On June 9th, 2025, Oregon enacted Senate Bill 9511 (the "Bill"), a law significantly limiting how management service organizations ("MSOs"), specifically those backed by private equity firms, may engage with physician practices. The Bill cites as its purposes the health, safety and welfare of residents and the desire for medical practitioners to exercise medical judgment free from interference from non-healthcare entities that may push for cost-cutting and profit-making.
Summary:
SB 951 prevents MSOs (defined as an "entity that under written agreement, and in return for compensation, provides management services to a medical entity") and their affiliates such as shareholders, directors, and employees from owning or controlling physician practices and having operating control over physician practices2. Under the Bill MSOs and their affiliates (including shareholders and employees), cannot own a majority of shares in a professional corporation. Any shares owned by a physician who is an affiliate of the MSO "count" when calculating whether the MSO owns a majority of the professional corporation's shares.
SB 951 also prohibits services provided by the MSOs that exert operational control on physician practices. This includes decisions about employment and termination, staff or patient scheduling, negotiating payor contracts, decisions on standards of care or pricing, and otherwise setting terms of employment for the physician practice that has engaged the MSO3. MSO functions that the Bill expressly permits include services that do not infringe on the medical judgment of licensed professionals such as payroll, human resources, facilities management, and other administrative support4.
Other facets of the Bill place limits on stock transfer restriction agreements, preventing MSOs from having contractual rights to remove or replace physician equity holders except in limited circumstances5. The Bill also prohibits the use of restrictive covenant clauses, voiding the enforceability of non-competition and non-disclosure agreements between licensed medical professionals and MSOs that restrict the practice of medicine6.
Implications of the Bill include reduced control by private equity firms over the medical practices they hold stake in, altered investment structures, increased scrutiny, and the potential for litigation and other enforcement mechanisms.
Analysis:
While the language of the Bill, like California's AB 3129 considered last year, introduces some statutory limits on the types of activities MSOs may engage in (cite to section discussing MSO limits), those limitations do appear to codify generally accepted corporate practice of medicine restrictions. The more impactful changes will likely be those restrictions on the ability of the PC owner to hold equity in, or be employed by a related MSO, and heavily restricting the use of stock transfer restrictions and other types of "continuity planning" mechanisms may require fundamental changes to how typical PE-backed "friendly MSO-PCs" operate in Oregon.
It is important to note that some of the strictest language of the Bill around equity ownership may not apply to entities that engage exclusively in telemedicine practice and that do not have a physical presence where patients in Oregon receive clinical services7, which may provide some flexibility for digital health and virtual care companies. This same carve out however does not apply to the restriction on continuity planning agreements.
MSOs incorporated or organized in Oregon prior to the Bill's adoption (June 9, 2025) have until January 1, 2029 to implement changes needed to comply with most of its requirements, while new MSOs will need to comply by January 1, 20268. One notable exception is the prohibition on non-compete agreements and other restrictive covenants, which takes effect immediately. This extended compliance timeline leaves open the possibility that other changes might clarify some clauses in the Bill, or create additional compliance obligations. Already, the Oregon Legislature is considering House Bill 34109, which would amend the language adopted in SB 951 to, among other things, include MSO contractors in the list of parties that could not own or control a majority interest in a professional entity that the MSO has engaged with.
The Bill adds to Oregon's reputation as a state that aggressively polices its corporate practice of medicine doctrine. While the MSO restrictions in the Bill do not include specific penalties, it seems reasonable that Oregon regulators may treat violations as the unlicensed practice of medicine by the MSO10, which carries criminal penalties11, in addition to the possibility of medical board discipline for Oregon licensees involved in the MSO-PC. Furthermore, the Bill also creates a private right of action, allowing any Oregon-licensed physician who has experienced an ascertainable loss due to an MSOs violation of the Bill's requirements to recover direct and punitive damages, and attorney's fees.
Conclusion:
Navigating SB 951's requirements will likely be complex, and may even require PE-Backed healthcare practices to adopt novel compliance and risk mitigation approaches that will not be needed in other states. There are also likely to be unanticipated impacts of the Bill that will be uncovered as it is implemented. Lastly, as we noted in a previous article, this is unlikely to be the last we hear from states looking to scrutinize and regulate MSOs more closely.
For now, PE-Backed healthcare practices, and other organizations currently operating as an MSO-PCs in Oregon should review their employment and other agreements with physicians to assess the impact of the new restrictions on the use of restricted covenants, which are already in effect, and businesses considering entering into the Oregon market that do not currently have a presence there should carefully analyze the Bill's requirements to ensure that the operation of its MSO-PC structure will be in compliance when those requirements take effect at the end of this year.
To discuss how these potential changes in law may affect your business, and for help navigating Oregon's new compliance landscape, don't hesitate to reach out to a member of the Michael Best healthcare team.
* Special thanks to Raabia Sheikh (University of Wisconsin Law School, Class of 2026) for contributing to this article.
Footnotes
1. https://olis.oregonlegislature.gov/liz/2025R1/Measures/Overview/SB951
2. Sec. 1, subsec. 2(a)(A); S.B. 951, 83rdLeg. 2025 Reg. Sess. (OR 2025)
3. Sec. 1, subsec. 2(a)(H); S.B. 951, 83rdLeg. 2025 Reg. Sess. (OR 2025)
4. Sec. 1, subsec. 2(c)(A); S.B. 951, 83rdLeg. 2025 Reg. Sess. (OR 2025)
5. Sec. 1, subsec. 2(a)(D); S.B. 951, 83rdLeg. 2025 Reg. Sess. (OR 2025)
6. Sec. 7; S.B. 951, 83rdLeg. 2025 Reg. Sess. (OR 2025)
7. Sec. 1, subsec. 4; S.B. 951, 83rdLeg. 2025 Reg. Sess. (OR 2025)
8. Sec. 9, subsec. 2, 3; S.B. 951, 83rdLeg. 2025 Reg. Sess. (OR 2025)
9. https://olis.oregonlegislature.gov/liz/2025R1/Measures/Overview/HB3410
10. ORS § 677.080(4)
11. ORS § 677.990
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.
