The Oregon Legislative Assembly has enacted new regulations that fundamentally reshape the landscape for healthcare business models in the state. Senate Bill 951 is designed to reinforce and expand Oregon’s longstanding prohibition on the corporate practice of medicine (CPOM). The law introduces significant restrictions on the use of management services organizations (MSOs) and business entities in the ownership, control, and management of professional medical entities. These changes have immediate and long-term implications for healthcare providers, investors, and organizations operating in Oregon.
Key Provisions of the New Law:
Strict Limits on MSO Involvement and Business Entity Control
The new legislation prohibits MSOs and their affiliates from:
- Owning or controlling a majority of shares in any professional medical entity with which they contract for management services.
- Serving as directors, officers, or employees who manage or direct the management of such professional medical entities.
- Exercising proxy rights to vote the shares of professional medical entities the MSO contracts with.
- Controlling or restricting the sale or transfer of shares, interests, or assets of professional medical entities.
- Issuing shares or paying dividends from the shares of professional medical entities.
- Acquiring or financing the acquisition of a majority of shares in professional medical entities.
- Exercising de facto control over administrative, business, or clinical operations in ways that affect clinical decision-making or the quality of care of the professional medical entity. This includes (but is not limited to) decisions about hiring, firing, setting work schedules or compensation for licensees, setting clinical staffing levels, setting clinical standards or policies, and advertising a professional medical entity’s services under the name of an entity that is not a professional medical entity.
Permitted MSO Activities
MSOs may still provide support, advice, and consultation on business operations—such as accounting, budgeting, personnel management, and compliance—so long as they do not exercise de facto control over clinical or business operations that impact clinical decision-making or patient care. MSOs may also purchase or lease assets in arm’s-length transactions and advise on value-based contracts.
Professional Corporation and Ownership Requirements
- Only Oregon-licensed physicians (or other relevant licensees) may hold the majority of voting shares and serve as the majority of directors in professional medical entities.
- Removal of directors or officers is generally only by majority vote of shareholders or directors, with exceptions for misconduct or loss of licensure.
Noncompetition, Nondisclosure, and Nondisparagement Agreements
- Noncompetition agreements restricting the practice of medicine or nursing are generally void and unenforceable, with limited exceptions (such as significant ownership interest or a documented protectable interest).
- Nondisclosure and nondisparagement agreements between medical licensees and MSOs, hospitals, or hospital-affiliated clinics are void and unenforceable, except in cases of employment termination or as part of a negotiated settlement. Good faith reporting of legal violations is protected.
Enforcement and Remedies
- Any contract provision that authorizes or implements a prohibited act is void and unenforceable.
- Medical licensees or professional medical entities harmed by violations may sue for actual damages, injunctive relief, and other equitable remedies. Courts may award punitive damages and attorney fees to prevailing plaintiffs.
Exemptions and Special Cases
Certain healthcare entities are exempt from some of these restrictions, including:
- Professional medical entities providing services exclusively to PACE organizations, crisis line providers, urban Indian health programs, certain behavioral health providers, hospitals, long-term care facilities, and residential care facilities.
- Telemedicine entities without a physical clinical location in Oregon where patients receive clinical services and certain coordinated care organizations under specific circumstances.
What This Means for Healthcare Providers and MSO Models
This legislation represents one of the most comprehensive statutory frameworks in the country for enforcing CPOM principles. It closes many of the loopholes previously used to structure MSO arrangements and ensures that the practice of medicine in Oregon remains under the control of licensed professionals, insulated from undue business influence.
The introduction of this legislation in Oregon targeting CPOM underscores a growing national trend: states are increasingly tightening their enforcement of laws that restrict non-physician ownership and control of medical practices. This movement is not isolated as many states, through case law and/or legislation, have increasingly scrutinized arrangements that may circumvent these longstanding, but often uncodified, prohibitions. As more states adopt stricter approaches, it is essential for healthcare organizations and MSOs to adapt their business models accordingly.
Frier Levitt has been at the forefront of advising clients on strategies, having anticipated this shift toward more rigorous enforcement, and our attorneys have developed sustainable mechanisms to both advance the interests of MSOs while maintaining compliance with CPOM frameworks.
Next Steps
If you are currently using, developing, or considering an MSO model in Oregon, it is critical to review your arrangements in light of these new requirements. The law’s broad definitions and strict prohibitions mean that many existing models may require significant adjustment to remain compliant.
Given the complexity and the significant penalties for noncompliance, including voided contracts, damages, and punitive awards, stakeholders are encouraged to consult with experienced healthcare counsel. Those who are already in the process or operating under existing structures have until January 1, 2029, to make necessary adjustments, but new entities must comply by January 1, 2026. Early review and proactive planning are essential to avoid disruption and liability.
If you have questions about how CPOM rules may impact your business or need assistance in reviewing or restructuring your MSO or healthcare practice model, contact Frier Levitt to speak to an experienced healthcare attorney. We are here to help you navigate these significant changes and ensure your continued compliance and success in an evolving healthcare environment.
