Executive Summary

Oregon’s recently enacted SB 951 and HB 3410 disrupt historically accepted corporate practice of medicine (CPOM) structures, limiting non-physician influence on medical practices and ensuring that clinical decision-making remains in the hands of licensed professionals. This article examines SB 951 and HB 3410’s key provisions and potential effects on practitioners in the state.

Significantly, these new laws:

• restrict the control of management services organizations (MSOs) over the clinical and operating decisions of physician-owned practices;
• prevent dual employment arrangements where MSOs employ “friendly” physicians; and
• limit noncompetition, nondisclosure, and nondisparagement agreements.

In 1947, the Oregon Supreme Court banned corporations from owning medical practices, practicing medicine, or employing physicians.

Over time, though, the state legislature allowed a degree of corporate investment in medical practices. In the 21st century, business entities, including MSOs, contract with professional medical entities (PMEs) to provide nonclinical business functions, such as billing, collections, marketing, and information technology (IT), in return for payment. Sometimes, these arrangements involve the MSOs having ownership in medical practices, directly or indirectly. 

On June 9, 2025, Governor Tina Kotek signed SB 951, amending Oregon’s CPOM law, now codified at ORS § 58.375 and § 58.376. CPOM, of course, is the legal framework prohibiting non-licensed professionals or a company from owning or controlling a professional practice. SB 951 was billed as the strictest in the nation as far as limiting health care ownership and influence by non-physicians, propelling others in the legislature to pass a modified version, HB 3410, within two weeks. Governor Kotek signed HB 3410 on July 24, 2025.

Key Objectives of SB 951 and HB 3410

The bills were designed to prevent business entities from doing an end-run around the state’s CPOM law through the use of complex ownership structures and contracting practices. SB 951 and HB 3410, taken together, generally prohibit an MSO and individuals affiliated with that MSO from owning or controlling a majority of shares in a PME with which the MSO has a contract for management services—with exceptions for hospitals, long-term care and residential care facilities, telemedicine providers, Program of All-Inclusive Care for the Elderly (PACE) organizations, certain behavioral health entities, and more. The bills further prohibit an MSO and affiliated individuals from exercising de facto control over administrative, business, or clinical operations of a PME in a manner that affects the PME’s clinical decision-making or the nature or quality of medical care that the PME delivers.

Restrictive Covenants: Noncompetition, Nondisclosure, and Nondisparagement Agreements with Medical Licensees

SB 951 and HB 3410 also limit noncompetition, nondisclosure, and nondisparagement agreements with medical licensees in an attempt to keep business entities from, for example, stifling criticism of their operations and practices. Agreements between medical licensees or PMEs with MSOs that violate the law will be deemed unenforceable. Should a medical licensee or a PME suffer a loss of money or property stemming from these prohibitions, the law allows a legal action—for damages, an injunction, or other equitable relief—in an Oregon circuit court against the offending MSO with which they have a contract for management services, or against a shareholder, director, member, manager, officer, or employee of the MSO.

We discuss these relevant sections in more detail below.

Current CPOM Law in Oregon

We begin with a description of Oregon law as it exists now, before SB 951 and HB 3410 go into effect on January 1, 2026 (and with a delayed effective date for some parts, as described below).

With some exceptions, ORS § 58.375 mandates that, in a professional corporation (PC) organized for the purpose of practicing medicine:

• physicians licensed in Oregon to practice medicine must hold the majority of each class of shares that are entitled to vote;
• physicians licensed in Oregon must be a majority of directors;
• all officers except the secretary and treasurer, if any, must be physicians licensed in Oregon to practice medicine (the same person may hold two or more offices);
• the Oregon Medical Board may require that physicians who are licensed in this state to practice medicine hold more than a majority of each class of shares that is entitled to vote; and
• the Oregon Medical Board may expressly require that physicians who are licensed in this state to practice medicine be more than a majority of the directors.[1]

ORS § 58.376 mandates that in a PC organized for the purpose of allowing physicians, physician associates, and nurse practitioners to jointly render professional health care services, licensees must:

• hold a majority of each class of shares of the PC that is entitled to vote, and
• be a majority of the directors of the PC.

ORS § 58.376 also states that:

• individuals whom the PC employs, or those who own an interest in the PC, may not direct or control the professional judgment of a licensee practicing within the PC and with the scope of practice permitted under the licensee’s license, and
• licensees whom the PC employs, or those who own an interest in the PC, may not direct or control the services of another licensee who is practicing within the PC unless the other licensee is also practicing within the scope of practice permitted under the licensee’s license.

