As a healthcare attorney working closely with providers across Texas, I’ve seen more and more physicians approached by private equity (PE) groups promising fast payouts, operational support, and the allure of a “business-minded” future. But while private equity may offer financial opportunities, these deals also carry real legal and operational risks—especially in Texas, where the corporate practice of medicine (CPOM) doctrine still holds firm.
This article explores what Texas physicians need to know before signing on the dotted line, how to structure these transactions wisely, and why involving a healthcare attorney early on isn’t just advisable—it’s essential.
Why Are Private Equity Firms Targeting Healthcare Providers?
Private equity’s interest in healthcare isn’t new—but it’s growing. In fact, recent studies suggest that acquisitions by PE firms have accelerated across specialties, from dermatology to orthopedics and cardiology. Why? Predictable cash flow, insurance reimbursement, and scalable operational models make medical practices attractive investments.
But this financial model doesn’t always align with long-term patient care or professional autonomy. Recent Congressional reports have highlighted concerns about diminished care quality, cost-cutting measures, and even practice closures after PE takeovers.
Before getting swept up in the promise of a lucrative exit, physicians must understand how these deals work—particularly under Texas law.
Texas’ Corporate Practice of Medicine Doctrine: A Deal-Defining Constraint
Texas is one of the few states with a strict corporate practice of medicine (CPOM) prohibition. This means that a general business entity—like a private equity firm—cannot directly employ physicians or control medical decisions. This restriction is grounded in the principle of protecting physician autonomy and preserving the sanctity of the doctor-patient relationship.
So how do PE-backed firms still manage to buy practices in Texas?
They don’t—at least not directly. Most deals are structured using management service organizations (MSOs). These entities purchase non-clinical assets (like real estate, billing systems, and office staff), while the medical entity remains physician-owned and controlled. The MSO then enters into a management services agreement (MSA) with the medical practice to handle business operations.
This setup can comply with Texas law—but it must be drafted carefully. If the MSA gives too much control over clinical matters, the arrangement risks violating CPOM and triggering regulatory scrutiny.
Key Legal Considerations for Physicians Entering a Private Equity Deal
Before you move forward with any transaction, it’s critical to engage a healthcare compliance lawyer to help you evaluate these essential issues:
1. Governance and Control
Who ultimately makes decisions about staffing, scheduling, or expanding services? Even under the MSO model, the physician practice must retain clinical control. Review the MSA carefully—especially any language that might give the MSO undue influence.
2. Compensation and Buyout Structure
How are you being paid? Is there an earnout? Is your compensation tied to future EBITDA? In many cases, healthcare attorneys can renegotiate terms to reduce long-term risk and clarify payout obligations.
3. Regulatory Compliance
Any PE deal must comply with state and federal regulations, including HIPAA, Stark Law, and Anti-Kickback Statute restrictions. In Texas, a HIPAA compliance attorney can ensure the deal structure doesn’t put your license—or your practice—at risk.
4. Non-Competes and Exit Rights
Many deals include restrictive covenants. If you leave the group, will you still be allowed to practice in your area? Make sure the healthcare licensing lawyer you work with reviews these terms early.
5. Due Diligence: Know Your Buyer
Ask questions. Has this private equity group owned medical practices before? Have they had legal issues or regulatory violations? What’s their reputation with other physicians?
Structuring the Deal: How to Protect Your Interests
You don’t get a do-over with these transactions. Here’s how to set yourself up for success:
- Work with legal counsel experienced in healthcare M&A. A healthcare mergers and acquisitions attorney can negotiate terms that align with Texas law and your long-term goals.
- Use clear, compliant documents. Your MSA should explicitly preserve physician control and avoid CPOM pitfalls.
- Retain equity or influence when possible. Consider whether you’ll retain ownership in the medical practice, MSO, or both. Retaining a meaningful role gives you more leverage down the road.
Location Matters: Why Dallas and Houston Physicians Are in High Demand
If you’re a physician in a metro area like Dallas or Houston, you’re likely already on private equity’s radar. As a healthcare attorney in Dallas, I frequently work with clients navigating these exact issues.
For Dallas or Houston-based providers, locating and using a Texas healthcare compliance lawyer, Texas HIPAA attorney, or healthcare fraud lawyer in Texas is becoming more relevant than ever. We aren’t just helping physicians close deals—we’re helping them keep control over their careers.
Final Thought: Don’t Sign Before You Understand
Private equity isn’t inherently bad. In some cases, it can offer capital, scale, and exit opportunities that would otherwise be unavailable. But these deals are rarely simple—and they’re never one-size-fits-all.
Whether you’re looking for legal counsel for healthcare providers, assistance with healthcare compliance audits, or guidance on telehealth regulations, a trusted legal partner can help ensure you’re not trading long-term independence for short-term gain.
If you’re considering an acquisition or have been approached by a private equity group, let’s talk. We provide transactional healthcare services and can walk you through the process—so that when you make your decision, you do it with clarity, confidence, and control.
Speak with one of our attorneys today by calling 214.208.4606.