An Update on the Implementation and Implications of Oregon's New CPOM Laws

From the West Coast Healthcare Desk

Current litigation over Oregon's new corporate practice of medicine (CPOM) restrictions signals that ensuring compliance is critical to mitigating risk, and organizations should not assume that enforcement will be limited to public regulators because the law specifically includes a private right of action. Oregon has long recognized the CPOM doctrine through judicial precedent, beginning with a 1947 Oregon Supreme Court decision prohibiting corporations from owning medical practices or employing physicians.

Prior to 2025, Oregon's statutory framework primarily addressed physician ownership requirements for professional corporations (PCs). Enacted in 2025 as Senate Bill (SB) 951 (effective June 9, 2025) and subsequently amended by House Bill (HB) 3410, the amendments¹ revised Oregon's existing CPOM statute for PCs, codified at ORS Section 58.375 and Section 58.376, and added new restrictions for management services organizations (MSOs) providing management services to PCs, which are codified at ORS Section 676.555 (collectively referred to herein as the CPOM Law).

The CPOM Law significantly expands this framework by imposing detailed ownership, control, and governance restrictions on MSOs and their affiliated individuals while creating parallel requirements for physician, nurse practitioner and physician associate PCs. The CPOM Law also limits the use of noncompetition, nondisclosure and nondisparagement provisions in contracts with clinicians.

Organizations operating in Oregon that utilize MSO-PC structures can still operate but will need to evaluate their ownership models, governance systems and practitioner contracting arrangements against the statute's requirements and consider any needed adjustments. Holland & Knight previously analyzed CPOM reform efforts and the evolving regulatory landscape for MSO-PC structures in other jurisdictions, and this alert continues that coverage as Oregon charts new ground.

Violations of the CPOM Law constitute unlawful trade practices under Oregon law. Accordingly, it provides for civil penalties and injunctive relief enforced by the Oregon Attorney General and also creates a private right of action. Private litigants may seek actual damages, punitive damages, equitable relief and attorneys' fees.

This Holland & Knight alert analyzes recent developments and lingering questions related to the CPOM Law, including the first significant private lawsuit filed in April 2026. It also summarizes the law's principal compliance requirements, discusses available exemptions and their scope, and suggests practical steps for organizations assessing their compliance obligations.

Early Enforcement: Eugene Emergency Physicians, P.C. v. PeaceHealth, et al.

In April 2026, Eugene Emergency Physicians P.C. (EEP), an Oregon-based emergency medicine physician group, filed a motion for preliminary injunction in the U.S. District Court for the District of Oregon against PeaceHealth (a Washington nonprofit hospital system), ApolloMD Inc. (a Georgia-based management services organization), ApolloMD Business Services LLC and Lane Emergency Physicians LLC (LEP), a newly formed Oregon limited liability company (LLC). The lawsuit stems from PeaceHealth's decision to not to renew its contract with EEP, which staffed PeaceHealth with emergency physicians at three of its hospitals in Oregon for more than three decades, and instead contract with ApolloMD for emergency management services. PeaceHealth announced in February 2026 that the transition to ApolloMD at two hospitals would occur by June 1, 2026, and at the third hospital by July 1, 2026. PeaceHealth's announcement prompted a letter from Oregon Gov. Tina Kotek asking PeaceHealth reconsider or delay the transition and a petition from more than 6,800 EEP supporters urging PeaceHealth to renew EEP's contract.

EEP alleges that ApolloMD is not registered to conduct business in Oregon or majority-owned by Oregon-licensed physicians and that LEP, wholly owned by a single Illinois-based physician affiliated with ApolloMD, was created as a "front organization" to sidestep Oregon's CPOM laws. EEP further alleges that the proposed arrangement violates the CPOM Law because ApolloMD and its MSO exercise prohibited de facto control over LEP by negotiating and executing contracts on LEP's behalf, recruiting physicians under the ApolloMD name, dictating staffing levels and compensation terms, and publicly holding itself out as the entity managing the emergency departments. EEP has moved for a preliminary injunction motion to allow EEP to continue providing services at PeaceHealth hospitals, prohibit ApolloMD and LEP from violating Oregon's CPOM Law, and dissolve LEP or prohibit it from conducting business in Oregon. An evidentiary hearing for the plaintiff's preliminary injunction began on April 27, 2026, during which U.S. District Judge Mustafa Kasubhai heard witness testimony from doctors at EEP and members of leadership for ApolloMD, LEP and PeaceHealth. After witness testimony concluded on May 4, 2026, Judge Kashubhai expressed skepticism that the arrangement between PeaceHealth, LEP and ApolloMD, for which there are no written contracts, complied with Oregon's CPOM law. Closing arguments are set for May 6, 2026.

