Oregon enacts strict new Corporate Practice of Medicine Law (SB 951)

On June 9, 2025, Oregon Governor Tina Kotek signed Senate Bill 951 (SB 951) into law, enacting one of the most restrictive corporate practice of medicine prohibitions in the nation. SB 951 takes direct aim at the management services organization (MSO) models through which a variety of corporate investors, including private equity firms and strategic corporate investors, commonly structure their physician practice relationships. With certain features of the law already in effect, health care investors, MSOs, and medical practices with Oregon operations should assess their existing structures and agreements to ensure compliance.

MSO ownership and governance restrictions

• MSOs defined broadly. SB 951 broadly defines MSOs as entities that provide management services to professional medical entities under a written agreement and in return for monetary compensation. Under this broad definition, an MSO does not need to be private equity-backed for the law to apply. The entity simply must provide any “management services” on behalf of a professional medical entity, with management services also broadly defined as essentially any administrative or business service to support a medical entity. Due to the breadth of this definition, SB 951 will impact a wide variety of business organizations formed to provide support services to Oregon medical practices. 
• Barring MSO control or dual ownership. SB 951 takes a novel step by prohibiting dual ownership and control between an MSO and the medical practice it manages. Under the new law, an MSO and its affiliates (including the MSO’s shareholders, directors, employees, and contractors) cannot own or control a majority interest in a professional medical entity for which the MSO provides services. This means that an owner or employee of an MSO may not also be the controlling owner of an Oregon physician practice. The law expressly prohibits MSOs from contracting with a medical practice that is owned by a single physician-employee of the MSO in a so-called “friendly physician model.” 
• Equity transfer restriction agreements severely restricted. SB 951 limits equity transfer restriction agreements, common tools used by MSOs to prohibit or direct the sale of managed medical practices by allowing MSOs to restrict or require the sale of a medical practice only in limited enumerated circumstances, including the revocation of a physician-owner’s medical license or the owner’s felony indictment. The law prohibits medical practices from granting an MSO a unilateral right to cause or require a medical licensee to convey their interest in a professional medical entity to another licensee. Importantly, the law does not prohibit a medical licensee from granting another medical licensee an option to purchase its interest in a professional medical entity.
• No board seats or proxy rights. MSO insiders, including shareholders, directors, members, managers, officers, and employees, may not serve as directors, officers, employees, independent contractors, or proxy holders for an Oregon medical practice.
• Financing limits. MSOs may not issue shares in a professional medical entity, pay dividends from such shares, or finance the purchase of a controlling interest in a medical entity.

Prohibition against MSO control over operations 

Like many corporate practice of medicine prohibitions, SB 951 makes clear that all medical clinical decisions must be made by licensed practitioners, independent of MSO influence. SB 951 explicitly bans MSOs from exercising so-called de facto control over a host of practice business and operational decisions that could indirectly affect patient care. The law provides a non-exhaustive list of specific activities that constitute prohibited de facto control when an MSO holds the decision-making authority, which – like many other state corporate practice prohibitions – include the following:

• Hiring and compensation. MSOs cannot, on behalf of a medical practice (a) hire or fire physicians, (b) set physician salary levels, or (c) make decisions about recruiting, termination, or compensation. 
• Work schedules and staffing. An MSO may not determine physician clinical work schedules, patient load, or overall staffing levels. MSOs cannot dictate how many patients a physician must see or how much time can be spent per appointment. 
• Clinical policies. MSOs are barred from influencing clinical protocols, treatment standards, or diagnostic coding practices of the medical practice. Care standards must remain under physician control. 
• Billing, rates, and contracts. MSOs cannot unilaterally set billing or collection policies, service pricing, or negotiate the practice’s contracts with insurers and payors. Decisions regarding fee schedules and entering/exiting insurance networks must be made by practice owners.

MSOs may still perform their core administrative roles, including providing support, consulting, and assistance on these matters, so long as the ultimate decision-making authority rests with the practice’s physicians or licensed owners. Any arrangement allowing a non-physician entity to influence practice governance or remove physician directors is forbidden. Contracts that violate these prohibitions are deemed void and unenforceable by law.

Noncompete and nondisclosure restrictions 

SB 951 also targets restrictive covenants in MSO-physician agreements. Noncompete clauses for medical providers (e.g., physicians, nurse practitioners, physician assistants), a tool frequently used by investors in MSOs, are void and unenforceable under the new Oregon law. This prohibition is subject to certain exceptions, including if the provider subject to the noncompete (i) owns at least 10% of the outstanding ownership in the entity enforcing the noncompete, (ii) owns less than 10% of the outstanding ownership interest in the entity enforcing the noncompete but has not sold or transferred that ownership interest, (iii) was hired by the entity enforcing the noncompete within the past three years and receives documentation supporting the enforcing entity’s protectable interest, (iv) owns the entity enforcing the noncompete and that entity is not party to a management services contract with an MSO, or (v) does not directly engage in providing medical services. Standard nondisclosure agreements that extend beyond protecting bona fide trade secrets or proprietary business information are no longer enforceable, along with blanket non disparagement clauses, except under very narrow conditions.