In early June, Oregon Gov. Tina Kotek signed a bill enacting the strictest regulatory regime on private equity and corporate control of medical practices in the nation.
Here’s nine notes on how the new law will impact physicians:
1. The law mandates that physicians hold at least a 51% stake in most medical practices, while excluding corporations and management service organizations from decision-making control of practices.
2. The law also bans noncompete agreements that prohibit physicians from moving to facilities in the surrounding area. Under the new law, any existing noncompete agreements are now void and unenforceable between a medical licensee and an MSO, hospital, hospital-affiliated clinic or other “person,” as defined by the new law, with some exceptions, according to a June 18 report by The National Law Review.
3. Noncompete agreements are still valid if the licensee is a shareholder or member of the other “person” or otherwise owns or controls an ownership interest that exceeds or is equal to 10% of the entire ownership interest. Medical licensees who own less than 10%, but have not sold or transferred their ownership interest, may also have enforceable noncompetes. Noncompetes may be valid for up to three years if they are with a professional medical entity that provides the licensee with documentation of the entity’s “protectable interest,” which includes costs to the entity for things like sign-on bonuses or education that are equal to 20% or more than the annual salary of the licensee.
4. The new law also permits noncompete agreements if the licensee is a shareholder or member of a professional medical entity and has a noncompete agreement with that medical entity, provided that it does not have a management agreement with an MSO. Additionally, noncompete agreements are valid under the new law if the licensee does not engage directly in providing medical services or clinical care.
5. The law also voids nondisclosure agreements and nondisparagement agreements between a licensee and an MSO, hospital or hospital-affiliated clinic unless the MSO, hospital or hospital-affiliated clinic terminated the licensee’s employment or the medical licensee voluntarily left employment with the MSO, hospital or hospital-affiliated clinic.
6. These agreements cannot be enforced by an MSO, hospital or hospital-affiliated clinic for the licensee’s good faith reporting of information to a hospital or affiliated clinic, or a state or federal authority that the licensee believes is evidence of a violation of state or federal laws, rules and regulations. The law also prevents medical entities from taking an “adverse action” against a medical licensee as retaliation for the licensee’s violation of an nondisclosure agreement or because the licensee disclosed information that they believe is evidence of legal or regulatory violations.
7. The legislation aims to give physicians exclusive decision-making authority over clinical responsibilities and practices while still outsourcing nonclinical responsibility MSOs. It clarifies that MSOs are prohibited from owning or controlling professional medical entities either individually or in combination with any other shareholders, director, member, manager, officer or employee of the MSO.
8. “Professional medical entity” includes medical nursing, and naturopathic PCs, LLCs, LPs and partnerships organized for a medical purpose.
9. The legislation also impacts the use of succession agreements with physicians owners of medical practices, permitting only the following triggering events:
- Suspension or revocation of a physician’s medical license in any state
- A physician’s disqualification from holding ownership in the professional medical entity
- A physician’s exclusion, debarment, or suspension from a federal healthcare program, or if the physician is under an investigation that could result in such actions
- A physician’s indictment for a felony or other crimes involving fraud or moral turpitude
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