This litigation represents the first major test of Oregon's strengthened CPOM framework and may provide critical interpretive guidance on 1) the threshold for establishing "de facto control" under the CPOM Law, 2) when a newly formed professional entity may be deemed a vehicle for an out-of-state corporate interest and 3) how the statute applies to traditional MSO-PC structures. Organizations operating in Oregon or contemplating market entry should monitor developments of this case and any subsequent litigation closely.

Restrictions on MSO Ownership, Control and Dual Roles

When an MSO provides management services to a professional medical entity (PME) under a written contract for monetary compensation, ORS Section 676.555 prohibits the MSO and its shareholders, directors, members, managers, officers, employees and contractors from:

• owning or controlling, individually or in combination with the MSO or any other MSO shareholder, director, member, manager, officer, employee or contractor, a majority of shares in a PME with which the MSO has a management services contract
• exercising a proxy or taking or exercising on behalf of another person a right or power to vote the shares of a PME with which the MSO has a management services contract
• controlling or entering into an agreement to control or restrict the sale or transfer of a PME's shares, interest or assets or otherwise permitting a person other than a medical licensee to control or restrict the sale or transfer of the PME's shares, interest or assets, except under limited for-cause conditions
• issuing shares of stock, or causing a PME to issue shares of stock, in the PME, a subsidiary of the PME or an affiliate of the PME
• paying dividends from shares or an ownership interest in a PME
• acquiring or financing the acquisition of a majority of the shares of a PME, or
• exercising "de facto control" over administrative, business or clinical operations of a PME in a manner that affects the PME's clinical decision-making or nature or quality of medical care delivered

ORS Section 676.555 defines PMEs as:

• PCs organized for the practice of medicine (ORS Section 58.500)
• multidisciplinary PCs involving physicians, physician associates and nurse practitioners (ORS Section 58.503)
• naturopathic medicine PCs and LLCs, partnerships and limited partnerships organized for a "medical" purpose (ORS Section 58.506), or
• an LLC, a foreign LLC, partnership, foreign partnership, limited partnership or foreign limited partnership with authority to transact business in the state and organized for a medical purpose²

De facto control under ORS Section 676.555 includes, but is not limited to, exercising ultimate decision-making authority over:

• hiring or terminating, setting work schedules or compensation for, or otherwise specifying terms of employment of medical licensees
• setting clinical staffing levels or specifying the period of time a medical licensee may see a patient for any location that serves patients
• making diagnostic coding decisions
• setting clinical standards or policies
• setting policies for patient, client, or customer billing and collection
• advertising a PME's services under the name of an entity that is not a PME
• setting the prices, rates or amounts the PME charges for a medical licensee's services, or
• negotiating, executing, performing, enforcing or terminating contracts with third-party payers or persons who are not employees of the PME

Dual-Role Restrictions. A critical feature of the CPOM Law as it relates to MSO-PC structures is the restriction on individuals serving in dual roles across both the MSO and PME as described above. Under HB 3410, a physician who serves as a director or officer of both the MSO and a PME may qualify for an exemption only if:

• the physician owns less than 25 percent of the PME
• the PME owns less than 49 percent of the MSO's voting interest
• the physician receives no compensation from the MSO for serving in that capacity
• supermajority governance protections are maintained for actions materially affecting minority owners
• the MSO and all PMEs with voting rights were incorporated before January 1, 2024

In practice, this means that many common dual-role arrangements in MSO-PC structures, where a physician serves as the nominal director or officer of both entities, must now satisfy all of these conditions or be restructured. The significance of this for existing platforms is substantial: Many MSO-PC structures rely on having an affiliated physician serve as the bridge between the MSO's operational infrastructure and PME's clinical governance. Organizations should carefully assess whether their current dual-role arrangements comply with the statute's requirements.

