On June 9, 2025, Oregon's governor signed SB 951 into law, making Oregon one of the most restrictive states in the country with respect to the corporate practice of medicine. This law reflects a growing trend among states to revisit and reinforce the state's corporate practice of medicine (CPOM) doctrine by limiting the influence of management services organizations (MSOs) over professional entities, including professional corporations (PCs).
For digital health companies in particular, the law has implications for how PCs may contract with MSOs when operating in Oregon.
This article highlights the top five takeaways for telemedicine and digital health companies navigating the new regulatory landscape.
1. Prohibits PC Owners from Being Owners or Employees of MSO.
With limited exceptions, the new law prohibits shareholders, directors, and officers of a PC from having ownership in, or being a director, officer, employee, or independent contractor of, an MSO with which the PC has a contract for management services.
The law includes a narrow exception to the ownership restriction, allowing a PC owner to hold an ownership interest in the MSO if that ownership is "incidental and without relation" to the individual's compensation as a shareholder, director, member, manager, officer or employee of, or contractor with, the MSO.
Another exception allows physicians and independent providers who own no more than 10% of the PC to also serve as an independent contractor of the MSO, provided that such individuals are reimbursed at market rates for their services.
Finally, there is an exception for entities engaged in the practice of telemedicine that do not have a physical location where patients receive clinical services in Oregon (other than physical locations necessary for compliance with 21 U.S.C. § 829, which would include physical locations necessary for Drug Enforcement Administration controlled substance registration purposes).
2. Restricts Use of Assignable Option and Stock Transfer Restriction Agreements.
The new Oregon law places significant restrictions on an MSO's use of an assignable option agreements, equity transfer restriction agreements, or any other agreement that would allow the MSO to control or restrict the sale or transfer of a PC's shares.
Under the new law, MSOs generally would only be able to utilize these types of succession agreements in narrowly defined scenarios such as when: (i) a PC owner loses their professional license; is disqualified from owning the PC; is excluded, debarred, or suspended from a federal health care program; is indicted for a felony; or becomes disabled or deceased; and (ii) the PC breaches the contract for management services with the MSO. Accordingly, telehealth companies operating under an MSO-PC model must find alternative ways to foster alignment between the PC and the MSO.
3. Restricts MSO Authority Over Clinical and Operational Decisions.
The legislation expressly prohibits MSOs from exercising ultimate decision-making authority over hiring, firing, setting work schedules and compensation, setting clinical staffing levels, making diagnostic coding decisions, setting prices, setting policies for billing and collection, and negotiating, executing, performing, enforcing, or terminating contracts with third-party payors.
However, the law also states that the MSO can assist with all of these activities, if the services the MSO provides do not constitute an exercise of de facto control over the administrative, business, or clinical operations of the PC in a manner that affects the PC's clinical decision-making or the nature or quality of medical care that the PC delivers.
The restrictions on the MSO are not unprecedented and the new law codifies CPOM principles found in several other states that MSOs may already be following for CPOM compliance. Digital health companies should carefully review their management services agreements and revise them as needed to ensure they reflect the PC's right to have ultimate decision making authority over certain activities.
4. Limits Use of Non-Competes and Non-Disclosures.
The new law makes void and unenforceable (i) non-competition agreements between MSOs and licensed professionals that restrict the practice of medicine or nursing unless they meet narrow statutory exceptions, and (ii) non-disclosure or non-disparagement agreements between licensed professionals and MSOs, hospitals and/or hospital-affiliated clinics, with limited exceptions. These restrictions apply immediately to contracts entered into or renewed after June 9, 2025.
5. Effective Dates for New Law.
The new law went into effect immediately on June 9, 2025, but the CPOM restrictions outlined in sections 1, 2, and 3 above take effect on January 1, 2026, for PCs and MSOs that are incorporated or formed in Oregon, and transfers of ownership, on or after June 9, 2025.
For PCs and MSOs that existed before June 9, 2025, the restrictions become effective on January 1, 2029 (meaning for entities that existed before June 9, 2025, the restrictions do not apply for three years).
Oregon's new law presents compliance challenges for MSO-PC structures. Telemedicine and digital health platforms operating in multiple states should evaluate whether restructuring is needed to ensure compliant operations in Oregon. We will continue to monitor for any legislative changes that affect or improve telehealth opportunities.
Special thanks to Ryan Johnston, a summer associate in Foley's Tampa office, for his contributions to this article.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
