Overview
On June 20, 2025, the Oregon legislature passed House Bill (HB) 3410, which amends portions of the corporate practice of medicine law, Senate Bill (SB) 951, enacted on June 9, 2025. As we previously reported, SB 951 prohibits professional medical entities from relinquishing control over their “assets, business operations, clinical practices or decisions or the clinical practices or decisions of a physician.” If signed into law by the governor, HB 3410 would allow greater structural flexibility for management structures but would not amend the central prohibitions on management services organizations (MSOs) interfering in the clinical operations of professional medical entities (professional corporations, or PCs).
In Depth
Dual compensation and ownership
HB 3410 expands SB 951’s prohibitions on dual compensation and ownership to include contractors of an MSO. HB 3410 also amends an exception in SB 951 for PC physicians and providers who have less than 10% ownership in the PC so long as such individuals are reimbursed at market rates for provision of their medical services and the services that such individuals may provide to the MSO. Prior to HB 3410, SB 951 included an additional requirement that such individuals could not be a shareholder, director, member, manager, officer, or employee of the MSO.
SB 951 provides an exception that permits physician shareholders, directors, or officers of a PC to serve as a director or officer of an MSO with which the PC has a contract for management services. Under this exception, the physician must not receive compensation from the MSO for the physician’s services as a director or officer of the MSO (although the physician-owner can be paid for their separate contracted services to the MSO, as set forth above). Additionally, any actions taken by the MSO that materially impact the professional, ownership, or governance interests of the minority owners in the MSO must require a greater than majority vote, including the shares held by PCs with voting rights. Further, the MSO and all PCs with voting rights in the MSO must have been in existence and contracted for the provision of management services prior to January 1, 2026.
HB 3410 would limit this exception to only physician directors or officers of the MSO who own less than 25% of the PC, and where all of the below criteria are met:
- The PC owns less than 49% of the voting rights in the MSO.
- The MSO and the PCs with voting rights were in existence and entered into management agreements before January 1, 2024.
- The physician, all PCs with voting rights in the MSO, and the actions of the MSO complied with the above requirements prior to and after January 1, 2024.
Noncompetition and stock transfer restrictions
HB 3410 also removed the requirement that a PC not have a contract with an MSO, or otherwise qualify for an exemption, to hold a valid noncompetition agreement between a shareholder or member of a PC and the PC. HB 3410 further seeks to modify the prohibition on noncompetition agreements to expand the three-year term to five years where the medical services of the licensee are directly provided in an Oregon county designated as a health professional shortage area.
Further, HB 3410 clarifies that conditions under which a PC may enter into stock transfer restriction agreements with a shareholder of the PC and an MSO includes a shareholder’s or member’s breach of the management services contract with a PC or MSO on behalf of a PC.
HB 3410 left intact the exception for entities engaged in the practice of telemedicine that do not have a physical location where patients receive clinical services in the state of Oregon.
HB 3410 will take effect immediately upon passage. McDermott will continue to monitor the bill’s progression through the state legislature and provide updates.
Key takeaways
If HB 3410 is signed into law:
- The central prohibitions on MSO interference in the clinical operations of the PC in a manner the affects the PC’s clinical decision-making will remain unchanged.
- Contractors of MSOs will be subject to the prohibition on dual compensation and ownership.
- SB 951’s prohibition on MSOs and its shareholders, directors, members, managers, officers, and employees from serving as directors, officers, or employees of or receiving compensation from an MSO for the management of a contracted PC will be removed.
- The circumstances for valid enforcement of noncompetition agreements will be expanded and certain contractual breaches are added as conditions under which a PC may enter into a stock transfer restriction agreement.