The foregoing list of services is fairly standard for CPOM lines drawn by states, with the notable exception of third-party contracting services. Most MSOs provide some form of payer contracting support given the complexities, which will require some adjustments now that the CPOM Law has been passed. MSOs may still provide administrative services that amount to mere assistance in furtherance of the PME's business (as long as they do not constitute de facto clinical control), purchase or lease PME assets at arm's length, advise on business operations (e.g., accounting, budgeting, facilities, compliance), and consult on value-based and payer contracts. Accordingly, management services agreements (MSAs) should be reviewed to ensure that the MSO's scope of services does not constitute de facto control over clinical operations.

Enhanced Governance Protections

The statute also amends the PC statutes, ORS Section 58.375 (physician PCs), ORS Section 58.376 (multidisciplinary PCs), and the new naturopathic PC provisions to prevent MSOs from engineering the removal of independent physician-leaders. These protections apply uniformly across all three corporate forms. Under the amended statutes, physician-directors and physician-officers may be removed only by majority vote of licensed shareholders or directors, unless the individual has committed specific disqualifying acts (breach of fiduciary duty, license action, fraud, separation from employment or failure to meet established standards). Any transfer of operational control requires a shareholder agreement executed exclusively to benefit a majority of licensed practitioner-shareholders.

In addition, the statute restricts the use of equity transfer restriction agreements, succession agreements and similar instruments that MSOs have traditionally used to govern the transfer of PC shares. Such agreements are permissible only if limited to specific for-cause conditions: suspension or revocation of a PC owner's professional license, disqualification from ownership, exclusion or debarment from a federal healthcare program (or an investigation that could result in such exclusion, debarment or suspension), a felony indictment involving fraud or moral turpitude, breach of the MSA by the PC or a shareholder or member, or the owner's death, disability or permanent incapacity. Provisions in existing continuity agreements that exceed these permitted grounds are void and unenforceable under the statute.

Organizations should review their equity transfer restriction agreements and continuity agreements to ensure they are limited to the narrow for-cause conditions permitted by the statute. Organizations can also explore the use of option agreements and other governance arrangements that do not otherwise conflict with the CPOM Law.

Restrictive Covenant Reforms

SB 951, as amended by HB 3410, also imposes significant restrictions on restrictive covenants between medical licensees and MSOs, hospitals and hospital-affiliated clinics contained in contracts entered into or renewed on or after effective date of June 9, 2025. Notably, noncompetition restrictions also apply retroactively to agreements entered into before June 9, 2025.

"Medical licensee" is defined as "an individual licensed in Oregon to practice medicine or naturopathic medicine, or an individual licensed as a nurse practitioner or physician associate."

Noncompetition Agreements. Noncompetition agreements restricting the practice of medicine or nursing are void and unenforceable as a default. Limited exceptions apply to:

• medical licensees holding an ownership interest of 1.5 percent or greater
• agreements with PMEs documenting a "recruitment investment" (costs equivalent to 20 percent or more of annual salary toward recruiting, training and similar items), subject to maximum terms of five years in health professional shortage areas or three years elsewhere, or
• the medical licensee does not directly provide clinical care

Nondisclosure and Nondisparagement Agreements. Nondisclosure and nondisparagement agreements between medical licensees and MSOs or a hospital or hospital-affiliated clinic are void and unenforceable, with the exception of:

• post-employment agreements, except those restricting a licensee's good faith report of information that the licensee believes is evidence of a violation of state or federal law, or
• as part of negotiated settlements

Exemptions and Carve-Outs

The CPOM Law contains several exemptions, but no single exemption provides a blanket waiver from all of the statute's requirements. The statute establishes four distinct categories of obligations: 1) ownership and dual role restrictions (prohibitions on MSO affiliates owning PME shares, serving in dual MSO-PME roles, exercising proxy voting and related controls), 2) entity document requirements, including restrictions on continuity agreements, equity transfer restriction agreements and governance provisions in articles of incorporation and bylaws, 3) MSA requirements, including the prohibition on de facto control over clinical operations, and 4) restrictive covenant restrictions on noncompetition, nondisclosure and nondisparagement agreements. Each exemption applies to one or more – but not necessarily all – of these categories.