ORS § 58.375 and § 58.376 do not address restrictive covenants, but there are other sources of Oregon law that do. For example, ORS § 653.295 places specific timing, salary, and other conditions on noncompetition agreements for employees. Another example relates to the Oregon Physician Visa Waiver Program; a participating health care facility may not include in an employment contract with a physician a noncompetition clause or restrictive covenant “that prevents or discourages the physician from continuing to practice in any designated area after the term of the contract expires.”[2]

We now turn from existing law to the new definitions and standards created by SB 951 and HB 3410.

SB 951 and HB 3410: Definitions and Key Terms

HB 3410 amends Sections 1, 7, and 9 of SB 951, so that definitions exist throughout both bills.

Professional corporation:

• Section 2 of SB 951 amends ORS § 58.375 to add that a PC is one organized for the purpose of practicing medicine.
• Section 3 of SB 951 amends ORS § 58.376 to add that a PC is one organized for the purpose of enabling physicians, physician associates, and nurse practitioners to jointly render professional health care services.
• Section 5 adds to ORS chapter 58 that a PC is one organized for the purpose of practicing naturopathic medicine.

Professional medical entity: Under both SB 951 and HB 3410, a PME means either:

• a PC as defined in ORS § 58.375 and § 58.376;
• a PC as defined in Section 5 of SB 951; or
• a limited liability company, foreign limited liability company, partnership, foreign partnership, limited partnership, or foreign limited partnership, with authority to transact business in the state and organized for a medical purpose.

Management services agreement: SB 951 and HB 3410 define “management services,” which are services on behalf of a PME that include payroll, human resources, employment screening, employee relations, or any other administrative or business services that support or enable a PME’s medical purpose but that do not constitute:

• practicing medicine, as described in ORS § 677.085;[3]
• physicians, physician associates, and nurse practitioners jointly rendering professional health care services; or
• practicing naturopathic medicine.

Management services organization: SB 951 and HB 3410 define an MSO as an entity that, under a written agreement, and in return for monetary compensation, provides management services to a PME.

SB 951 and HB 3410: Section 1 – Limiting MSO Control Over Medical Practices

The typical MSO arrangement allows “private investors and business professionals to participate in healthcare administration” in areas such as billing and payroll, marketing, and IT without running afoul of state laws, such as those above, that prevent non-physicians from owning or controlling medical practices.

What an MSO may not do is exercise undue control over a PME with respect to medical decisions and patient care. Thus, SB 951, as amended by HB 3410, fills in existing gaps in the law by limiting an MSO’s ownership control over a PME and de facto (in reality or in fact) control over administrative, business, or clinical operations of a PME affecting clinical decision-making or the nature or quality of medical care. The policy behind the new laws is that non-physicians cannot control medical practice or decision-making. 

Prohibited Ownership and Control Practices

Prohibited ownership/control. Under Section 2(a) of SB 951 and HB 3410, an MSO or a shareholder, director, member, manager, officer, employee, or contractor of an MSO—with exceptions—may not:

• own or control a majority of shares in a PME with which the MSO has a contract for management services (the ownership/control prohibition applies both individually and in combination with the MSO and/or its shareholders, directors, members, managers, officers, employees, or contractors);
• exercise a proxy or a right or power of another person to vote the shares of a PME with which the MSO has a contract for management services;
• control or restrict, including through agreement, the sale or transfer of a PME with which the MSO has a contract for management services;
• issue shares of stock in the PME, or in a subsidiary or affiliate, or cause a PME to issue shares of stock;
• pay dividends from shares or an ownership interest in a PME; or
• acquire or finance the acquisition of the majority of shares of a PME.

Prohibited decision-making control. Section 2(a) of SB 951, as amended by HB 3410, also prohibits MSOs or their shareholders, directors, members, managers, officers, or contractors from exercising “de facto control,” including, but not limited to, exercising ultimate decision-making authority over:

• hiring or terminating, setting work schedules or compensation for, or otherwise specifying terms of employment of medical licensees;
• setting clinical staffing levels, or specifying the period of time a medical licensee may see a patient, for any location that serves patients;
• making diagnostic coding decisions;
• setting clinical standards or policies;
• setting policies for patient, client, or customer billing and collection;
• advertising a PME’s services under the name of an entity that is not a PME;
• setting the prices, rates, or amounts the PME charges for a medical licensee’s services; or
• negotiating, executing, performing, enforcing, or terminating contracts with third-party payors or persons who are not employees of the PME.

