want your own structure instead, MyOrbitHealth offers PC-MSO formation and physician PC owner services, including collaborating physician support. Book a call to talk through which path fits your brand.
