On June 9, 2025, Oregon Governor Tina Kotek signed S.B. 951 into law (the "Bill"), which significantly limits a common "PC/MSO" model allowing management services organizations (MSO) to provide administrative services to a "friendly" physician-owned medical practice (PC) for a fee. The express intention of the Bill was to further limit the Corporate Practice of Medicine in Oregon by continually assessing the operations of a PC rather than evaluating it at the point of a change in ownership. The Bill also limits the enforceability of nondisclosure, noncompetition, and nondisparagement agreements with medical professionals.
The Bill addresses these matters from several angles. Corporations were already prohibited from owning a majority ownership stake in PCs, and now MSOs' equityholders, directors, employees, managers, and officers also cannot own a majority interest in or engage in certain specifically delineated activities with respect to such PCs. In addition, MSOs cannot exercise control over PCs in such matters as setting employment terms for medical licensees, specifying the period of time a medical licensee may see a patient, making diagnostic coding decisions, or setting clinical policies or negotiating contracts with third-party payors, among other things.
The Bill still leaves some room for interpretation for how an MSO can conduct business with a PC. For example, Section §1(2)(c)(A)(1) of the Bill provides that an MSO may still undertake certain activities if they "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." It is already a best practice for such arrangements to include similar guardrails, but the MSOs operating in Oregon should still closely analyze the causation between their respective agreements and the quality of provided medical care, in anticipation of any potential audits or inquiries.
Importantly, the Bill exempts PCs that are:
- Programs of All-Inclusive Care for the Elderly (PACE) organizations
- mental health or substance use disorder crisis line providers
- urban Indian health programs in Oregon
- recipients of a Tribal Behavioral Health or Native Connections program grant from the federal Substance Abuse and Mental Health Services Administration
- entities that:
- the Oregon Health Authority has certified to provide behavioral health care
- contract with an MSO that is a nonprofit entity or
- are licensed opioid treatment programs
- hospitals
- long-term care facilities or
- residential care facilities
The Bill also exempts certain individuals, such as those whose ownership in an MSO is incidental and unrelated to his or her compensation from such MSO or where a person owns 10% or less of a PC while not being involved with an MSO in any capacity and not being compensated at the market rate, among other scenarios.
Once the Bill goes into effect, MSOs cannot enter into any contractual arrangements regulating transfer of a PC's equity or assets or even finance acquisitions of such PC's equity, except for narrow instances where an owner's ability to engage in the practice of medicine is limited in certain ways or where a PC breaches the terms of an agreement with an MSO.
In addition to the exemptions identified above, the restrictions also do not apply to the following entities:
- telemedicine practices without a physical location where patients receive clinical services in Oregon and
- coordinated care organizations that before January 1, 2026, owned an interest in, or controlled, a professional medical entity
The Bill applies to MSOs and PCs at different times, depending on when they were formed. MSOs and PCs that will be formed on or after January 1, 2026, must start complying with the Bill as of that date. MSOs and PCs formed before January 1, 2026, must start complying with the Bill on January 1, 2029.
As scrutiny of management agreements continues to increase from state to state, obtaining proper legal advice is essential. We invite you to learn more about Venable's Healthcare and Private Equity teams.