An Oregon bill that could create some of the strictest limits in the nation on corporate ownership of primary care and specialty clinics cleared its first hurdle in the state Legislature and is headed for a vote in the House this week.
Supporters say the bill, HB 4130, could be a model to counter large companies and private equity firms investing in medical practices, cutting staff, and increasing costs for patients and payers.
Opponents, meanwhile, have called it an untested strategy that could backfire, reduce investment and innovation, and lead more independent clinics and practices to close.
Some of the bill’s toughest provisions do not apply to hospitals, health systems, and nursing homes, which have been largely exempt from Oregon’s restrictions on the corporate practice of medicine since 1974.
State Rep. Ben Bowman, a Tigard-area Democrat, introduced the bill. On Wednesday, Democrats on the House Behavioral Health and Health Care Committee voted to advance the bill to the floor for a vote. Republican Rep. Cyrus Javadi, a Salem dentist, joined them.
“We should value the practice structure that brings the patient into close proximity with the provider of services, whose name is on the line of the business,” Javadi said. “When we start to scale that up, I am worried about the decisions and depersonalization that can happen.”
But most Republicans on the committee voted against it, citing concern for existing healthcare businesses in Oregon that would be out of compliance with the law.
A One Medical clinic in Portland's Pearl District, February 2024. The Oregon legislature is considering a bill that would place new limits on corporate ownership of doctors offices, citing recent deals like Amazon's acquisition of One Medical.
Amelia Templeton / OPB
The bill would give businesses seven years to come into compliance with the new regulations.
Bowman said he’s concerned that some of the largest corporations in the country are investing in primary care and urgent care clinics, like Amazon, which acquired One Medical, a Portland-area primary care and telehealth network.
“There are lots of unregulated levers that can be pulled when ownership shifts to generate more money,” he said. For example, a corporate owner could direct physicians to see fewer Medicaid patients or to take on higher caseloads.
Some parts of the bill would also target private equity firms’ increasing investments in primary care nationwide. Private equity acquisitions have sparked particular controversy because of concerns about a business model that involves trying to increase an undervalued or struggling business’s revenues in a short time frame and then flipping it to new buyers.
In Oregon, private equity firms have acquired urgent-care clinics in Bend and Redmond and primary-care clinics in the Eugene area.
Current Oregon law requires that physicians hold a majority stake in a professional corporation — generally a clinic or independent practice — providing medical care, but the law is so narrowly written it has been easy for corporate investors to work around it.
HB 4130 would extend the 51%-ownership-by-doctors requirement to other types of healthcare corporations, including limited liability companies, limited liability partnerships and holding entities.
“Regardless of how you organize your company, you have to follow the corporate practice of medicine law, simple and easy,” Bowman said.
Hospitals and nursing homes have separate licensing agreements with the state and, as a result, they don’t need to be majority physician-owned. They would remain exempt under HB 4130, according to Bowman.
Bill would require more separation between doctors and management groups
The novel and more controversial part of the proposed law involves limits on a type of health care player called a “management services organization.”
Management services organizations, or MSOs, are for-profit companies that provide non-clinical services, like billing management, to medical practices.
Proponents of HB 4130 say that, in recent years, private equity funds have bought MSOs to, in effect, acquire medical practices and control physicians while skirting state prohibitions on the corporate practice of medicine.
Erin Fuse Brown, a professor and health law expert at Georgia State University, co-authored a journal article on private equity in health care that partially inspired HB 4130. She also worked with Bowman on the bill.
Fuse Brown said HB 4130 is the first bill in the nation she’s aware of that responds to the rapid expansion of for-profit investment in primary care clinics.
“It’s the first one that targets these contractual workarounds that private investors have used to — if they’re not outright buying physicians, they are contractually controlling them, and basically investing in and taking their assets,” Fuse Brown said.
The bill doesn’t ban MSOs outright. Instead, it requires more separation between MSOs and the clinics they work with, barring the shareholders, employees and others running an MSO from managing or directing a medical practice they contract with.
The bill, however, includes significant exemptions. Behavioral health providers, telehealth companies, hospitals, nursing homes and a specialized type of clinic for elderly patients with complex needs would be exempt from HB 4130′s limits on management services organizations.
The bill also would eliminate non-compete and non-disparagement agreements for doctors, regardless of whether they work in a clinic or hospital setting. Non-compete agreements would only be allowed for doctors who own 25% or more of a practice.
The bill has been endorsed by former Gov. John Kitzhaber, the Oregon Pediatric Society, the Oregon Academy of Family Physicians and the Oregon Independent Medical Coalition, the lobby group for private practices. Public testimony on the bill was supportive, with 51 out of 53 statements in favor of it.
Opponents of the bill, meanwhile, are working more quietly against it.
Lobbyist Tom Holt has been speaking to reporters in the Capitol about the potential risks of HB 4130, but declined to comment on the record for this story.
A few opponents have gone on the record. ATA Action, the lobbying arm of the American Telemedicine Association, opposes the bill, despite the legislation’s exemptions for telemedicine providers.
ATA Action said no other state has enacted such a broad mandate limiting corporate ownership.
“There is a good reason for this: the language and the untested concepts proposed here would in practice seem to prohibit or severely limit the ability of medical practices to contract with management or administrative service providers, or attract investment, despite proponents claims to the contrary,” wrote ATA Action executive director Kyle Zebly.
Kellie Schenk, a diagnostic radiologist with practices that are part of Rayus Radiology, a private-equity-backed MSO, also submitted testimony opposing the bill. Schenk said the regulations would make it harder for independent practices to compete with hospitals and “will likely drive further hospital-based consolidation by reducing available partnership opportunities,” Schenk wrote. “This consolidation will inevitably increase costs to patients, especially in capital intensive specialties like radiology.”
The bill is scheduled for its third reading and a vote in the full House Thursday. If it passes in the House, it advances to the Oregon Senate Health Care Committee next.