Oregon Enacts Nation’s Most Restrictive CPOM Law | Wilson Sonsini Goodrich & Rosati

On June 9, 2025, Oregon enacted the most restrictive corporate practice of medicine (CPOM) law in the country (SB 951), which imposes substantial restrictions on the ownership and control of professional medical entities (PCs)¹ and the conduct of management services organizations (MSOs).² SB 951 follows Oregon’s healthcare transaction notification law (effective since 2022), which requires parties to seek approval from the Oregon Health Authority for certain transactions involving healthcare entities. These laws are seen as a direct response to alleged consolidation in Oregon’s healthcare market led by corporate, venture capital, and private equity relationships with independent medical practices.³

SB 951 is effective immediately, but the provisions restricting MSO ownership and control of PCs take effect on January 1, 2026, for newly formed entities, and on January 1, 2029, for existing entities. Additionally, the restrictions on noncompetition, nondisclosure, and nondisparagement agreements only apply to contracts entered into or renewed on or after June 9, 2025.

Executive Summary

• Oregon’s new law imposes sweeping limits on how MSOs can interact with and support PCs, changing the risk profile for investors, buyers, and founders in the healthcare space.
• Key restrictions apply to both clinical and business operations including restrictions on controlling or restricting PC share transfers (e.g., through Continuity Planning Agreements), negotiating or executing third-party payor agreements, and overlapping roles between PC owners and MSO personnel (e.g., PC owners taking independent contractor/medical director roles at MSOs in exchange for equity).
• Entities that operate exclusively via telemedicine and do not maintain a physical location in Oregon aren’t off the hook and are subject to a patchwork of requirements.
• Physician noncompetes and nondisparagement agreements are enforceable only if certain conditions are satisfied.
• Enforcement risk is substantially heightened as PCs and physicians may now bring civil lawsuits to challenge improper MSO ownership or control.

Action Steps to Take with Knowledgeable Healthcare Counsel

• Assess whether SB 951 applies to the company’s operations, including whether the company has a nationwide MSO-PC model, has operations in Oregon, or works with a PC that is foreign qualified in Oregon.
• Evaluate and amend MSO-PC agreements, organizational documents, and payor agreements for compliance with the new law and to ensure PC independence in clinical and business decision-making, while still maintaining business objectives and goals.
• Strategize on timing and execution of necessary structural changes to meet deadlines, including allowing significant time for renegotiations with existing physicians and third-party payors, and the need to potentially recruit and identify new PC owners.
• Strategize on how to reduce litigation risk given the new ability for civil enforcement.

The following sections provide a detailed analysis of SB 951, including the scope of the restrictions, key definitions, and implications of the law, including impact on common contract terms, organizational structures, investment strategy and physician relationships.

Background and Initial Considerations

The MSO-PC model requires several different agreements, but two are particularly important: the Administrative Services Agreement (ASA) and the Continuity Planning Agreement (CPA). The ASA establishes the management services the MSO will provide to the PC in exchange for an administrative fee. The CPA frequently specifies the circumstances under which the PC owner can transfer their shares in the PC to another person/entity and requires the MSO’s consent for such a transfer. The CPA also outlines specific circumstances under which the physician owner transfers their shares.

In recent years, legislators have attempted to impose a variety of restrictions on MSOs and the MSO-PC model. Now, with the passage of SB 951, Oregon has created substantial restrictions on the MSO-PC model that may be replicated in other states. For example, states such as California (AB 1415 and SB 351) and Washington (SB 5387) have introduced similar legislation this year.

In response to SB 951, companies, founders, and investors utilizing an MSO-PC model in Oregon will need to evaluate their ownership and management structures and may need to rework key MSO-PC agreements to align with the new law. In particular, organizations will need to consider changes to their CPAs, ASAs, medical director arrangements, relationships with PC owners, and their approach to negotiating and executing agreements with third-party payors, vendors, and suppliers.

Continuity Planning Agreements

SB 951 includes an explicit ban on agreements (subject to certain limited exceptions) that allow an MSO to control or restrict the sale or transfer of PC shares. CPAs are an important element in existing MSO-PC models and allow for the replacement of the PC owner if they can no longer perform their duties. States like California and New Jersey have imposed limited restrictions on CPAs through case law and agency guidance; however, Oregon is the first state to explicitly ban their use. Companies and investors may need to amend their existing CPAs to ensure the MSO cannot control or restrict the sale or transfer of PC shares.

MSO Advisors and Medical Directors

A key mechanism to ensure strategic alignment between the MSO and the PC is for the PC owner to maintain roles in both entities. For example, a PC owner is often an officer and director of the PC and serves as medical director or advisor to the MSO through a non-clinical consulting relationship (often receiving equity as a form of compensation). However, with certain exceptions, SB 951 prohibits MSO shareholders, directors, members, managers, officers, or employees from taking on roles like director, employee, or contractor, within the PC. Therefore, in many cases, a PC owner will not be able to receive equity in the MSO as compensation for advisor services or hold a leadership position in the MSO, which could limit integration between the MSO and the PC and affect patient-centered decision making, patient safety and satisfaction, and business continuity.

