On June 9, 2025, Oregon Governor Tina Kotek signed into law Oregon Senate Bill 951 (Oregon CPOM Law), further expanding Oregon’s prohibition on the corporate practice of medicine (CPOM) doctrine. The stated purpose of the Oregon CPOM Law is to build upon Oregon’s established corporate practice of medicine prohibition, originally established by the Oregon Supreme Court in the 1947 decision in State ex rel. Sisemore v. Standard Optical Co, which banned corporations from holding a majority ownership in medical practices, practicing medicine, or employing physicians.

The Oregon CPOM Law, summarized below, prohibits a variety of practices and arrangements between non-licensed management services organizations (MSOs) and licensed professionals or professional entities that have, until now, been generally permissible. This law is emblematic of the nationwide trend to restrict the influence of non-licensed entities in health care and to restrain private equity-based investment in health care. The Oregon CPOM Law takes a dramatic step toward making Oregon one of the nation’s most stringent CPOM states. 

Ownership Restrictions

Under the Oregon CPOM Law, an MSO or any of its shareholders, directors, members, managers, officers, or employees (MSO Agents), subject to the below exceptions, may not:

• own or control a majority of the shares in a professional medical entity (Professional Medical Entity) with which the MSO has a management agreement; or
• simultaneously serve as a director, officer, employee, or independent contractor of both the Professional Medical Entity and the MSO.

The exceptions permit: (1) an owner of a Professional Medical Entity to serve as an independent contractor of an MSO if the owner owns less than 10% of the Professional Medical Entity, or (2) if the owner’s ownership in the MSO is “incidental” and without relation to the owner’s compensation as a shareholder, director, officer, employee, or independent contractor of the MSO. The Oregon CPOM Law does not define the term “incidental”, and we anticipate that further guidance may be forthcoming on how these exceptions will be interpreted. While we wait for further guidance, an owner of a Professional Medical Entity should proceed with caution prior to receiving equity in an MSO. 

These new prohibitions substantially limit the longstanding arrangement in MSO-Professional Medical Entity arrangements where the owner of the Professional Medical Entity holds shares in the MSO, through receipt of rollover equity in the MSO, often while also entering into an independent contractor relationship with the MSO to provide certain services to the MSO. Notably, this prohibition does not apply to out-of-state Professional Medical Entities providing telemedicine in Oregon as long as such entities do not have a physical location in Oregon where patients receive clinical services.

For purposes of the Oregon CPOM Law, “Professional Medical Entity” means entities formed under Oregon law to practice medicine or nursing. The Oregon CPOM Law explicitly excludes from its reach arrangements between MSOs and 

• Behavioral health care providers;
• Licensed opioid treatment programs, providers that primarily provide office-based or medication-assisted treatment services, or providers of withdrawal management services or sobering centers;
• Hospitals;
• Long-term care facilities;
• Residential care facilities; and 
• PACE organizations, mental health or substance use disorder crisis line providers, or certain Indian health program, Tribal behavioral health or Native Connections program providers. 

Additionally, the Oregon CPOM Law does not apply to Professional Medical Entities who through themselves act as an MSO or own a majority interest in an MSO. Notably, the law does not apply to other licensed professions such as psychology, social work, dentistry, and veterinary medicine.

Control Restrictions

In addition to the above, an MSO and its MSO Agents may not: (1) enter into an agreement to control or restrict the sale or transfer of a Professional Medical Entity’s shares or assets, subject to the exceptions below; (2) vote by proxy for a Professional Medical Entity that the MSO manages; (3) cause a Professional Medical Entity to issue shares of stock in an affiliate or subsidiary; (4) pay dividends from an ownership interest in a Professional Medical Entity; or (5) acquire or finance the acquisition of a majority interest in a Professional Medical Entity. 

Exceptions to Stock Restriction Agreement Limitation

Under the Oregon CPOM Law, an MSO or its MSO Agents may continue to control or restrict the sale or transfer of a Professional Medical Entity’s equity or assets in the following instances, all of which are generally commonplace in existing MSO- Professional Medical Entity arrangements:

• The Professional Medical Entity breaches its management services agreement with the MSO;
• The professional license of the Professional Medical Entity’s owner is suspended or revoked;
• The owner of the Professional Medical Entity is:
  • disqualified from holding equity in a Professional Medical Entity;
  • excluded, debarred, or suspended from a federal health care program, or is under investigation which could result in him or her being, excluded, debarred, or suspended from a federal health care program;
  • indicted for a felony or another crime that involves fraud or moral turpitude; or
  • disabled, permanently incapacitated, or dies.

Clinical Decision-Making

The Oregon CPOM Law also prohibits an MSO or its MSO Agents from exercising de facto control over a Professional Medical Entity’s administrative, business, or clinical operations in ways that affect clinical decision-making or the quality of care. “De facto control” includes, but is not limited to, (1) hiring or terminating physicians, nurse practitioners or physician assistants and associates (Licensees); (2) setting work schedules, compensation, or terms of employment for Licensees; (3) specifying the amount of time a Licensee may spend with a patient; (4) establishing billing and collection policies; (5) setting rates for Licensees’ services; and (6) negotiating, executing, performing, enforcing, or terminating the Professional Medical Entity’s payor contracts.

Effective Date

The above restrictions go into effect on January 1, 2026, for (1) MSOs and Professional Medical Entities that are incorporated or organized in Oregon on or after June 9, 2025; and (2) existing MSOs and Professional Medical Entities that are sold or transfer ownership on or after June 9, 2025. For MSOs and Professional Medical Entities that existed before June 9, 2025, and that are not sold or whose ownership is not transferred on or after June 9, 2025, the Oregon CPOM Law goes into effect on January 1, 2029. 

Non-Competition and Non-Disparagement

Effective June 9, 2025, the Oregon CPOM Law renders void and unenforceable, with very limited exceptions, (1) noncompetition agreements between MSOs and Licensees, and (2) nondisclosure or non-disparagement agreements between Licensees and MSOs, hospitals, and hospital-affiliated clinics. Noncompetition agreements have traditionally protected MSO investments by preventing Licensees from competing with the Professional Medical Entities with whom the MSO has a management agreement. This prohibition will require significant reexamination of current arrangements between MSOs and Licensees and the structuring of future transactions in this space.

Looking Forward

This move by Oregon to reshape the traditional MSO-Professional Medical Entity model is in line with the continued barrage of state legislation aimed at curbing non-licensed investors’ role in health care, with a particular emphasis on private equity. As we have noted in our previous blog posts, health care transaction review laws are becoming commonplace with states like Massachusetts, California, and Oregon leading the charge. While many of the transaction review laws seek to review and approve proposed transactions involving private equity, this move by Oregon to reshape the traditional MSO-Professional Medical Entity model is a drastic step towards trying to eliminate private equity’s role in the delivery of health care in Oregon generally. Time will tell whether other states will follow Oregon in taking this drastic step and whether any legal challenges will be made to the Oregon CPOM Law.