New Oregon Law Strengthens Prohibition on the Corporate Practice of Medicine

Footnotes for this article are available at the end of this page.

On June 9, 2025, Oregon Governor Tina Kotek signed Senate Bill 951 (SB 951) into law. According to sponsors of SB 951, this new legislation is designed to curb the influence of private equity and third-party management companies over medical practices by closing perceived loopholes in the state’s historical prohibition against the corporate practice of medicine. SB 951 imposes significant restrictions on management services organization (“MSO”) structures, introduces new prohibitions on noncompetition and nondisclosure agreements, and places additional limitations on professional medical entities. As a result, to ensure compliance with SB 951, medical practices and MSOs currently operating in Oregon (or evaluating the Oregon market) may need to revise their existing management services agreements, “friendly-physician” practice ownership structures, and employment arrangements with medical licensees.

Under SB 951, MSOs1 — either as an entity or through any individual that is a shareholder, director, member, manager, officer, or employee — generally may not:

  • Own or control2 a majority of shares in a professional medical entity with which the MSO has a contract for management services;
  • Serve as a director or officer of, be an employee of, work as an independent contractor with, or otherwise receive compensation from the MSO in exchange for managing or directing the management of a professional medical entity with which the MSO has a contract for management services;
  • Exercise a proxy or take or exercise on behalf of another person a right or power to vote the shares of a professional medical entity with which the MSO has a contract for management services;
  • Control or enter into an agreement to control or restrict the sale or transfer of a professional medical entity’s shares, interest, or assets, or otherwise permit a person other than a medical licensee to control or restrict the sale or transfer of the professional medical entity’s shares, interest, or assets;3
  • Issue shares of stock, or cause a professional medical entity to issue shares of stock, in the professional medical entity, in a subsidiary of the professional medical entity or in an affiliate of the professional medical entity;
  • Pay dividends from shares or an ownership interest in a professional medical entity;
  • Acquire or finance the acquisition of the majority of the shares of a professional medical entity; or
  • Exercise de facto control4 over administrative, business, or clinical operations of a professional medical entity in a manner that affects the professional medical entity’s clinical decision making or the nature or quality of medical care that the professional medical entity delivers.

However, under the new law MSOs are expressly not prohibited from:

  • Providing services to assist in carrying out certain activities if the services the MSO provides do not constitute an exercise of de facto control over the administrative, business, or clinical operations of a professional medical entity in a manner that affects the professional medical entity’s clinical decision making or the nature or quality of medical care that the professional medical entity delivers;
  • Purchasing, leasing, or taking an assignment of a right to possess the assets of a professional medical entity in an arms-length transaction with a willing seller, lessor, or assignor;
  • Providing support, advice, and consultation on all matters related to a professional medical entity’s business operations, such as accounting, budgeting, personnel management, real estate and facilities management, and compliance with applicable laws, rules, and regulations; or
  • Advising and providing direction concerning a professional medical entity’s participation in value-based contracts, payor arrangements, or contracts with suppliers and vendors.

While the restrictions on MSOs also apply to shareholders, directors, members, managers, officers, or employees of MSOs, there are numerous exceptions for individuals. Other exceptions also carve out certain telemedicine providers; professional medical entities that function as or own MSOs; and MSOs that contract with particular professional medical entities, including but not limited to certain PACE organizations, mental health or substance use disorder providers, behavioral healthcare entities, hospitals, long-term care facilities, and residential care facilities.

In addition, SB 951 generally prohibits and makes unenforceable the imposition of noncompetition or nondisclosure agreements between medical licensees and MSOs that restrict the practice of medicine or practice of nursing, subject to a limited number of exceptions.

The new law takes effect in phases. Certain provisions — including the prohibition on noncompetition and nondisclosure agreements and restrictions of the circumstances under which a professional corporation may remove a director or officer — go into effect immediately.

For MSOs and professional medical entities that are incorporated or organized in Oregon on or after June 9, 2025 (the effective date of SB 951), and sales or transfers of ownership or membership interests in such MSOs or professional medical entities that occur on or after June 9, 2025, the restrictions on MSOs go into effect on January 1, 2026.

For MSOs and professional medical entities that existed before June 9, 2025, and sales or transfers of ownership or membership interests in such MSOs or professional medical entities that occur on or after January 1, 2029, the MSO restrictions are effective January 1, 2029.

For more information on Oregon SB 951 and the impact the new legislation will have on existing or proposed MSO structures in the state, please contact AGG Healthcare attorneys Jennifer Burgar, Matt Brohm, or Charmaine Mech Aguirre.

 

[1] “MSOs” are defined as an entity that under a written agreement, and in return for monetary compensation, provides management services to a professional medical entity. “Management services” means services for or on behalf of a professional medical entity that include payroll; human resources; employment screening; employee relations; or any other administrative or business services that support or enable a professional medical entity’s medical purpose but that do not constitute practicing medicine, enabling physicians, physician associates and nurse practitioners to jointly render professional healthcare services; or practicing naturopathic medicine.

[2] Individually, or in combination with the MSO or any other shareholder, director, member, manager, officer, or employee of the MSO.

[3] The law does provide limited circumstances under which a professional medical entity may enter into an agreement to control or restrict a transfer or sale of the entity’s stock, interest or assets, including but not limited to actions against a shareholder or member’s professional license, a professional medical entity’s breach of a contract for management services with a MSO.

[4] De facto control expressly includes, but is not limited to, exercising ultimate decision-making authority over: (1) hiring or terminating, setting work schedules or compensation for, or otherwise specifying terms of employment of medical licensees; (2) setting clinical staffing levels, or specifying the period of time a medical licensee may see a patient, for any location that serves patients; (3) making diagnostic coding decisions; (4) setting clinical standards or policies; (5) setting policies for patient, client or customer billing and collection; (6) advertising a professional medical entity’s services under the name of an entity that is not a professional medical entity; (7) setting the prices, rates, or amounts the professional medical entity charges for a medical licensee’s services; or (8) negotiating, executing, performing, enforcing, or terminating contracts with third-party payors or persons who are not employees of the professional medical entity.