Private equity firms’ ability to invest in medical practices in Oregon may be sharply curtailed under a bill passed this week by the Oregon legislature. On May 29th, a bipartisan supermajority in the Oregon House passed Senate Bill 951 (“SB 951”), previously passed by the Oregon State Senate in April.1 Democratic Governor Tina Kotek has five business days to either pass or veto the bill. If signed, SB 951 will strengthen Oregon’s Corporate Practice of Medicine (“CPOM”) restriction and create the country’s most aggressive limits on private equity and other corporate involvement in medical practice management. Specifically, the law would place first-of-its-kind restrictions on overlapping ownership and control between Management Services Organizations (“MSOs”) and the medical practices they manage. The bill’s supporters claim the legislation is based on a simple principle: “that decisions in exam rooms are being made by doctors, not corporate executives.”2 Meanwhile, opponents of the bill warn that the legislation, if enacted, could significantly chill investment in the state and make doing business in the state challenging.
SB 951 takes specific aim at MSOs, a favored mechanism for private equity firms investing in medical practices in states with CPOM restrictions. CPOM restrictions generally seek to prevent unlicensed investors from influencing the clinical judgment of medical professionals, often by requiring medical practices to be majority- or wholly-owned by licensed physicians. Oregon law requires majority ownership of medical practices. In CPOM states like Oregon, private equity investors frequently form and manage MSOs, which contract with medical practices to manage the finances, operations, and other non-clinical elements of such businesses. To ensure alignment between a corporate-owned MSO and medical practices held by licensed physicians, MSO owners often give medical practice owners some ownership interest in the contracted MSO and require such medical practice owners to enter into equity transfer restriction agreements (“ETRAs”). ETRAs allow MSOs to prohibit or direct the sale of a contracted medical practice. As the business of healthcare has evolved, states have pursued laws that ensure that MSOs are not vehicles for lay investors to achieve de facto ownership of medical practices but have generally not restricted MSO ownership or broadly prohibited ETRAs.
SB 951’s most significant restrictions take the novel approach of targeting these mechanisms for ensuring MSO-medical practice alignment. SB 951 would severely limit overlapping ownership and control between MSOs and the medical practices they manage, prohibiting MSOs (and affiliates such as independent contractors, shareholders, directors, officers, and employees) from owning, controlling shares in, serving on the board of directors of, or participating in the management and decision-making processes of managed medical practices. SB 951 would also limit ETRAs, such that MSOs would only be able to require or restrict the sale of a medical practice under very limited circumstances, such as the revocation of an owner’s medical license. If enacted, SB 951 will require private equity investors and their advisors to reconsider how best to ensure alignment between MSOs and medical practices.
Other provisions of SB 951 limit the role of MSOs in clinical management and controlling healthcare professionals but are not unprecedented. For instance, MSOs would be prevented from exercising ultimate decision-making authority over hiring, 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, or enforcing contracts with third-party payors. In addition, SB 951 prohibits the use of many types of restrictive covenants, including non-compete, non-disparagement, or non-disclosure agreements between MSOs and physicians at partner practices, and renders existing agreements as void and non-enforceable. While these prohibitions would impact the role of MSOs in medical practice management, other states have implemented similar restrictions.
Altogether, if enacted, SB 951 would cement Oregon’s place at the forefront of states regulating private equity firms’ investment in the healthcare industry. Oregon already operates an expansive regime requiring advance notice of material healthcare transactions and approval by the Oregon Health Authority (“OHA”).3 By prohibiting key aspects of the standard MSO-managed practice model, SB 951 would extend the state’s aggressive regulatory posture towards healthcare transactions into the realm of ongoing provider operations.
Oregon’s action could also pave the way for other states to follow suit with respect to the treatment of MSOs, as we have already seen increased scrutiny of healthcare transactions and operations, with a focus on private equity. Notably, legislatures in Indiana, Massachusetts, New Mexico, and Washington have recently passed laws heightening state oversight of healthcare transactions or corporate ownership of healthcare providers, although none have gone as far as SB 951. Additionally, lawmakers are considering similar bills in Connecticut and Pennsylvania. Many of these efforts have gained traction following the bankruptcies of Steward Health Care System and Prospect Medical Holdings, both of which were private-equity backed (although Steward was not private-equity backed at the time it went bankrupt).
Notwithstanding the advancement of SB 951, such bills in other states face strong opposition, and passage is far from certain, exemplified by California Governor Gavin Newsom’s veto of a bill similar to SB 951 last year that would have required the state attorney general to approve certain private equity-backed healthcare transactions.4 Similarly, legislative efforts in this area have failed this year in Colorado, Illinois, Minnesota, and New York. SB 951 itself required multiple attempts to pass and was reintroduced in this current legislative session after failing to pass through the Oregon Senate at the beginning of 2024.
Goodwin will continue to closely monitor the progress of the bill, along with related bills in other states, on Goodwin’s State Healthcare Transaction Notification Laws portal. If signed in the next five business days, private equity firms should take a close look at all present and future healthcare investments in Oregon to ensure compliance with the law. SB 951 would apply to all new investments beginning January 1, 2026, would apply to all investments made before that date beginning January 1, 2029. Further, those parties contemplating new healthcare acquisitions with an Oregon nexus will need to analyze transaction structures and recognize that previous MSO structures may need reconsideration under the new law.
[1] Oregon Senate Bill 951, 2025.
[2] Offices of Representative Ben Bowman, Representative Cyrus Javadi, Representative Lisa Fragala, Oregon Passes First-in-the-Nation Bill to Block Corporate Takeovers of Medical Practices (May 28, 2025).
[3] Through the Health Care Market Oversight (“HCMO”) program, the OHA reviews proposed healthcare deals with the goal of ensuring they support “health equity, lower costs, increased access, and better care.” Oregon’s HCMO regime is one of the country’s most restrictive, requiring extensive disclosures, filings due up to 180 days prior to closing, and OHA approval of noticed transactions.
[4] Goodwin Client Alert, Governor Vetoes California Assembly Bill 3129, Regulating Private Equity- and Hedge Fund-backed Healthcare Transactions (September 30, 2024).
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