Corporate Practice of Medicine Legislation
Why the Legislation Is Relevant to OMA Members
Oregon has a long-standing medical-legal doctrine intended to prevent corporations from interfering with physicians' medical decisions. The “corporate practice of medicine doctrine” is a basic legal standard that has operated for over 78 years in a self-executing manner without significant state oversight, much like an honor code. As physicians have shifted at a more rapid pace from private practices into employment relationships with larger corporations, policies and procedures imposed by those corporations have challenged the clinical autonomy of physicians in the delivery of medical care. Further, as private equity moved into the health care space, complex legal structures evolved to create the perception, on paper, that a medical practice and its physicians were still in control of the practice of medicine. More often than not, however, management and business interests directed how care would be provided.
Senate Bill 951 (2025) and its companion bill, House Bill 3410 (2025), represent a first-in-the-nation legislative attempt to balance physician interests, which seek to take care of patients without interference of medical judgment, with corporate interests, which seek to bring investment and efficiency to health care while turning a profit.
The goals of the bills are to:
- set legal standards for how management services organizations may assist with managing a medical practice
- redefine the list of business entities that are permitted to engage in the practice of medicine
- address the widespread use of noncompete and other restrictive agreements imposed on physicians and health care professionals
The legislation is complex and will require monitoring as it is implemented in the coming years to ensure that the goals of the bills are being met.
What Members Need to Know
The following is a summary of the new law.
Terminology
Professional Medical Entity
Medical practices in Oregon operate under different business structures, such as a professional corporation or limited liability company. The term “professional medical entity” (PME) is intended to be a more universal term for a medical practice, regardless of how, it is organized and includes professional corporations, limited liability companies and limited liability partnerships.
Management Services Organization
Many practices today are managed under an agreement with a separate business called a “management services organization” (MSO). The new law is intended to establish a firewall for MSOs that contract with PMEs. The MSO may provide administrative and business services as long as those services do not constitute practicing medicine.
Noncompetition Agreement
In recent years, a majority of physicians and most physician associates have been employed by their medical practice, a larger hospital system or a health plan affiliated company. The use of a “noncompetition agreement,” commonly referred to as a “noncompete,” in employment agreements became commonplace in medicine when physicians owned their practices. Now, however, where the employer may not be a physician, the use of a noncompete by a corporate entity seems to limit autonomy and patients' choice more than its original intent of providing employers some protection from employees establishing patient relationships and starting up a new practice next door to their former employer.
Changes to the MSO and PME Relationship
A series of takeovers of distressed clinics by larger organizations, such as health plan or hospital affiliated medical groups, led to legislative interest in strengthening the corporate practice of medicine doctrine. In some instances, the PME ownership was changed to a single shareholder physician who worked both for the PME and the MSO or simply the MSO. This concept of a “friendly PC model” has been a legal workaround for many years in states like Oregon that follow a corporate practice of medicine doctrine.
The new law seeks to shake up this type of structure by both limiting what an MSO can and cannot do as well as putting some ground rules in place for physicians who work for the PME and MSO to limit the MSO's control over the PME.
The MSO Restrictions
The general rule of thumb for the MSO restrictions is that an MSO may be engaged to provide administrative, business or clinical operations services if that engagement does not result in “de facto control” of the PME in a way that affects clinical decision-making or the nature or quality of medical care. The concept of limiting de facto control is very much the heart of the legislation. This will be the challenge with respect to monitoring how an MSO’s policies and procedures end up directing medical care. For example, does a policy that financially penalizes a physician for exceeding 15-minute patient encounters potentially interfere with the quality of medical care? Do adjustments installed by the MSO to the PME’s electronic medical record system that automatically add clinical diagnostic code suggestions for the physician to select potentially affect clinical decision-making? Does a marketing practice of sending messages to patients under the physician’s name about other services they may benefit from affect the nature of medical care?
As you can see, the concept of de facto control is going to take some time to figure out and clearly recognize when it is occurring. Hopefully, the legislation encourages PMEs and their physicians when contracting with an MSO to insist on more transparency with respect to policies and procedures imposed by an MSO, not less.
