Our Health Care Group examines two recently enacted Oregon laws that significantly heighten the state’s restrictions on the corporate practice of medicine.
- Together, HB 3410 and SB 951 prohibit management services organization (MSOs) and their contractors from owning or controlling a majority interest in professional medical entities
- Under the new laws, most noncompete, nondisclosure, and nondisparagement agreements between medical licensees and MSOs, hospitals, or clinics are void
- Oregon’s laws create new restrictions for physicians seeking to serve as officers or directors of MSOs
As corporate ownership structures continue to shape the delivery of health care, Oregon has taken a bold step to make sure that clinical decision-making remains independent. The state has enacted two sweeping laws – SB 951 and HB 3410 – that together create perhaps the strictest regulatory framework in the country for the corporate practice of medicine (CPOM). These laws significantly impact management services organizations (MSOs) and professional medical entities (PMEs), including physician-owned professional corporations (PCs).
SB 951 was signed into law on June 9, 2025, and HB 3410 followed on July 24, 2025. While both laws are effective immediately, compliance timelines vary depending on when an entity was formed. These laws represent a significant shift in Oregon’s regulatory approach to MSO–PME relationships and warrant close attention, particularly from national health care management organizations operating in the state.
Key Provisions of the New Legislation
Decision-making control
The laws prohibit MSOs and their employees, contractors, and agents from owning or controlling a majority interest in PMEs. Further, MSOs are restricted from controlling the sale or transfer of ownership interests, assets, or shares in PMEs, except in certain circumstances, and from exercising control over administrative, business, or clinical operations.
The law also creates additional guardrails on the management of PMEs and any ownership interests, including (1) a ban on MSO governance rights unless the MSO holds a minority, noncontrolling interest; and (2) a narrow exception for physician governance participation. A physician may serve as an officer or director of an MSO only if:
- The physician owns less than 25% of the PME.
- The PME owns less than 49% of the MSO.
- The physician does not receive compensation for serving as an MSO officer or director.
- A supermajority vote is required for MSO actions affecting minority owners and their interests.
- The governance structure of the MSO and all PMEs with voting rights existed before January 1, 2024.
Restrictive covenant limitations
Most noncompete, nondisclosure, and nondisparagement agreements between medical licensees and MSOs, hospitals, or clinics are now void under the new laws. However, HB 3410 introduces specific exceptions for noncompetes, which may be enforceable if:
- The licensee owns at least 1.5% of the contracting entity.
- The licensee does not provide direct clinical care.
- The PC provides a recruitment investment equal to 20% of the licensee’s annual salary.
The maximum enforceable duration is five years in shortage areas and three years in all other areas. Retaliation against licensees who refuse to enter into such agreements is expressly prohibited. Importantly, these restrictions are effective immediately and apply retroactively – ensuring that all contracts are subject to the new rules with no grandfathering protections for existing contracts.
Enforcement provisions and remedies
Violations are classified as unlawful trade practices under Oregon law. MSOs may be liable for actual damages, injunctive relief, and other equitable remedies. Officers, shareholders, members, and managers of violating entities are not shielded from liability. The Oregon attorney general may pursue civil penalties, and private plaintiffs may seek punitive damages and attorneys’ fees.
Exceptions and exemptions
There are several notable carve-outs, including for telemedicine providers with no physical presence in Oregon and for coordinated care organizations with preexisting PME contracts or ownership before January 1, 2026. Providers with ownership interest in the PME are also exempt from the noncompete prohibition. Additionally, MSO–PME equal ownership arrangements are permitted if the MSO interest is incidental (e.g., not a controlling or strategic stake) and not tied to or used as a substitute for payment for services (e.g., MSOs cannot receive equity in lieu of management fees or as a performance incentive).
Importantly, the law includes explicit exemptions for hospitals and hospital-affiliated clinics. These entities are also shielded from CPOM enforcement under a long-standing 1975 Oregon attorney general opinion, which cited their licensure and regulatory oversight as justification. However, ambulatory surgical centers are not included in these exemptions, despite having comparable oversight, potentially leaving them uniquely exposed to enforcement risk and operational disruption.
Implementation Timeline
For MSOs and PMEs incorporated or organized on or after June 9, 2025, the laws take effect on January 1, 2026. Existing entities formed before that date must comply by January 1, 2029. The restrictive covenant provisions are effective immediately and apply retroactively to existing contracts. All other general provisions are also effective immediately due to the inclusion of emergency clauses.
Next Steps for Compliance
MSOs and PMEs operating in Oregon should begin by reviewing their ownership structures, governance roles, and contractual arrangements. Management services agreements should be updated to remove any provisions that confer clinical or operational control. Entities should assess whether existing restrictive covenants remain enforceable and determine if they qualify for any exemptions.
Legal counsel should be engaged to assist with restructuring joint ventures, equity arrangements, and governance models. Organizations should also closely follow any potential challenges to the laws based on antitrust, equal protection, and federal preemption arguments.
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