Kotek signs bill restricting corporate control at Oregon medical clinics

Corporate investors hoping to take over local health care facilities in Oregon could

soon face one of the hardest markets

nationwide.

Senate Bill 951

, which was quietly signed into law by Gov. Tina Kotek on Monday, sets the strongest regulations on private and corporate control of medical practices in the nation, according to

industry lawyers

. A similar effort failed in the Legislature last year amid pushback from Republicans that prevented the bill from meeting key legislative deadlines.

The governor told reporters at a news conference Monday that the bill should be a model for other states and for Congress.

“We need to make sure that our health care providers and our delivery system stays local and is controlled locally,” she said. “That’s what that bill is trying to do.”

The legislation was opposed by companies such as Amazon and the statewide nonprofit Oregon Ambulatory Surgery Center Association, an industry group, where executives see private investment as vital to their business strategy.

“We universally agree that the way to protect clinics from closure and maintain the broadest patient access to outpatient care is to keep the existing, and multi-ownership models alive and well,” wrote Ryan Grimm on behalf of the association and the Portland Clinic, a private multispecialty medical group, in a March

letter

to lawmakers.

“In some communities, there is no hospital to swoop in to the rescue, or no hospital in a financial position to save a clinic,” he wrote.

The bill does not go into effect immediately and it contains a three-year adjustment period for clinics to comply with the restrictions. Institutions such as hospitals, tribal health facilities, behavioral health programs and crisis lines are exempted.

“We’re at an inflection point in this country when it comes to the corporatization of healthcare,” wrote House Majority Leader Ben Bowman, D-Tigard, in a statement May 28 following the bill’s passage in the Oregon House. “With the passage of this bill, every Oregonian will know that decisions in exam rooms are being made by doctors, not corporate executives.”

The signature from Kotek deals a major victory to local providers and doctors, who sought to wrest back control over their practices in key decisions such as spending, staffing levels, physician ownership stake, and the price of services.

The legislation would close what supporters say is a loophole in state law, which mandates that doctors hold at least a 51% stake in most medical practices, but which companies have taken advantage of by employing their own doctors — sometimes from out of state — and putting them down on paper as clinic owners.

Then the company itself, or a hired management service, is brought in to handle payroll, accounting and other services, shifting away control and revenues from the clinic to the company, and from what was once a locally operated business.

The bill limits the control such companies can have in a clinic’s operations and would ban noncompete agreements used by companies to prohibit doctors from taking a job at a different practice.

Support for the bill coalesced around the takeover of the Eugene-based Oregon Medical Group by the health care giant Optum, one of the nation’s largest employers of physicians. The surrounding area lost dozens of doctors, leaving thousands of people without care after Optum required its doctors to sign non-compete contracts, The Oregonian/OregonLive first

reported

. Optum reversed course after

pressure

from lawmakers in May 2024.

“This bill is about preventing the kind of takeover that happened at the Oregon Medical Group in Eugene,” wrote state Rep. Lisa Fragala, D-Eugene, in a May statement. “When we see consolidation in the healthcare market, we see three things happen: higher prices, negative effects on the quality of care and decreased access to care.”

The

Oregon Capital Chronicle

, founded in 2021, is a nonprofit news organization that focuses on Oregon state government, politics and policy.