Dual Employment Issue
To curtail sham structures that make it seem like physicians licensed in Oregon are in control of a PME and not the MSO, there are general prohibitions on ownership and control of a PME and some exceptions related to how physicians may work with both a PME and an MSO.
At a high level, none of the owners, employees or contractors of an MSO may individually or collectively own a majority interest in the PME. The doctrine in Oregon has always permitted up to 49% ownership of a clinical practice by non-licensees. If medical licensees owned 51% of the practice and represented the majority of the business directors, other investors who did not practice medicine could own part of the practice. The legislation does not change this concept.
The legislation does change how physicians may own or work with both a PME and separate MSO to avoid the MSO taking over ownership and control of the PME. For example, a physician could own part of a PME (no more than 10%) and be paid by an MSO to provide medical direction services for the PME in an arm’s-length transaction that allows the physician to exercise independent professional and ethical judgment. This is one example of a few permitted exceptions to the concept of dual employment or dual compensation. Physicians engaging with both their PME and an MSO should have those relationships reviewed to ensure compliance with the new legislation.
Business Entities Permitted to Practice Medicine
The original intent of the corporate practice of medicine doctrine was to only allow specific business entities to be organized for the purpose of engaging in the practice of medicine with the physicians who owned or were employed by the entity. Over the years, statutory exceptions were created for certain types of nonprofit corporations and specialized health centers. There was also concern that the limitations did not apply to newer forms of medical practices organized as limited liability companies or limited liability partnerships. The new law does not create new statutory exceptions for entities allowed to engage in the practice of medicine, but there are carve-outs from the MSO restrictions for a long list of entities and providers, including mental health or substance use disorder crisis line providers, hospitals and long-term care facilities.
Given the varied types of business entities involved in the delivery of health care services, this area of the law will need further monitoring for possible revision of carve-outs, especially if distressed hospitals are acquired by business interests seeking to maximize profits by selling off hospital assets, such as the real estate under the facility (a business practice that has led to hospital bankruptcies).
Limitations on Noncompetition Agreements and Other Restrictive Covenants
Effective June 9, 2025, most noncompetition agreements for Oregon medical licensees (physicians, physician associates and nurse practitioners) who practice in the state will be void and unenforceable. Because of the nature of the companion bills, the combined intent of the new law is to void noncompetes already entered into, which could result in some legal challenges. Going forward, in Oregon, unless there is an exception, the use of noncompetes for medical licensees will not be permitted.
There are exceptions where noncompetes may still be used, including ownership of 1.5% or more of a medical practice and a recruitment investment waiting period of three years for new hires (and five years in a health professional shortage area). Because of the strictly legal nature of the noncompete and other restrictive covenant provisions of the new law for nondisparagement and nondisclosure restrictions, a good rule of thumb is to have contract language reviewed before signing. Existing agreements will also need to be reviewed for possible amendments or an understanding that enforcement of a restriction may not be possible.
Timing and Effective Dates
The noncompete provisions of the legislation are effective as of June 9, 2025, the date that the governor signed SB 951 into law. The restrictions related to MSOs take hold in two phases:
- The first phase begins on January 1, 2026, for MSOs and PMEs incorporated or organized after June 9, 2025. After that date, all newly organized MSOs and PMEs will need to structure transactions in compliance with the MSO restrictions.
- The second phase begins on January 1, 2029, for MSOs and PMEs that existed before June 9, 2025. The reason for the delayed implementation was to allow for existing agreements to be reviewed and updated to comply with the restrictions and to identify if there are existing practices that might need some sort of limited exception with a future amendment to the law.
As discussed below, because there is no administrative oversight of the legislation, there is no ability to seek a limited waiver from a state agency.
Implementation Issues
The new law establishes private legal standards intended to be self-executing. That means there is no state oversight or enforcement agency responsible for monitoring and implementing the new law. As a result, medical clinics will need to resolve issues privately through legal counsel. If disputes arise, there are some legal rights in the legislation assigned specifically to medical licensees and professional medical entities to bring cases against an MSO and obtain monetary damages and attorney fees.
