In a companion development to the California Attorney General’s recent amicus filing, the California Medical Association (CMA) submitted its own unsolicited amicus curiae brief in Art Center Holdings, Inc., et al. v. WCE CA ART, LLC, et al. (No. B338625). Like the AG, the CMA focuses on the corporate practice of medicine (CPOM) implications of “friendly PC” structures—i.e., professional corporations owned by physicians but contractually tethered to lay management services organizations (MSOs) through continuity agreements, replacement rights, assignable options, or stock transfer restrictions. While the AG endorsed the trial court’s view that even unexercised MSO replacement rights over physician-owners may constitute unlicensed control, the CMA advocates a more nuanced, fact-based, and context-driven analytical framework, urging oversight bodies to focus on whether an arrangement, in operation and substance, results in undue lay interference with clinical decision-making rather than adopting a categorical rule that would invalidate common arrangements across the industry that ultimately can benefit healthcare delivery systems.
CMA’s position: history, legitimate uses, and a call for precision
The CMA brief provides a historical and policy overview of CPOM, tracing its core tenet: protecting physician independence and patient-centered judgment from commercial profit motives and lay control. It acknowledges the evolution of modern healthcare delivery, including the rise of physician alignment with hospitals, PE-backed MSOs, and other strategic investors, to secure capital, scale, and administrative expertise.
Friendly PC models, the CMA notes, have become widespread and often legitimate tools for such alignment. These structures can expand access, improve efficiencies, and sustain practices amid rising operational costs and consolidation pressures.
At the same time, the CMA recognizes inherent risks across all alignment models: the potential for lay entities to exert indirect control through ownership succession rights, especially when tied to clinical disagreements. It cites literature on PE-driven conflicts between profit motives and patient care, while acknowledging documented benefits of capital infusions into underperforming providers.
Crucially, the CMA urges the Court of Appeal to apply CPOM through a “fact-based, context driven” lens rather than a per se prohibition on replacement rights. Relevant factors would include the identity and incentives of the lay stakeholder (e.g., nonprofit hospital vs. PE fund focused on short-term returns); the purpose and actual operation of the friendly PC; whether clinical functions remain reserved to licensed physicians in governance documents and in practice; and the specificity of any “for cause” triggers or PC board involvement in successor selection.
Implications for the medical foundation model
Neither the AG nor the CMA directly addresses the California “medical foundation” model, a uniquely state-permitted structure under Health & Safety Code Section 1206(l) that allows nonprofit medical foundations to contract with a multi-specialty physician group for professional services. That said, both frameworks have clear implications for these arrangements. Foundation-affiliated medical groups typically operate as friendly PCs, through which ownership and succession are closely coordinated with the foundation and its affiliated health system to ensure clinical and operational alignment.
Under the CMA’s context-based approach, foundation arrangements are likely to be viewed favorably because the medical foundation itself functions as a healthcare provider and delivers patient care services. Thus, the goals of the foundation and its friendly PC are generally aligned with respect to clinical functions. The AG’s more categorical position, if adopted, could create uncertainty even for these long-standing nonprofit models, particularly where foundation-affiliated PCs use broadly drafted continuity or succession agreements.
Implications for PE-backed PC-MSO structures
For PE-backed PC-MSO platforms, the implications are more direct. These arrangements have become a primary capital-formation pathway for physician practices facing reimbursement pressure, technology investment needs, and consolidation economics. The CMA brief acknowledges that without some level of contractual tie to friendly PC ownership, “the venture can become less stable and riskier and potentially drive away outside interest in aligning with medical corporations and practices,” an implicit recognition that overly broad CPOM rules could chill capital flows into the sector.
Nonetheless, the CMA identifies the potential concerns associated with PE-backed friendly PC models, citing price increases, quality declines, and physician dissatisfaction following PE acquisitions. Combined with SB 351’s January 1, 2026, effective date which codifies CPOM-style protections specifically against PE interference and authorizes AG enforcement, PE and strategic sponsors should anticipate heightened scrutiny of unlimited replacement triggers, MSO-designated successor physicians, and integrated termination/continuity mechanics.
Calibration strategies in light of both amici
Organizations across the healthcare spectrum should proactively inventory existing PC-MSO and foundation-PC agreements for replacement, continuity, option, or stock transfer provisions that could be viewed as conferring control over physician ownership or clinical functions. Where appropriate, parties should consider restructuring triggers to true “for cause” events (e.g., license revocation, gross negligence, death, or disability) with successor selection vested in the PC board or independent physicians rather than unilateral MSO designation. Governance documents and management services agreements should expressly reserve nondelegable clinical decisions—including physician hiring/firing based on competency, coding/billing affecting care, and equipment approvals—to licensed professionals. Organizations should maintain clear operational distinctions between clinical authority and business services, with regular audits to demonstrate compliance in practice.
Key takeaways
The CMA’s amicus brief enriches the Art Center Holdings dialogue by advocating precision over blanket prohibitions and implicitly recognizing that friendly PC structures serve legitimate capital and operational needs across California’s healthcare delivery system. Its call for a context-driven approach may temper the broadest readings of the AG’s position and help preserve certain legitimate alignment structures, including the medical foundation model and capital-infused PE or strategic platforms. Importantly, at this time, neither amicus brief represents binding law. PC-MSO enterprises, foundation-affiliated systems, and capital sponsors should treat the AG and CMA filings as important enforcement signals rather than settled doctrine, and would be well-served by a fresh compliance review focused on substance and operational practice, not just contractual form.