Rhode Island Seeks to Introduce Detailed CPOM Ban and Ownership
The Rhode Island Legislature on February 6, 2026, introduced the Ban on the Corporate Practice of Medicine Act (CPOM) and Rhode Island Transparency in Ownership and Control of Healthcare Facilities Act (collectively, the Act) to regulate the ownership of medical practices by unlicensed corporate and other business entities and require annual reporting of ownership and control of healthcare facilities in the state.
Current Law
Rhode Island maintains restrictions on the corporate practice of several healthcare professions, including medicine. The state allows certain corporate entities to provide professional services and employ healthcare professionals, provided specific conditions are met. Existing regulations are designed to preserve the quality of healthcare services while allowing flexibility in corporate structures.
For example, professionals subject to the CPOM prohibition, such as physicians, may establish professional service corporations (PSC) with an appropriately structured board and necessary state approvals. Rhode Island also permits limited liability companies to offer professional services listed under the PSC law.
Proposed Law
If enacted in its current form, the Act would expressly prohibit unlicensed individuals, corporations, partnerships and other entities from owning a medical practice or employing healthcare licensees.
The Act would also mandate physician ownership and control of "medical practices" (entities that practice medicine and/or employ physicians), specifying that a majority of voting shares and director positions must be held by licensed physicians. Exceptions are provided for specific healthcare entities, including safety net clinics and public hospitals, that may employ physicians under certain conditions.
The Act also regulates contracts between medical practices and management services organizations, prohibiting arrangements such as straw ownership structures – clarifying that the physician owner(s) must demonstrate meaningful ownership by substantially engaging in delivering medical care or managing medical care in the medical practice – and banning dual ownership interests that could interfere with a licensee's professional judgment.
It also includes provisions that ban noncompetition agreements and restrict the ability of unlicensed entities to control or direct the clinical decisions of licensed professionals.
More Clarity Needed
Several key terms are not defined in the Act or elsewhere in existing law, creating uncertainty about how they would apply in practice. For example, the Act does not define "medical practices" or "healthcare licensees."
It is possible that the legislature intended "medical practice" to have the same meaning as "medical-practice group," separately defined in Title 5 of the Rhode Island General Laws, but this interpretation is an open question.
If these two terms are the same, the Act's ownership and control restrictions would be limited to any single legal entity formed for purposes of being a "physician group practice" (also not defined), but the definition of a medical-practice group notably applies to "any organizational form recognized by the state in which the group practice achieves its legal status," which extends to foundations, not-for-profit corporations and faculty practice plans, in addition to other corporate forms.
Neither the Act nor the Rhode Island General Laws defines "healthcare licensees," making it unclear what types of non-physician licensees to whom it is intended to apply. Though it is not uncommon in CPOM states for ownership and control restrictions to apply to group practices that employ, for example, nurse practitioners, how states treat licensed professionals such as physical therapists, acupuncturists and other professional disciplines varies significantly.
Proposed Reporting and Enforcement
To enhance transparency, the Act would require healthcare entities beginning on January 1, 2027, to report detailed ownership and control information to the Rhode Island Department of Health (DOH) annually, including the legal name, business address, ownership interests and contact information of representatives. Additionally, comprehensive financial reports and organizational charts would need to be submitted on an annual basis to DOH.
DOH is granted authority pursuant to the Act to enforce compliance through audits and inspections, with specified penalties for violations, including civil penalties based on the size and revenue of the healthcare entity.
Nationwide Trend
In the past few weeks, at least four states in addition to Rhode Island have recommended or introduced enhanced CPOM legislation, including Washington, New Mexico, Vermont and Maine, suggesting a continued focus and concern from legislators about the perceived commercialization and lay-influence of medical care in their states.
Next Steps
The Act is designed to take effect immediately upon passage, demonstrating Rhode Island's ongoing commitment to strengthening oversight and accountability in the healthcare sector. As of February 6, 2026, the Act has been referred to the Rhode Island Senate Committee on Health and Human Services.
Holland & Knight will continue to monitor the Act as it proceeds through the legislative process and provide updates, particularly if additional clarity is provided on any of the identified open issues in need of interpretation.
Please contact the authors with any questions.