When Oregon Governor Tina Kotek signed Senate Bill 951 on June 9, 2025, healthcare attorneys across the country took notice. Legal commentators at Kirkland & Ellis called it "the nation's toughest limits on private equity in physician practices." McDermott Will & Emery said it "revives" Oregon's restrictive CPOM doctrine. Ropes & Gray published an alert the same week it passed.

If you operate a Management Services Organization anywhere near Oregon — or if you are building a multi-state healthcare business that includes Oregon — SB 951 is not a state-level footnote. It is a meaningful structural constraint that changes how MSO-PC arrangements can be documented, financed, and governed. This guide explains what the law actually says, who it hits, and what founders and investors need to do before the deadlines arrive.

Background: Why Oregon Acted

Oregon, like most states, has operated under a CPOM doctrine that prohibited non-physician corporations from practicing medicine or employing physicians to do so. In practice, however, the standard MSO-PC structure — where a non-physician entity owns the MSO and a physician nominally owns the PC — had become so well-established that regulators struggled to distinguish genuine physician governance from corporate control dressed up in legal paperwork.

Oregon legislators identified three specific mechanisms that allowed investors to retain functional control over physician practices even when they did not own them on paper: cross-ownership (MSO insiders holding majority interests in the contracting PC), Stock Transfer Restriction Agreements (STRAs) that gave investors a veto over who could own the PC, and operational control clauses embedded in management services agreements. SB 951 directly targets the first two.

What SB 951 Actually Prohibits

The Ownership Overlap Ban

The law's core restriction is clean and blunt. Shareholders, directors, members, managers, officers, and employees of an MSO may not collectively or individually own a majority interest in a Professional Medical Entity (PME) — essentially a PC — that contracts with that MSO. The concern is obvious: if the same people who run the MSO also control the PC, the physician-ownership structure is cosmetic at best.

For many PE-backed healthcare companies, this creates an immediate structural problem. It is common for investors to hold equity positions in both the MSO (through which they finance the business) and the PC (through stock transfer agreements or nominee arrangements). Under SB 951, that overlap is prohibited in Oregon if it adds up to majority control of the PC.

The STRA Restriction

Stock Transfer Restriction Agreements have long been the investor's insurance policy in MSO-PC structures. By requiring the physician PC owner to transfer their shares back to the investor or a designated successor under specified conditions, STRAs let investors maintain economic control even when they cannot legally own the PC outright.

SB 951 prohibits STRAs in Oregon, with only a narrow list of exceptions. The law permits STRAs that are triggered by:

What is conspicuously absent from that list: investor exit events, funding rounds, change-of-control transactions, and operational disagreements. Under SB 951, an Oregon physician PC owner cannot be contractually forced to transfer their shares simply because a private equity backer wants to close a deal or restructure the business. That is a major departure from standard MSO-PC documentation.

Clinical Independence Is Unchanged

One thing SB 951 does not change is the existing prohibition on MSOs making clinical decisions. Oregon law already prohibited that. The new law does not add new clinical independence requirements — it tightens the structural rules around who can hold ownership and how ownership can be transferred.

Who Is Affected and When

New MSOs (Formed On or After June 9, 2025)

If your Oregon MSO was formed on or after the date the Governor signed SB 951, you must be in compliance with the ownership overlap ban and the STRA restrictions by January 1, 2026. If you are forming a new Oregon MSO-PC structure today, you must comply immediately.

Existing MSOs (Formed Before June 9, 2025)

Existing Oregon MSOs have a longer runway: the compliance deadline is January 1, 2029. That may sound comfortable, but given that restructuring cross-ownership arrangements typically requires negotiating with investors, revising operating agreements, and potentially recapitalizing the MSO, early action is strongly advisable. The closer you get to 2029, the harder it will be to renegotiate terms when everyone knows the deadline is fixed.

The Mental Health Exemption

Oregon lawmakers specifically excluded mental health and substance use disorder treatment facilities from SB 951. The reasoning was pragmatic: Oregon faces a significant behavioral health workforce shortage, and legislators worried that applying SB 951 to behavioral health providers could reduce access to care by deterring the investment structures that fund many of those facilities. If your Oregon operation is exclusively behavioral health, you are not subject to SB 951's ownership restrictions. However, mixed-service platforms that include both medical and behavioral health should get legal guidance on how the exemption applies.

What This Means for Multi-State Operators

If Oregon represents one state in a broader multi-state expansion, SB 951 complicates your cap table design. The same investor who holds minority-or-majority equity in your MSO may also hold STRA rights over your PC in California, Texas, and New York. Those structures may be fine in those states under current law. But if Oregon is added to the footprint, you will need Oregon-specific PC documentation that is clean of the prohibited ownership overlaps and STRA triggers — which means maintaining a separate documentation strategy for Oregon.

SB 951 is not just an Oregon problem. It is a preview of where other states are heading. California, Massachusetts, and Connecticut have all moved to restrict PE influence in healthcare in the past two years. Oregon simply went the furthest.

How to Prepare Your MSO-PC Structure for SB 951

Step 1: Audit the Ownership Stack

Map every person who holds a role at your Oregon MSO — shareholder, director, member, manager, officer, employee — and determine whether any of those individuals also hold a majority of the Oregon PC's equity. If they do, your current structure is non-compliant with the new law.

Step 2: Review All STRAs

Pull every stock transfer restriction or put/call agreement tied to your Oregon PC. Identify which trigger events are outside the SB 951-permitted list. Any STRA that can be triggered by an investor exit, a change-of-control, or a business disagreement needs to be renegotiated. Your Oregon PC physician owner needs to know that these provisions are being removed — and you need their cooperation to do it properly.

Step 3: Separate Oregon PC Governance

Consider building a standalone Oregon PC governance structure that is deliberately separated from the MSO's investor group. Oregon physicians who own the PC should be independent of the MSO's capitalization. The PC operating agreement should vest genuine decision-making authority in the physician owner, not in committees that mirror the MSO's board.

Step 4: Update Your MSA

Review your Oregon Management Services Agreement for any provisions that give the MSO control over clinical hiring, patient protocols, visit quotas, or revenue thresholds. These provisions were already problematic under pre-SB 951 Oregon CPOM law, and the new law makes the regulatory environment even less tolerant of functional control masquerading as administrative services.

Step 5: Plan for Successor PC Owners

Because STRAs can now only be triggered by the limited list above, you need an alternative plan for PC ownership succession. What happens if your Oregon physician PC owner retires or leaves the specialty? Draft a clear succession process in your PC operating agreement that identifies how a replacement physician owner will be identified, vetted, and brought on — without relying on STRA mechanics that are now prohibited.

The Broader Signal

Oregon SB 951 is the clearest legislative statement yet that state lawmakers are not satisfied with MSO-PC structures as currently documented. Across the country — in California with AB 1415 and SB 351, in Massachusetts with its new PE reporting requirements, and in Oregon with SB 951 — the direction of regulation is the same: clinical governance must be genuine, not nominal, and investor control mechanisms disguised as management agreements will face increasing scrutiny.

For founders building healthcare businesses today, the takeaway is not that MSO-PC structures are under threat. They remain the standard and legally required compliance vehicle in most CPOM states. The takeaway is that those structures need to be built correctly from the start — with actual physician independence, legitimate management fee structures, and governance documents that reflect real operational separation between the MSO and PC.

If your existing structure was built quickly to get to market, now is the time to audit it before a regulator or acquirer does it for you.