Third-Party Payor, Vendor, and Supplier Agreements

MSOs regularly assist PCs by credentialing PC providers with various payors and negotiating and executing agreements with third-party payors, vendors, and suppliers on the PC’s behalf. However, SB 951 prohibits de facto control of a PC by an MSO and requires that the PC must have ultimate decision-making authority over clinical decisions and quality of care. SB 951 specifically states that this prohibition on de facto control means an MSO cannot enter into, execute, or terminate contracts with third-party payors, vendors, and suppliers. However, the law does contain an exception that allows an MSO to advise a PC on such agreements, so long as the PC maintains ultimate decision-making authority over whether to enter into, execute, or terminate the agreement. Going forward, MSOs operating in Oregon should take an advice-only approach to such agreements and ensure that ultimate decision-making authority rests with the PC. For existing agreements, companies should consider whether any third-party payor agreements need to be amended and/or assigned to the PC.

Detailed Analysis and Action Items

Restrictions on Ownership and Control of PCs

Pursuant to SB 951, with certain exceptions, an MSO, or a shareholder, director, member, manager, officer, or employee of an MSO may not:

1. Own or control a majority of shares in a PC*
2. Serve as a director or officer of, be an employee of, work as an independent contractor with or receive compensation from the MSO to manage or direct the management of a PC*
3. Exercise proxy control or vote the shares of a PC*
4. Control or restrict the sale or transfer of a PC’s shares, interest, or assets
5. Issue shares of stock, or cause a PC to issue shares of stock, in the PC, in a subsidiary of the PC, or in an affiliate of the PC
6. Pay dividends from shares or an ownership interest in a PC
7. Acquire or finance the acquisition of the majority of the shares of a PC

*These sections do not apply to an entity that is engaged in the practice of telemedicine and does not have a physical location where patients receive clinical services in Oregon.

Action Items

Companies and investors should consider:

• Reviewing PC ownership and management structures to determine whether it violates SB 951 and, if so, consider divesting ownership or management responsibilities to qualified personnel.
• Amending CPAs to remove any MSO restrictions on the sale or transfer of a PC’s shares, interest, or assets.
• Amending PC organizational documents to remove any MSO authority to issue stock, pay dividends, or exercise proxy control of PC shares.

Additionally, an MSO may not exercise de facto control over the administrative, business, or clinical operations of a PC in a manner that affects the PC’s clinical decision making or the nature or quality of medical care that the PC delivers. De facto control includes, but is not limited to, exercising ultimate decision-making authority over:

1. Hiring or terminating, setting work schedules or compensation for, or otherwise specifying terms of employment of physicians
2. Setting clinical staffing levels, or specifying the period of time a physician may see a patient, for any location that serves patients
3. Making diagnostic coding decisions
4. Setting clinical standards or policies
5. Setting policies for patient, client or customer billing and collection
6. Advertising a PC’s services under the name of an entity that is not a PC
7. Setting the prices, rates, or amounts the PC charges for a physician’s services
8. Negotiating, executing, performing, enforcing, or terminating contracts with third-party payors or persons that are not employees of the PC

Notably, an MSO is not prohibited from offering these services if the PC maintains ultimate decision-making authority.

Action Item

Companies and investors should consider revising ASAs with PCs to ensure the PC maintains ultimate decision-making authority over clinical decision making or the nature or quality of medical care that the PC delivers.

Nonclinical MSO Activities Not Prohibited

Under SB 951, MSOs are not prohibited from:

1. Purchasing, leasing, or taking an assignment of a right to possess the assets of a PC in an arm’s-length transaction with a willing seller, lessor, or assignor
2. Providing support, advice, and consultation on all matters related to a PC’s business operations
3. Advising on a PC’s participation in value-based contracts, payor arrangements, or contracts with suppliers and vendors

Action Item

Companies and investors should consider revising ASAs (as applicable) to explicitly allow for these activities.

Changes to Continuity Planning Agreements

The new law specifies that, while an MSO may not control or restrict the sale or transfer of a PC’s shares, interest, or assets, a PC may enter into an agreement to control or restrict a transfer or sale of the PC’s stock, interest, or assets under certain conditions, including:

1. The suspension or revocation of an owner’s medical license
2. An owner’s disqualification from holding stock or an interest in the PC
3. An owner’s exclusion, debarment, or suspension from a federal healthcare program or an investigation that could result in the owner’s exclusion, debarment, or suspension
4. An owner’s indictment for a felony or another crime that involves fraud or moral turpitude
5. The PC’s breach of a contract for management services with an MSO
6. The death, disability, or permanent incapacity of a PC owner

This means that an MSO can no longer direct or control the transfer of shares under a CPA, and instead, the PC must enforce any transfer restrictions and facilitate any transfer of shares.