Exempt from All MSO Restrictions (Section 1(2)). The following are exempt from all ownership, dual-role, entity document and MSA restrictions set forth in Section 1(2) of the CPOM Law:

• individual providers who furnish medical or healthcare services for or on behalf of a PME, own no more than 10 percent of the PME and are compensated at market rate consistent with their professional obligations to the PME and patients
• individuals with incidental dual ownership, where ownership of MSO shares or interest is "incidental and without relation" to the individual's MSO compensation
• physician-controlled MSO structures where PMEs themselves function as or own a majority of an MSO
• specified healthcare entities, including Program of All-Inclusive Care for the Elderly (PACE) organizations, behavioral health providers, hospitals and hospital-affiliated clinics, long-term care and residential care facilities, Tribal health programs and crisis line providers.

Exempt from Ownership and Proxy Voting Restrictions Only. The following are exempt only from the restrictions on MSO majority ownership (Section 2(a)(A)) and proxy voting (Section 2(a)(B)) and remain subject to all other restrictions, including equity transfer controls, de facto clinical control prohibitions, entity document requirements and restrictive covenant reforms:

• telemedicine entities without a physical Oregon clinical location (as amended by HB 3410, this exemption was narrowed from all of Section 1(2) to only the ownership and proxy voting restrictions)
• grandfathered coordinated care organizations with pre-2026 PME relationships

Exempt from Dual-Role and Ownership Restrictions Subject to Conditions. Legacy physician-led MSO arrangements may qualify for an exemption from the dual role and ownership restrictions if 1) a physician serves as a director or officer of the MSO, owns less than 25 percent of the PME and is a director or officer of the PME, 2) the PME owns less than 49 percent of the MSO's voting interest, 3) the physician receives no compensation from the MSO for the director or officer role, 4) supermajority governance protections are maintained for actions materially affecting minority owners, and 5) the MSO and all PMEs were incorporated and entered into MSAs prior to January 1, 2024 (as amended by HB 3410). This exemption does not exclude the arrangement from the de facto control prohibition, continuity agreement restrictions or restrictive covenant reforms. Preexisting entities that do not qualify for this or another exemption must comply with the statute's MSO restrictions by January 1, 2029.

Restrictive Covenant Exemptions. As noted above, the restrictive covenant reforms operate independently and are not subject to the same exemption framework as the MSO ownership and control restrictions. Limited exceptions to the noncompetition prohibition apply to licensees with ownership interests of 1.5 percent or greater, PMEs that document a qualifying recruitment investment and nonclinical licensees. The nondisclosure and nondisparagement prohibitions are subject to separate exceptions for post-employment agreements and negotiated settlements. These restrictive covenant exceptions apply regardless of whether an entity qualifies for an MSO ownership exemption.

As a threshold matter, the CPOM Law applies only to physicians, nurse practitioners, physician associates, and naturopathic practitioners and their associated practices. It does not extend to dental, physical therapy, podiatry, optometry or veterinary practices.³

Takeaways

The CPOM Law imposes significant compliance obligations on organizations that utilize MSO-PC structures. As demonstrated by the Eugene Emergency Physicians litigation, affected parties are prepared to challenge arrangements they believe violate the statute. Given the breadth and complexity of the statute's requirements and absence of detailed regulatory guidance, organizations should consider engaging legal counsel experienced in CPOM compliance and MSO-PC structuring to evaluate existing arrangements, assess available exemptions and develop a phased compliance plan that accounts for the January 1, 2026, and January 1, 2029, deadlines.

For more information on Oregon's CPOM statute and its implications for your organization, please contact the authors of this alert. Holland & Knight's Healthcare & Life Sciences Team continues to monitor legislative and regulatory developments affecting MSO-PC structures nationwide, including Oregon's evolving CPOM framework. For ongoing updates on state-by-state healthcare regulatory trends, visit HK Navigator.

Notes

¹ SB 951, 83rd Or. Leg. Assemb., Reg. Sess. (2025) (codified at ORS 676.555 et seq.); HB 3410, 83rd Or. Leg. Assemb., Reg. Sess. (2025) (amending SB 951).

² Foreign PCs are noticeably absent from this list, but it is believed they are subject to the CPOM Law.

³ Some practitioners have also pointed out that nurse practitioner-owned practices fall outside of the CPOM Law as long as there are no physicians or physician assistants engaged in such practices.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.