The PC-MSO model is an organizational arrangement in United States health care in which a professional corporation (PC) contracts with a management services organization (MSO) for administrative and business services. The professional entity provides medical care, while the MSO supplies services under a management services agreement. The arrangement is used in response to state restrictions on the corporate practice of medicine, which can limit ownership or control of a medical practice by people or businesses without professional licenses. The Federation of State Medical Boards describes its use in hospital, virtual-care, managed-care and private-investment settings.
The term friendly PC is used for arrangements in which a physician owns the professional entity but contracts connect that ownership to the management company. These may include restrictions on transferring shares and provisions affecting the selection or replacement of the physician-owner. Legal commentators distinguish the physician's formal ownership from the control an MSO may exercise through those contracts.
Structure The professional entity and the management company perform different functions. One description, in American Oncology Network's annual report for 2023, assigns clinical personnel and the costs of clinical care to a physician-owned entity, and administrative personnel and business expenses to the MSO. The report identifies this as the model the company uses. +Functions in a physician-practice management arrangementComponentFunctionProfessional entityEmploys or contracts with the clinicians, retains responsibility for clinical judgment, and pays clinical compensation, benefits and malpractice-insurance expenses from practice revenue.Management services organizationEmploys administrative personnel and supplies services such as financial administration, billing and collection, human resources and office management.Management services agreementEstablishes the contractual exchange of management services for a fee paid by the professional entity. The clinical entity's permitted legal form depends on state law. Although the model's name refers to a professional corporation, descriptions also include professional limited liability companies where those entities are permitted. California's medical board, by contrast, identifies a physician's operation of a medical practice through an ordinary corporation or limited liability company as a prohibited structure.
Clinical and administrative authority The division between clinical care and business administration extends beyond who diagnoses a patient. California's medical board reserves to physicians decisions about diagnostic testing, referrals, treatment and patient volume. Its guidance also requires physician responsibility for, or approval of, decisions about medical records, hiring and dismissing personnel on clinical-competence grounds, payer-contract parameters, coding and billing procedures, and equipment and supplies. An MSO may assist with business functions without acquiring the physician's ultimate authority over those decisions.
Comparisons of state rules therefore distinguish among specific powers. The PC-MSO website's October 2026 responsibility matrix separates ten areas: clinician hiring; compensation and schedules; staffing and patient volume; clinical standards; records; coding and billing; service pricing; payer contracting; equipment and supplies; and advertising. Its classifications distinguish decisions reserved to a licensee from those over which the licensee retains final authority. Blank entries identify questions for which the compilation has not published an answer.
Management fees and patient information
Fees Payment for management services is subject to fee splitting and referral-payment restrictions. California Business and Professions Code section 650 generally prohibits compensation for referring patients. It also provides that payment for services other than patient referrals may be calculated as a percentage of gross revenue when the amount is commensurate with the value of the services or the fair rental value of premises or equipment supplied. The statute thus distinguishes payment for services from payment for referrals.
Patient information An MSO's administrative work can also involve protected health information. Under federal HIPAA rules, a business performing billing, data analysis or practice management for a covered entity may be a business associate when the work involves that information. The U.S. Department of Health and Human Services requires a business associate agreement specifying permitted uses and disclosures and applicable safeguards. Business associates are also directly responsible for complying with specified HIPAA provisions.
State variation Corporate-practice restrictions are not uniform. Arizona, for example, generally permits a licensed health professional to practice through, or as an employee of, any form of business entity, subject to a statutory exception. California's board guidance prohibits an unlicensed management company from controlling a physician's practice even when physicians formally own the medical business.
An October 2026 compilation on the Corporate Practice of Medicine website covered the 50 states, the District of Columbia and Puerto Rico. It classified management-company arrangements as permitted with conditions in 17 jurisdictions and restricted in eight; six were classified as not addressed and 21 had no published classification. These categories describe the compilation's findings; an unpublished answer is not a finding that an arrangement is permitted.
Oregon legislation In 2025, Oregon enacted Senate Bill 951 and amended it through House Bill 3410. The legislation restricts an MSO and associated persons from collectively holding a majority interest in a contracted professional medical entity, exercising certain voting rights, or exercising control over operations in ways that affect clinical decisions or the nature or quality of care. It identifies powers over clinician employment, staffing, diagnostic coding, clinical policies, billing, pricing and payer contracts.
The amended law preserves administrative assistance, business advice and specified transactions that do not confer prohibited control, and includes exceptions for particular entities and relationships. It sets January 1, 2026, as the first application date for the MSO-control provisions for specified newly formed entities and ownership transactions, and January 1, 2029, for specified existing entities and transactions.
Litigation and enforcement In Allstate Insurance Co. v. Northfield Medical Center, P.C. (2017), the Supreme Court of New Jersey considered a practice structure in which contractual arrangements protected a chiropractor's control of a medical business with a nominal physician-owner. The litigation concerned the relationship between compliance with professional-practice rules and claims submitted to an insurer.
In June 2026, California's attorney general announced a settlement with Carbon Health resolving allegations involving its friendly-PC structure and other business practices. According to the attorney general, contracts allowed the management company to replace the physician-owner, while the physician risked losing ownership by replacing the MSO. The announced settlement required restructuring and changes to billing and other practices, and provided for $4.4 million in company penalties and $100,000 against its co-founder. The announcement stated that the settlement was subject to court approval.
Professional and policy debate The Federation of State Medical Boards' 2026 report describes potential benefits of organizational partnerships and outside investment, including infrastructure, technology, coordinated services and research support. It also identifies possible conflicts between organizational financial interests and physicians' duties to patients, and recommends stronger protection of clinical independence. Its recommendations are model guidance to be applied within each board's statutory authority.
In a 2024 analysis, Hayden Rooke-Ley and Daniel S. Bowling argued that the separation of a physician's formal employer from the organization exercising operational control complicates collective bargaining. They examined how single-employer and joint-employer doctrines could affect physician organizing under such arrangements.
See also Corporate practice of medicine Professional corporation Fee splitting
References
External links PC-MSO - state rules on management arrangements and control of medical practices Medical Board of California - guidance on physician and management-company responsibilities Corporate Practice of Medicine - comparison of ownership, employment and management rules by jurisdiction