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On June 9, 2025, Oregon Governor Tina Kotek signed into law Senate Bill 951 (the “2025 Act”).  Unlike California’s AB 3129, which was vetoed by California Governor Gavin Newsom in September 2024, the passage of the 2025 Act is the culmination of the state’s efforts to strengthen controls on health care transactions involving management services organizations (“MSOs”) and private equity investors.  The 2025 Act implements significant changes to Oregon’s existing corporate practice of medicine (“CPOM”) doctrine and materially affects existing arrangements between MSOs and the professional medical entities that they manage.  Significantly, the 2025 Act prohibits several material aspects of health care transactions that are standard in states that restrict CPOM. 

The 2025 Act defines an MSO as an entity that under a written agreement, and in return for monetary compensation, provides management services to a professional medical entity.  Under the 2025 Act, MSOs are prohibited from engaging in the following activities with respect to professional medical entities:

  • Owning or controlling individually, or in combination with the MSO or any other shareholder, director, member, manager, officer or employee of the MSO, a majority of shares in a professional entity with which the MSO has a contract for management services;
  • Serving as a director or officer of, being an employee of, working as an independent contractor with or receiving compensation from the MSO to manage or direct the management of a professional medical entity with which the MSO has a contract for management services;
  • Exercising a proxy or taking or exercising 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;
  • Controlling or entering into an agreement to control or restrict the sale or transfer of a professional medical entity’s shares, interest or assets, or otherwise permitting 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;
  • Issuing shares of stock or causing 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;
  • Paying dividends from shares or an ownership interest in a professional medical entity;
  • Acquiring or financing the acquisition of the majority of the shares of a professional medical entity; or
  • Exercising de facto control 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 (e.g., specifying terms of employment for licensed medical professionals, setting clinical standards or policies, etc.).

Notably, the 2025 Act exempts several types of health care providers from the new CPOM restrictions.  These include hospitals, behavioral health programs, long-term care facilities, telemedicine providers and coordinated care organizations, among others.  Certain individuals, professional medical entities and physicians in dual ownership/health care provider capacities are also exempt if they meet specific conditions related to ownership, compensation and management services arrangements.

In addition to the MSO-specific restrictions, the 2025 Act imposes organizational restrictions on professional corporations organized for the purpose of practicing medicine.  The 2025 Act also voids noncompete, nondisclosure and nondisparagement agreements between MSOs, hospitals or corporations and Oregon-licensed physicians, with exceptions.

While the professional corporation and noncompete, nondisclosure and nondisparagement rules are effective immediately, the MSO-specific restrictions will take effect in two phases:

  • For MSOs and professional medical entities incorporated, organized or undergoing a transfer of ownership or membership interest on or after the effective date of the 2025 Act, the restrictions take effect on January 1, 2026; and
  • For MSOs and professional medical entities existing before the effective date of the 2025 Act, the restrictions take effect on January 1, 2029.

Parties considering health care transactions in Oregon involving MSOs and existing MSOs providing management services to professional medical entities in Oregon should take steps to review proposed or existing ownership arrangements.  This includes closely scrutinizing relevant contractual language and ensuring that any ownership interests and other features comply with the new CPOM requirements.

The health care attorneys at Vedder Price will continue to monitor regulatory developments in Oregon and similar legislation in other states.  Stay tuned to see if the passage of the 2025 Act leads to other states proposing similar CPOM restrictions.  If you have any questions, please contact Jeremy Alexander at jmalexander@vedderprice.com, Andrew Sylora at asylora@vedderprice.com or any of the Vedder Price attorneys with whom you normally work.