Permitted Ownership and Activities for PMEs and MSOs

Permitted ownership/control. Section 2(b) of SB 951, as amended by HB 3410, also identifies conditions under which a PME may enter into an agreement with a shareholder of the PME and an MSO to control or restrict a transfer or sale of the PME’s stock, interest, or assets. Those conditions include:

• the suspension or revocation of a shareholder’s or member’s professional license in Oregon or another state, if the shareholder or member is a medical licensee;
• a shareholder’s or member’s disqualification from holding stock or an interest in the PME;
• a shareholder’s or member’s exclusion, debarment, or suspension from a federal health care program or an investigation that could result in such if the shareholder or member is a medical licensee;
• a shareholder or member’s indictment for a felony or other crime involving fraud or moral turpitude;
• a breach of a contract for management services between a PME and an MSO; or
• the death, disability, or permanent incapacity of a shareholder or member who is a medical licensee.

Note that these are events that are outside of the normal course of business of a PME. 

Other permitted activities. Section 2(c) of SB 951, as amended by HB 3410, identifies permitted activities, including:

• providing services that do not constitute an exercise of de facto control over the administrative, business, or clinical operations of a PME in a manner affecting clinical decision-making or the nature or quality of medical care that the PME delivers;
• purchasing/leasing/taking assignment of a right to possess the assets of a PME;
• providing support, advice, and consultation on matters relating to a PME’s business operations;
• advising a PME’s participation in value-based contracts, payor arrangements, or contracts with suppliers and vendors;
• collecting quality metrics as required by law or in accordance with an agreement to which a PME is a party; or
• setting criteria for reimbursement under a contract between a PME and an insurer.

Section 1 Exemptions: Individuals and Entities Excluded from Prohibitions

The prohibitions above do not apply to:

• individuals providing medical or health care services for or on behalf of a PME, if the individual (1) does not own or control more than 10 percent of the total shares of or interest in the PME; (2) is compensated at the market rate, if the employment and services provided are entirely consistent with the individual’s professional obligations, ethics, and duties to the PME and to patients;
• individuals owning shares or an interest in a PME and a contracting MSO, if the individuals’ ownership of shares or an interest in the MSO is incidental and without relation to the individual’s compensation by the MSO;
• a PME and its shareholders, directors, members, managers, officers, or employees, if the PME functions as an MSO or owns a majority of shares of or interest in the MSO;
• a physician who serves as a director or officer of an MSO with which a PME has a contract for services, if that physician owns less than 25 percent of the ownership interest in the PME and is a director or officer of the PME, if all of the following are met:
  • the PME owns less than 49 percent of the ownership interest that has voting rights in the MSO;
  • the physician does not receive compensation from the MSO for serving as a director or officer;
  • an action of the MSO materially affecting the professional, ownership, or governance interests of minority owners in the MSO requires a vote of more than a majority of shares of the MSO that are entitled to vote, including the shares held by PMEs with voting rights in the MSO;
  • the MSO and all of the PMEs that have voting rights in the MSO were incorporated or organized and entered into agreements for the provision of medical services before January 1, 2024; and
  • the physician, all the PMEs with voting rights in the MSO, and the MSO complied with the four points above before, on, and after January 1, 2024;
• an MSO contracting for management services with a PME that is solely and exclusively:
  • a PACE organization or engaged in providing professional health services to a PACE organization;
  • a mental health or substance use disorder crisis line provider;
  • an urban Indian health program in Oregon;
  • a recipient of a Tribal Behavioral Health or Native Connections program grant;
  • an entity certified to provide behavioral health care, other than a hospital, or having a contract for management services with such entity, if a nonprofit;
  • a licensed opioid treatment program, provider of treatment services, withdrawal management services, or a sobering center;
  • a hospital or hospital-affiliated clinic;
  • a long-term care facility or an affiliate; or
  • a residential care facility or an affiliate;
• certain entities engaged in the practice of telemedicine; and
• certain coordinated care organizations.

HB 3410: Section 2 – Which Agreements Are Void and Which Are Enforceable?

Section 2 of HB 3410, with exceptions, renders void certain agreements with medical licensees—namely, noncompetition, nondisclosure, and nondisparagement agreements.[4] The new laws about these restrictive covenants are not limited to professional medical entities, such as physician practices. 