In other states considering corporate practice of medicine restrictions, the state Department of Justice or attorney general’s office is considered a potential oversight agency to review transactions or investigate anticompetitive conduct in health care that drives up prices, limits access to care, or reduces the quality of care. Such conduct in Oregon may be investigated by the Antitrust Division of the Oregon Department of Justice. However, because the legislation did not provide for agency oversight, physicians considering bringing forward information about bad conduct should consult with legal counsel under the attorney-client privilege before filing a complaint with the Antitrust Division or another state agency.
Oregon’s new law is not the end of the story. As MSOs and PMEs move forward with forming new business relationships or amending existing ones to follow the new law, there will likely be issues that arise that will need to be tracked and reported back to the Oregon Legislature for possible fixes. The OMA is a good resource to help identify and gather those issues for future legislative sessions.
Where Members May Get More Information
The Legislation
You may review the signed versions of SB 951 and HB 3410.
To view the bills in statutory language, please refer to the following citations:
- 676.555 — pertains to management services organizations; prohibitions; exemptions; contracts; violations.
- 58.375 — renumbered to 58.500, defines the requirements for professional corporations organized to practice medicine.
- 58.376 — renumbered to 58.503, provides that professional corporations (PCs) for medical, physician associate, or nurse practitioner services must be majority-owned and directed by licensed professionals.
- 58.506 — new language that defines the requirements for professional corporations organized for the purpose of practicing naturopathic medicine.
- 653.297 and 653.298 — set prohibitions and limitations on noncompetition, non-disparagement, and nondisclosure agreements involving medical licensees and adverse actions or retaliation by management services organizations or professional medical entities against medical licensees for engaging in protected disclosures or actions related to nondisclosure or non-disparagement agreements.
The Legislative History
A bill may undergo many amendments before it is put into a final form to be passed by each legislative chamber, the Senate and the House, and then signed by the governor. The Oregon Legislative Information System has a wealth of information on bill changes and committee hearings that includes testimony and presentations about the issues in the bill. Good examples of some legislative history include this summary presentation about the impact of private equity in health care and also a frequently asked questions (FAQ) document submitted in a floor speech about the new legislation. Legislative history becomes important down the road when a court determines there is vagueness in the meaning of a statute and that allows other evidence to be introduced to explain what the Oregon Legislature intended.
Detailed Law Analysis
The OMA worked closely with Epstein Becker Green, a national health law firm that has a local Oregon presence, to provide a detailed technical review of the new law. We value the time the firm’s attorneys dedicated to assisting members in understanding the legal framework. The guidance is not legal advice, but rather a step-by-step analysis of how the new law was structured, and it serves as a good starting point for identifying issues that members will need to pay attention to as the 2025 updates to Oregon’s corporate practice of medicine doctrine are implemented.
Frequently Asked Questions
These FAQs originate from various background materials about the legislation as well as member calls to the Knowledge Center. This resource will be updated as new questions arise, and please feel free to send us your own FAQs that we may add to the list.
OMA Policy on the Corporate Practice of Medicine
In 2024, the OMA’s Corporate Practice of Medicine Task Force studied and developed a series of principles intended to guide the association in its advocacy work related to the state’s corporate practice of medicine doctrine. The Board of Trustees subsequently adopted those principles.
Last updated: May 28, 2026
Disclaimer: This material is for informational purposes only and is not intended to constitute legal advice. The information, examples, and suggestions presented in this material (though reliable) should not be construed as legal or other professional advice. Before applying this information in legal situations, we recommend you consult with legal counsel or other professional advisors.
Legal Resources from the OMA Knowledge Center
As a nonprofit association, the OMA is not able to provide members with individual legal advice about a medical-legal issue, but we do listen to all member questions and are able to provide guidance and resources based upon those questions. For example, if a medical clinic needs to find a health care lawyer familiar with the concepts in the bills about amending MSO agreements, changing business structures to meet MSO restrictions, or modifying employment or ownership agreements to comply with noncompete restrictions, the OMA is able to connect members with attorneys and other consultants. Please reach out to the Knowledge Center with your questions.
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