Oregon’s 2025 Corporate Practice of Medicine Legislation:
Frequently Asked Questions

How does the legislation regulate the legal concept of a “friendly PC”?

A common and legal practice in health care when a medical group was bought or managed by a management services organization (MSO) has been to have one or more physicians form a professional corporation (PC) to simplify ownership and management. The MSO and PC would have a friendly business relationship because, generally, the MSO and physician ownership were aligned in operations and business decisions. The business practice generally satisfied Oregon law unless the MSO exerted undue influence over the medical decisions in the PC. SB 951 and HB 3410 seek to curb that undue influence. New restrictions on the MSO and PC relationship will make it much more difficult for a “friendly PC” model to operate in Oregon unless policies and procedures are put in place to ensure the MSO is unable to exert what is known as “de facto control” over clinical practices in the PC. In other words, physicians practicing in the PC will need bona fide authority to sign off on all clinical matters or even override MSO recommendations about clinical matters in the PC.

What does “de facto control” mean?

The term “de facto control” is used in the legislation about management restrictions placed upon an MSO and it is not defined. The dictionary definition of de facto means that something is in effect even though it is not formally recognized, or it can also mean exercising power as if legally constituted. In practice, even though an MSO may not formally have authority to make clinical decisions, through unwritten practice, the MSO may indirectly influence how medical care will be provided. The legislation targets this type of decision making. While an MSO may assist with administrative, business or clinical operations, if that assistance touches on clinical decision making or the nature or quality of medical care, the MSO cannot have the final say. The authority to control those clinical decisions rests with the professional medical entity.

Will capital investments in medical practices be restricted?

As long as investments are not tied to agreements that attempt to exert de facto control over clinical decision making or the nature or quality of medical care, investments are permitted.

Will non-physicians be barred from investing in or owning part of a medical practice?

Oregon’s long-standing corporate practice of medicine doctrine permitted non-licensees to own up to 49% of a practice as well as serve on a practice’s board of directors as long as licensees made up a majority of the directors. This is unchanged by SB 951 and HB 3410.

Will the restrictions on the use of nondisclosure agreements allow for easier access to trade secrets?

While the law does restrict the use of nondisclosure agreements in physician agreements with an MSO, a hospital, or hospital-affiliated clinic, information that is clearly a trade secret or otherwise proprietary still may be protected from further disclosure.

What is a “recruitment investment” and why does that allow for limited use of a physician noncompete provision?

A recruitment investment represents the costs that a professional medical entity as an employer incurs to bring on a new medical licensee employee, including costs for marketing, education, training, bonus, staff support, technology and license fees. The costs must be 20% or more of the employee’s annual salary. Documentation of the costs must be provided to the new hire. The noncompete provision associated with the recruitment investment expires three years from the date of hire unless the professional medical entity is located in a health professional shortage area where the noncompete provision will expire in five years to incentivize recruitment by employers operating in those shortage areas.

Are physician-owned medical practices exempt from the noncompete restrictions?

This will depend upon the nature of the noncompete provision. Most physician noncompete provisions are banned in Oregon, regardless of whether the organization or employer is a hospital or a medical practice. There are narrow exceptions for ownership interests in a medical practice of 1.5% or more or when there is a significant recruitment investment that is documented. The restrictions would not interfere with traditional noncompete provisions included in buy-sell agreements.

Do the restrictions on physician noncompete provisions only apply to new agreements?

No, the general ban on the use of physician noncompete provisions in Oregon that became effective on June 9, 2025, applies not only to future employment or ownership agreements but also to existing agreements unless there is a specific exception.

What are the important effective dates for the new laws?

June 9, 2025, is the first important effective date for a medical licensee with an employment agreement or entering into one because as of that date, noncompetition provisions generally will be banned in the state with a few exceptions.

The next critical effective date is January 1, 2026, when the MSO restrictions in the law become effective for new business relationships that occur on or after June 9, 2025, such as a medical clinic signing an agreement with a management services organization.

The last effective date is January 1, 2029, when the MSO restrictions will be applied to any existing business relationships before June 9, 2025. There are some technical exceptions to these dates that should be reviewed by legal counsel any time a new transaction is anticipated or an amendment to an existing one is considered.

Does our medical practice need to change our existing contract with a management services organization due to the new law?

Existing agreements between a professional medical entity and a management services organization should be reviewed for potential amendment to come into compliance with the new law. Existing PME and MSO relationships will have some time to work through potential compliance issues.

Last updated: September 4, 2025

Disclaimer: This material is for informational purposes only and is not intended to constitute legal advice. The information, examples, and suggestions presented in this material (though reliable) should not be construed as legal or other professional advice. Before applying this information in legal situations, we recommend you consult with legal counsel or other professional advisors.