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Deputy AG tells osteopathic board corporate owners and MSOs can create legal risk and public‑safety gaps
Summary
The board heard a detailed legal briefing on California’s Moscone‑Knox corporate‑practice rules and enforcement options; the deputy attorney general flagged private‑equity and management‑services arrangements that may improperly control medical decisions and suggested enforcement avenues including injunctions, criminal referrals and regulatory discipline.
A senior attorney from the California Attorney General’s Office told the Osteopathic Medical Board on April 23 that corporations, management‑services organizations and private‑equity ownership can create situations where business interests interfere with medical decision‑making — and urged the board to look closely at contracts that delegate clinical control.
Deputy Attorney General John Gachet gave a structured presentation on the state’s corporate practice of medicine jurisprudence (commonly called the Moscone‑Knox framework), explaining that California generally bars unlicensed entities and lay owners from exercising direct or indirect control over medical care. He walked the board through common problematic models: mid‑level majority ownership (physician assistant or nurse practitioner groups that employ a nominal physician), lay‑person‑owned clinics that pay a physician a flat fee while retaining control of staffing and treatment protocols, management‑services agreements that cede medical decisions to third parties, and disqualified shareholders who continue to run practices after a license suspension or revocation.
Gachet said the state’s remedies include: criminal prosecution for unlicensed practice (district attorney referral), civil injunctions to stop illegal corporate practices, and standard board regulatory tools (accusation, citation, discipline for physicians who aid and abet unlicensed practice). He also flagged a new 2024‑25 statutory clarification aimed at limiting hedge‑fund and private‑equity control over clinical decisions.
"The concern is if you are a corporation… you might not be making the best decisions for a patient," Gachet told the board, summarizing the public‑safety rationale that underlies Moscone‑Knox enforcement.
Board members and staff asked about concrete investigative steps, when medical experts are required, and how the board should evaluate management‑services contracts. Gachet said legal questions about corporate control are decided under statutory standards and generally are legal determinations for administrative law judges; clinical experts remain necessary when the inquiry includes quality‑of‑care or supervision questions.
What this means for the board: Gachet urged early joint investigations with the Health Quality Enforcement Unit (HQIU) and early DAG involvement because corporate‑practice cases are document‑heavy, often multi‑jurisdictional and resource‑intensive. The presentation signaled increased attention by statewide prosecutors and reinforced that the board can and should use civil injunctions and disciplinary tools when unlawful corporate structures are discovered.
Sources: Deputy AG presentation to the Osteopathic Medical Board (April 23, 2026).
