Regulating Corporate Control in Health Care — Oregon’s Attempt to Revive the CPOM Doctrine

U.S. health care delivery organizations are increasingly being bought and controlled by profit-seeking entities, including private equity firms, publicly traded companies, health care conglomerates, and investor-owned management companies. This trend, often termed health care “corporatization,” has drawn intense scrutiny amid such high-profile cases as Steward Health Care’s recent financial collapse and UnitedHealth Group’s acquisition of a large number of physician practices. States have typically responded to corporatization with measures aimed at increasing transparency of ownership and strengthening the review of proposed transactions. Oregon’s Senate Bill (SB) 951, signed into law in June 2025, takes a different approach: it addresses ownership structure directly, targeting a pervasive loophole in laws that ban corporate ownership of medical practices. The bill offers a promising model for regulating corporate ownership, though substantial carve-outs could limit its reach and distort the competitive landscape in health care. More broadly, the bill’s emphasis on regulation of ownership form — rather than regulation of outcomes — spotlights ongoing debate about how corporatization in medicine should be defined, measured, and addressed.

Oregon’s law focuses on corporate management-services organizations (MSOs),¹ which enter into contracts with physician practices to provide nonclinical administrative and other services, such as billing, marketing, and information-technology services. MSOs have become a vehicle for corporate entities to functionally own medical practices while complying with corporate-practice-of-medicine (CPOM) prohibitions.² CPOM laws, originally designed to prevent conflicts between patient care and obligations to shareholders, require that licensed clinicians, rather than lay corporations, own and control medical practices. But workarounds have emerged. Under the commonly used “friendly physician” model, an MSO acquires the shares of a medical practice from physician owners, dissolves those shares, and installs an MSO-employed physician as the nominal owner of the practice. In addition to acquiring the practice’s assets and gaining legal control over its business and administrative functions, the MSO establishes contractual arrangements that allow it to direct key aspects of practice management and physician oversight.

Oregon’s law includes two primary provisions targeting this loophole. First, the bill prohibits physicians with a financial interest in an MSO from owning a majority stake in a medical practice — an attempt to disrupt the “friendly physician” structure. In an important exception, however, the law voids this provision for physicians who own less than 10% of a medical practice, theoretically allowing six or more “friendly,” MSO-affiliated physicians to collectively hold a majority stake in a practice. The law bans stock-transfer restriction agreements, which allow an MSO to use contractual provisions to exert control over physician owners. In addition, MSOs and affiliated clinicians generally cannot enter into noncompetition, nondisclosure, or nondisparagement agreements. Such arrangements may discourage physicians from leaving or voicing concerns about a practice.

Second, the law requires that medical practices, not MSOs, retain de facto control, or ultimate decision-making authority, over “administrative, business or clinical operations” that could affect quality of care. Examples include hiring and firing clinicians and determining clinician schedules and compensation; establishing clinical standards, billing and collection policies, and prices; and entering into, managing, or terminating contracts with third parties. Physician-owned MSOs are exempt from these stipulations.

SB 951 has elicited strong and divergent reactions. Supporters of the law believe that corporate ownership has resulted in financial returns being prioritized over patient care, undermined local control and accountability, and eroded the service-oriented ethics of the medical profession. Early studies have revealed that prices often rise after private equity acquisitions in health care. More concerning, private equity ownership of hospitals and nursing homes has resulted in poorer quality of care and outcomes.³ Physicians have mixed perspectives on private equity acquisitions and corporate employment, with some expressing concerns about loss of clinical autonomy and long-term effects on clinician well-being.

Meanwhile, critics have argued that the law’s restrictions on corporate ownership may unintentionally disadvantage independent practices that rely on legitimate MSO partnerships for administrative support and access to capital. Although SB 951 allows MSOs to provide nonclinical services and to own physical assets, the bill’s proponents have openly acknowledged their intent to limit the use of investment models in which control rests with a corporate partner. Critics contend that this approach could undermine beneficial partnerships that help independent physician practices remain viable in a consolidating market.

Moreover, the law doesn’t apply to hospitals and other institutional facilities, which routinely exert control over clinical decisions, staffing, and resource allocation; drive price increases; and reduce competition by means of vertical and horizontal consolidation.⁴ Although hospitals have historically been treated more permissively than other controlling entities under CPOM laws, today’s hospital systems differ substantially from the small, community-based charities of the past and often operate like large corporate enterprises. A key critique of SB 951 has therefore been that it targets one form of corporate control over physicians while leaving another arguably more entrenched and wide-reaching form unchallenged. Because of this exemption, the law could accelerate the absorption of independent practices into hospitals and inadvertently strengthen the market power of dominant systems.

To apply CPOM principles more consistently throughout practice settings, states could prohibit hospitals from employing physicians, a policy that exists in some states but generally isn’t enforced. This approach probably isn’t feasible, however, since hospitals have become dominant employers of physicians and are deeply embedded in care delivery. An alternative approach might be to extend some of SB 951’s protections, such as bans on noncompete clauses and protections for clinical decision making, to all physicians, regardless of their employer. Nonetheless, policy tools beyond the scope of CPOM laws — which are focused on preventing nonclinician control over medical practice — may be necessary to address the broader dynamics of hospital-driven consolidation and financialization. These tools could include state merger-review processes; adoption of price caps or site-neutral payments; strengthened oversight of nonprofit health care entities; and greater scrutiny of facility governance, such as bans on sale–leaseback arrangements, in which hospitals sell real estate to investors and lease it back at high long-term cost.

Broadly, as policymakers consider various approaches for addressing health care corporatization, SB 951 emphasizes an enduring question in health policy: Should regulation focus on the structure of ownership and governance or on the outcomes that the structure produces?⁵ Because certain organizational arrangements are understood to pose inherent risks to the public interest, structural oversight has been common in regulated sectors providing essential goods and services, such as banking, telecommunications, and energy. Regulators have historically also relied on structural oversight in health care. Yet recently, there has been movement away from structural regulation and toward outcomes-based oversight, which emphasizes metrics such as cost, access, and quality. Some commentators have argued, for example, that the risks associated with private equity involvement in health care can be mitigated by implementing value-based payment models, which theoretically align profit motives with population health goals. Outcomes-based approaches challenge assumptions that corporate influence over care delivery is inherently negative and that physicians are always reliable stewards of the public interest.

Structure-based approaches, on the other hand, aim to define clear boundaries for control, offering regulators a framework that can allow them to intervene even when outcomes are ambiguous or data are lagging. Structural approaches also prompt critical questions about the organization of health care — questions whose answers depend on subjective assessments. Who should own medical practices? As a matter of principle, does it matter whether medical entities are owned by the clinicians delivering the care or by investors? As the debates about SB 951 illustrate, a central policy challenge in the response to health care corporatization involves deciding whether to regulate on the basis of measurable outcomes or on the basis of values-based judgments about what forms of control should be allowed.

By targeting corporate-led MSOs, SB 951 offers a promising model for addressing the “friendly physician” workaround in state CPOM bans. California has since enacted a related law targeting private equity owners, reinforcing CPOM policies through transparency and oversight mechanisms. Oregon’s approach is more far-reaching in its structural prohibitions, though the law’s carve-outs will most likely limit its practical reach and may distort the competitive landscape. Whether the law curbs corporate influence or reinforces existing market asymmetries will depend on its enforcement, the industry’s response, and subsequent policies. Complementary strategies will almost certainly be needed for addressing corporatization in health care more broadly. These approaches will require normative decisions about what should be valued in the health care system, how the system should be organized, and whom it should benefit.