Noncompetition agreements. Section 2(a) provides that noncompetition agreements restricting the practice of medicine or nursing between a medical licensee and (1) any person, (2) an MSO, or (3) a hospital or hospital-affiliated clinic are void and unenforceable. Such agreements may, however, be valid and enforceable under Section 2(b) if:

• “[t]he medical licensee is a shareholder or member of the other person [sic] or otherwise owns or controls an ownership or membership interest and [t]he medical licensee’s ownership or membership interest is equivalent to 1.5 percent or more of the entire ownership or membership interest that exists in the other person”;
• the noncompetition agreement is with a PME that provides the medical licensee with documentation of the PME’s recruitment investment[5] and has a term that is not longer than:
• five years after the date on which the medical licensee was hired if the medical licensee engages directly in providing medical or health care services or clinical care in a county designated as a health professional shortage area, or
• three years after the date on which the medical licensee was hired if the medical licensee does not engage directly in providing medical services, health care services, or clinical care.

Nondisclosure and nondisparagement agreements. Section 3(a) provides that nondisclosure and nondisparagement agreements between a medical licensee and an MSO, or a medical licensee and a hospital or hospital-affiliated clinic, are void and unenforceable. Such agreements may, however, be valid and enforceable against a medical licensee under Section 3(b) if:

• the MSO, hospital, or clinic terminated the licensee’s employment, or the licensee voluntarily left employment (the MSO, hospital, or clinic may not, however, enforce these agreements for the licensee’s good faith report of information that the licensee believes is evidence of a violation of state or federal law), or
• the agreement is part of a negotiated settlement.

SB 951: Sections 2 and 3 – Restrictions on Director Removal and Control Transfers in Professional Corporations

With exceptions, Sections 2 and 3 of SB 951 amend ORS § 58.375 and § 58.376 to restrict how a PC may remove directors or officers, or how it may relinquish or transfer control over the PC’s administrative, business, or clinical operations. PCs may remove a director or officer by means other than a majority vote of shareholders if the director violated a duty of care, was the subject of a disciplinary proceeding, engaged in fraud, etc.

Timeline for Implementation

The new laws generally apply to contracts entered into or renewed after the effective date of SB 951, June 9, 2025. Section 1, however, first applies:

• on January 1, 2026, to MSOs and PMEs incorporated or organized on or after the effective date of SB 951;
• on January 1, 2026, to sales or transfers of ownership or membership interests in MSOs or PMEs occurring on or after the effective date of SB 951;
• on January 1, 2029, to MSOs and PMEs existing before the effective date of SB 951;
• on January 1, 2029, to PMEs existing before and after the effective date of SB 951, engaged in a reorganization or combination under common ownership but remaining bound by a contract for management services with a common MSO; and
• on January 1, 2029, to sales or transfers of ownership interests in an MSO or PME occurring on or after January 1, 2029.

SB 951: Section 5 – Naturopathic Medicine and Professional Corporations

Section 5 of SB 951 adds a requirement to existing law that a “professional corporation” is one organized for the purpose of practicing “naturopathic medicine,” defined in existing law as “[having] as its objective the maintaining of the body in, or of restoring it to, a state of normal health.”^[6] It includes physiotherapy, natural healing processes, and minor surgery.^[7] As in existing law, naturopathic physicians must:

• hold the majority of each class of shares that are entitled to vote,
• be a majority of directors, and
• constitute all the offices except that of the secretary and treasurer.

Section 5 further mandates that individuals employed by the PC or who own an interest in the PC may not direct or control the judgment of a naturopathic physician practicing within the PC and that directors and officers of a PC may not be removed from the board of directors or from an office of the PC except by majority vote of the shareholders or directors. The majority vote rule does not apply where the officer or director has violated a duty to the PC, was subject to a disciplinary proceeding resulting in a suspension or revocation of the medical license, or was engaged in fraud, misfeasance, or malfeasance with respect to the PC.

Section 5 also prohibits a PC from relinquishing or transferring control over its administrative, business, or clinical operations absent a shareholder agreement.

Enforcement Challenges and Future Implications

At present, no state agency has the statutory authority to enforce SB 951 or HB 3410. Many new laws present issues with interpretation and compliance, and this is certainly true of SB 951 and HB 3410. It is possible that we will see litigation over provisions of the bills as they become effective.