On June 9, 2025, Oregon’s governor signed into law the country’s strictest corporate practice of medicine (CPOM) prohibition. Senate Bill (SB) 951 will severely curtail the involvement of private equity firms and other corporations in the state’s medical practices. This Health Capital Topics reviews the bill and discusses the implications on the healthcare industry.

CPOM laws prohibit corporations or other non-physician entities from practicing medicine or employing physicians.¹ The doctrine was developed in the 19^th century to preserve medical decision autonomy by prohibiting the “commercialization or exploitation”² of medical professionals, under the reasoning that “the practice of medicine requires something more than the financial ability to hire competent persons to do the actual work.”³ Today, state laws and regulations, as well as case law and medical licensing board regulations, have further established CPOM prohibitions.⁴ While approximately 33 states have some form of CPOM regulation in place, they vary significantly in what is regulated.⁵ Nevertheless, the majority of states have adopted all or some of the following measures in the four key areas addressed by the doctrine:

1. Prohibiting business entities from employing physicians to provide medical care;
2. Requiring that licensed medical doctors own and operate facilities providing medical services;
3. Not allowing professional fee splitting between licensed practitioners and non-licensed individuals or entities; and,
4. Mandating that management service agreements (MSAs) adhere to fair market value (FMV) standards.⁶

In particular, MSAs and management service organizations (MSOs) have received increased scrutiny in recent years. MSAs allow outside companies (e.g., private equity, health insurers) to manage “friendly” or “captive” medical practices or groups.⁷ Fees for these management services must be consistent with FMV, and state laws and regulations establish certain standards for decisions that must be made by a licensed physician and how much revenue an MSO may receive from the practice.⁸

CPOM exceptions also differ by state. All states have exceptions for professional corporations, which are designed and created specifically to render a professional service, but states may specify the ownership structure for these organizations.⁹ Many states also allow for physicians to be employed by certain entities, including hospitals (especially nonprofit hospitals), while others allow for restricted non-physician ownership.¹⁰

Although Oregon has historically prohibited CPOM, SB 951 ups the ante by significantly restricting the interaction between MSOs and professional medical corporations.¹¹ Specifically, the law explicitly prohibits MSOs and their owners, directors, officers, and employees from:

• Owning a majority interest in a medical practice they manage;
• Serving as a director, officer, employee or independent contractor to the medical practice they manage (with some exceptions);
• Exercising proxy voting rights;
• Controlling share transfers (e.g., through continuity planning arrangements setting forth the terms of succession or restricting the transfer of stocks); or
• Otherwise exercising de facto control or ultimate decision-making authority over key aspects of the medical practice’s business or clinical operations.¹²

Other expressly MSO-prohibited activities include:

• Negotiating or executing payor agreements on behalf of the medical practice;
• Setting the prices, rates, or amounts charged for medical services;
• Making hiring and termination decisions;
• Setting staffing levels or clinical schedules;
• Making diagnostic coding decisions;
• Setting clinical standards or policies;
• Setting policies for patient, client, or customer billing and collection;
• Advertising under the MSO’s name; and
• Issuing or managing medical practice equity or dividends.¹³

These prohibitions do not apply in limited circumstances, e.g., if the MSO is owned by a professional medical entity, or if a licensed physician serves – without pay – as a director of officer of the MSO.¹⁴

Perhaps most notably, SB 951 prohibits non-licensees (e.g., MSOs) from using contractual or financial arrangements to exert indirect control over medical practice decision making or operations.¹⁵

Other provisions in SB 951 include:

• An increase to the number of practice voting shares and board seats that medical professionals must hold;
• The eradication of most restrictive covenants (e.g., noncompete agreements); and
• The establishment of a private right of action, which will allow medical professionals and their entities to bring civil suit to enforce the law’s ownership and control restrictions (rather than just state regulators);

Interestingly, despite the above added restrictions, SB 951 does not change or increase the current law’s requirement that 51% of a medical clinic be owned by licensed medical providers (a comparatively moderate threshold).¹⁶

The law will be phased in over the next few years. New entities must comply starting January 1, 2026, and preexisting entities must come into compliance by January 1, 2029.¹⁷

As noted by one legal analysis, the Oregon law’s “unprecedented and comprehensive approach to the CPOM is sure to reshape compliance strategy and investment risk profiles across the healthcare sector.”¹⁸ Whether the Oregon law will be a one-off or a harbinger of a new, emboldened wave of MSO regulatory scrutiny remains to be seen. Considering that a number of states have recently considered legislation to increase transparency and control costs, particularly where private equity is involved, in the healthcare industry,¹⁹ healthcare industry stakeholders would be well-served to monitor the legislative efforts of other states to regulate CPOM.