Action Item

Companies and investors should consider revising CPAs to remove the MSO as a party and specifying that the restrictions listed above are the only permitted restrictions on transfer of the PC shares.

Exceptions to Ownership and Control Restrictions

The ownership and control restrictions listed above do not apply to:

• an individual who provides healthcare services for or on behalf of a PC if the individual does not own more than 10 percent of the PC, is not an owner, office, or employee of the MSO, and is compensated at fair market value
• an individual who owns shares or an interest in a PC and an MSO if the individual’s ownership of shares or an interest in the MSO 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
• a PC and the shareholders, directors, members, managers, officers, or employees of the PC if the PC functions as an MSO or owns a majority of the shares of or interest in the MSO
• a physician who is a shareholder, director, or officer of a PC and who also serves as a director or officer of an MSO if:
  • the physician does not receive compensation from the MSO for serving as a director or officer of the MSO;
  • an action of the MSO that materially affects the professional, ownership or governance interests of minority owners in the MSO requires a vote of more than a majority of the shares of the MSO that are entitled to vote, including the shares held by PC with voting rights in the MSO; and
  • the MSO and all of the PCs that have voting rights in the MSO were incorporated or organized and entered into agreements for the provision of management services, before January 1, 2026

Changes to Removal of Directors and Officers

Under SB 951, a PC may only remove a director or officer by a majority vote of shareholders, if the director or officer:

• violated a duty of care, a duty of loyalty, or another fiduciary duty to the PC;
• was the subject of a disciplinary proceeding by the Oregon Medical Board in which the board suspended or revoked the director’s or officer’s license to practice medicine in Oregon;
• engaged in fraud, misfeasance, or malfeasance with respect to the director’s or officer’s performance of duties for or on behalf of the PC;
• resigned, separated, or was terminated from employment with the PC; or
• failed to meet standards or criteria the PC established for a position as a director or officer.

Action Item

Companies and investors should consider revising PC bylaws to remove any director or officer removal rights beyond those listed above.

Noncompetition Agreements

Noncompetition agreements (as defined in SB 951) between a PC and a physician are now void and unenforceable unless:

• the physician owns an interest (as defined in SB 951) in the PC;
• the agreement is valid for no more than three years after the date the physician was hired;
• the physician is a shareholder of the PC and the PC does not work with an MSO; or
• the physician does not provide healthcare services.

SB 951 contains additional details on these exceptions, and we recommend reviewing them closely with employment counsel.

Action Item

Companies and investors should consider reviewing physician noncompetition agreements to determine whether any could be voided by SB 951. If so, attempt to renegotiate such agreements within the bounds of SB 951.

Nondisclosure and Nondisparagement Agreements

Nondisclosure and nondisparagement agreements between a physician and an MSO are now void and unenforceable unless:

• the MSO terminated the physician’s employment or the physician voluntarily left employment; or
• the agreement is part of a negotiated settlement between the physician and the MSO.

Additionally, an MSO may not enforce a nondisclosure agreement or nondisparagement agreement against a physician for the physician’s good-faith report of information that the physician believes is evidence of a violation of state or federal law to a state or federal authority.

Action Item

Companies and investors should consider reviewing physician nondisclosure and nondisparagement agreements to determine whether any could be voided by SB 951 and, if so, maintaining a list of such agreements to reference when making termination or settlement decisions.

Enforcement

PCs and physicians can now bring civil actions to enforce restrictions on MSO ownership and control of PCs and noncompetition, nondisclosure and nondisparagement agreements. Remedies available under the new law include actual and punitive damages, an injunction against the prohibited act, attorneys’ fees, and other equitable relief as the court deems appropriate. Companies and investors should develop strategies to minimize the risk of such civil actions brought by disgruntled PC owners and physicians.

How Wilson Sonsini Can Help

Wilson Sonsini’s Digital Health team is actively advising companies on:

• compliance with SB 951 tailored to your structure, risk tolerance, and timeline;
• revising agreements to reduce litigation exposure and regulatory risk;
• structuring compliant but creative nationwide MSO-PC models that consider new Oregon restrictions, while also maintaining company and investor value;
• anticipating similar laws in other states and continued modifications to MSO-PC models;
• navigating investor due diligence on MSO-PC models and new enforcement risks, including necessary changes to representations and warranties; and
• building long-term company value by creating compliant MSO-PC structures and operations as a valuable asset and a strategic differentiator in a competitive market.

^[1]We use the term “PC” in this alert since it is the most common form of professional medical entity, but SB 951 also applies to domestic and foreign limited liability companies, partnerships, and limited partnerships.

^[2]If you’d like to learn more about the corporate practice of medicine, please see our recent client advisory.

^[3]Notably, SB 951 passed despite heavy opposition from large provider organizations.