On June 9, 2025, Oregon updated its Corporate Practice of Medicine (“CPOM”) doctrine by passing SB 951, to, among other things, prohibit workarounds to the doctrine by management services organizations (MSOs) and their owners and employees. According to one of the sponsors of the law, it was designed to prevent private equity or corporate owners from exploiting loopholes and exerting control over clinic operations through MSOs, which she argued violates the spirit and intent of Oregon’s CPOM law. The new law is effective on January 1, 2026 for new MSO arrangements, and its requirements apply on January 1, 2029 for those MSO arrangements in existence prior to its passing.
History
Oregon’s CPOM doctrine was established in 1947, and from its beginning, the doctrine was aimed at keeping clinical decision making in the hands of doctors. Its current framework prohibits unlicensed individuals and entities from owning 51% or more of a professional corporation (PC) or from directly employing physicians. (O.R.S. 677.080; O.R.S. 58.375.) The new law expands Oregon’s CPOM doctrine to specifically limit MSOs’ (“[an] entit[ies] that under a written agreement, and in return for monetary compensation, provides management services to a professional medical entity”) ability to own or control a PC.
Scope
In addition to preventing unlicensed individuals from owning 51% or more of a PC, the new law expands Oregon’s CPOM doctrine to prohibit MSOs, or a shareholder, director, member, manager, officer or employee of a MSO, from owning or controlling a majority of shares in a professional medical entity with which the management services organization has a contract for management services. It also limits a MSO and affiliated parties from 1) managing or directing the management of a professional medical entity with which it has a contract for management services; 2) exercising a proxy to vote the shares of the professional medical entity; 3) restricting the sale or transfer of the professional medical entity’s shares, issue shares of stock in the professional medical entity; 4) paying dividends from shares or an ownership interest in a professional medical entity; or 5) acquiring or financing the acquisition of the majority of the shares of the professional medical entity. In effect, the new law seeks to prevent many aspects of a typical “friendly PC” structure, implemented by private equity and other non-professional investors.
The bill also specifically lists prohibited tasks which the legislature has determined to be “de facto” control over decision making. These include:
- 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;
- Settling clinical standards or policies;
- Setting policies for patient, client, or customer billing and collection;
- Advertising a professional medical entity’s services under the name of an entity that is not a professional medical entity
- Setting the prices, rates, or amounts the professional medical entity charges for a medical license’s services; or
- Negotiating, executing, performing, enforcing, or terminating contracts with third-party payors or persons that are not employees of the professional medical entity
The law does not restrict the ability of MSOs entirely. It specifically allows MSOs to “purchase, lease, or take an assignment of a right to possess the assets of a professional medical entity in an arms-length transaction” with a willing opposing party. It allows MSOs to provide advice on non-clinical decisions such as accounting, budgeting, personnel management, estate and facilities management and compliance. MSOs also may set reimbursement criteria for contracts between the professional medical entity and insurers.
Other states may be following suit
While there have been many attempts to leverage CPOM laws to restrict the role of an MSO in practice management, the Oregon law is one of the first to address the topic head on. But it may not be the last. The legislatures in Connecticut and North Carolina have entertained similar bills in the 2025 legislative session, although neither of those bills have had the same success that the Oregon law had.
The Connecticut bill, Raised Senate Bill 1507, never made it out of committee before the legislature adjourned on June 4, 2025. But the subject could be raised again in future legislative sessions.
In North Carolina, the proposed bill SB 570 has been stalled in a Senate Committee since shortly after it was introduced in March. That state’s legislature adjourns at the end of July, so it might be difficult for the bill to make it out this session.
Similar to the health care state transaction laws proliferating over the past several years, more states are likely to follow suit.
What does this mean for MSOs and corporations?
MSOs with operations in Oregon, with the help of health care regulatory counsel, should evaluate their current operations to ensure they comply with SB 951. Areas ripe for evaluation include what percentage of shares are owned by the MSO, whether there is an equity transfer restriction in place, and exactly which tasks are delegated to the MSO. MSOs with existing operations must comply with the new requirements by January 1, 2029, while new entities must comply beginning January 1, 2026.
Reed Smith will continue to follow developments with regard to state regulation of the corporate practice of medicine. If you have any questions, please do not hesitate to reach out to the authors of this post or to other health care lawyers at Reed Smith.