This is not legal advice. Foundry PC is not a law firm.
More of our clients are growing by acquisition: a therapy group buying a competitor, a telehealth company buying an in-person practice in a target state, a founder buying out a retiring physician. In CPOM states, the mechanics are different from a normal M&A deal, and getting them wrong creates a structure you can't fix later.
What you're actually buying
In a CPOM state, your company cannot own the acquired practice's professional entity. So the deal is really two transactions:
- The MSO transaction. Your MSO acquires the practice's non-clinical assets (brand, equipment, leases, technology, non-clinical staff, goodwill attributable to management) and signs an MSA with the practice's PC.
- The physician transfer. The selling physician transfers ownership of the PC to your designated physician owner, under a stock purchase agreement, typically for a nominal price, with clinical assets (patient records, payer contracts, clinical staff) staying in the PC.
The purchase price you negotiated with the seller is mostly paid through the MSO transaction. The PC transfer is structural.
The two-phase sequence
Phase 1: Wrap the acquired PC first.
Before or at closing, put your document suite around the existing PC: an MSA between your MSO and the acquired PC, a stock transfer restriction agreement, a physician owner services agreement with your incoming physician, a BAA, and updated provider agreements. The acquired PC keeps its NPI, its payer contracts, and its history. This is the fastest path to operating the acquired practice compliantly, and it preserves payer contracts that would take months to re-establish.
Phase 2: Integrate into your broader structure.
If you operate a super PC or a multi-state structure, decide whether the acquired PC stays standalone (often simplest) or gets merged into your existing entity. Merging can require payer re-enrollment, licensing updates, and regulatory notices, so many companies leave the acquired PC standing and manage it in parallel under a second MSA. Where you do consolidate, sequence it after payer contract assignment or re-credentialing is confirmed.
Diligence items specific to CPOM
- Is the selling PC actually owned by a licensed physician? You'd be surprised.
- Is there an existing MSO relationship? The seller may already be managed by someone. You'll need to terminate that MSA cleanly.
- Employment structure. Are clinicians employed by the PC or by a separate entity? If the seller has clinicians on a non-professional entity's payroll, you're inheriting a violation.
- Payer contracts. Assignable, or require re-credentialing on ownership change? Medicaid, in particular, often requires notice or re-enrollment when a PC changes ownership.
- Transaction notice. California, Massachusetts, Indiana, Connecticut, New Mexico, Colorado, Illinois, Oregon, and others have notice or review requirements for practice transactions above certain thresholds. Some have 60 to 90-day waiting periods. Miss this and the deal can be unwound or penalized.
- Noncompetes. Several states now void physician noncompetes. If the seller's value depends on a noncompete, check enforceability in that state.
- Fee-splitting history. Legacy percentage arrangements with prior managers can be a problem in New York, California, and elsewhere.
Tax and money flow
The allocation of purchase price between the MSO asset purchase and the nominal PC transfer has tax consequences for both sides. Get a tax advisor involved before you sign an LOI, not after. The seller's counsel will also want to see how the incoming physician owner is compensated and indemnified.
The retiring-physician scenario
When the seller is the physician owner and wants to retire, plan the transition period: the seller often stays on as PC owner for 30 to 90 days while your physician gets licensed and credentialed, then transfers. The MSA can be effective at closing while the PC transfer happens on a defined later date.
How Foundry PC handles acquisitions
Foundry builds acquisition-specific document suites: an MSA and stock transfer agreement adapted to an existing PC, a physician owner agreement for your incoming physician, and a two-phase integration plan. We coordinate with your M&A counsel and can introduce healthcare counsel for the regulatory pieces and tax advisors for the allocation.
Book a 20-minute call if you have an LOI in hand or a target in mind.