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PE Rx: Navigating Oregon’s New Healthcare Rules and the Evolving State Law Landscape · Committed Capital

• 0:09
  Voiceover: Welcome to Dechert Committed Capital. This is an episode of Sidecar, a special bite-sized discussion of the latest market issues.
• 0:24
  Markus Bolsinger: We hope everyone had a great summer, and we welcome you back to Committed Capital, Dechert's podcast on corporate and private equity legal trends. I'm Markus Bolsinger, co-head of Dechert's global PE practice. Today, in the inaugural episode of our PE Rx series offering prescriptive insights on the intersection of private equity and healthcare, we will focus on a significant healthcare regulatory development in the U.S., with an emphasis on states. In particular, we'll focus on development coming out of Oregon this summer that may create a precedent for other states, and is certainly catching the attention of private equity investors and healthcare providers. Oregon has, related mainly to local current events, enacted two new laws that impose restrictive barriers on private equity participation in healthcare corporations, which most likely will have an impact on investments in the sector.
• 1:25
  Markus Bolsinger: And given that the new laws in Oregon are arguably the strictest ones in the U.S., the Dechert team has studied this development closely and has received a lot of questions from our PE and strategic investors in healthcare. I'm super excited to be joined by my Dechert partner, Jennifer Hutchens.
• 1:45
  Markus Bolsinger: Jennifer leads our healthcare regulatory team. She has spoken nationally about the Oregon developments and, more broadly, about our super important 50-state transactional law developments, which has seen a proliferation in the last several years. Jennifer regularly works with our PE and strategic clients to provide commercial guidance to navigate this ever-changing landscape.
• 2:06
  Markus Bolsinger: Welcome, Jennifer. Let's dive in. Can you give us a brief background on these new Oregon laws and what prompted them?
• 2:15
  Jennifer Hutchens: Absolutely.
• 2:18
  Jennifer Hutchens: Glad to be here, Markus.
• 2:18
  Jennifer Hutchens: Essentially, Oregon is the leading state at this point seeking to directly shape how private equity may be a part of the healthcare sector and ecosystem. Just to set the stage briefly, in the last two or so decades, give or take, private equity firms have invested close to $1 trillion in the U.S.
• 2:37
  Jennifer Hutchens: healthcare industry. We've seen these kinds of developments can actually be critical to help fund research into such diseases as Parkinson's, Alzheimer's, and to advance medical technology and treatments. Yet, there's definitely a growing tension with state lawmakers and healthcare professionals in some cases. They're conceptually concerned with what is popularly described as corporate influence over health care. Some states have tried to take matters into their own hands, and we're seeing that with Oregon, most recently, largely after some well-publicized healthcare investment developments in that state. Oregon's recent legislative activity in this area really began with the passage of a Senate Bill, which was 951, in early 2025, and then continued with the House legislation, which was 3410, just recently in July 2025. From my vantage point, Oregon's laws are quite an aggressive response to certain concerns over the corporate practice of medicine, or what we sometimes shorthand as CPOM. At the highest level, CPOM laws generally prohibit corporate entities from practicing medicine or employing practicing physicians and things along those lines. Often, CPOM laws are really old, some of them from the early 1900s, and they're usually very state specific. These recent Oregon laws are more rooted in a belief that involving private equity firms in healthcare inevitably leads to potentially higher prices, potentially decreased access to care, potentially quality of care concerns, although the numbers often don't bear that out, and the quality of service and access often improves. As a result of this apprehension of private equity involvement, founded or not, the Oregon laws create quite stringent transparency requirements for corporations, restricting the extent to which MSOs or management service organizations can functionally control a professional corporation, such as a medical practice, and requiring more explicit delineation of responsibilities in the MSO documentation itself.
• 4:46
  Markus Bolsinger: Got it.
• 4:49
  Markus Bolsinger: Thanks. Jennifer. I can see why that could be problematic. What exactly does the Senate bill do, and how does it relate to MSO and private equity involvement in healthcare?
• 4:59
  Jennifer Hutchens: That Oregon Senate action imposes quite rigid restrictions on MSOs, potentially hamstringing their full ability to provide efficient and innovative support to medical practices, which is actually the goal of those MSOs.
• 5:12
  Jennifer Hutchens: The bill prohibits MSOs and their agents from owning shares in a medical practice, serving on its board of directors or participating in management decisions that affect clinical care. Some of this bright line is not actually new for our PE clients, for example, staying away from control of any clinical decisions. The law also severely limits the use of non-compete agreements which, from the viewpoint of private equity, can be critical tools for protecting investment and ensuring stability in healthcare operations. Our read is that the Oregon Senate action fundamentally changes the healthcare landscape in Oregon by requiring private equity investors to go over existing arrangements with a fine-tooth comb to ensure they are compliant with the law's strict requirements. Additionally, the law's robust enforcement actions favor plaintiffs, that is those that may be critical of PE in healthcare. The law allows Oregon's Attorney General, for example, to pursue civil penalties and injunctive relief.
• 6:15
  Jennifer Hutchens: From my perspective, Oregon's enforcement teeth are truly the distinguishing mechanism from other states that have relatively similar guardrails.
• 6:25
  Markus Bolsinger: Were there any modifications to this bill by the subsequent legislation? And talk to me about the most recent developments in Oregon.
• 6:33
  Jennifer Hutchens: Yes.
• 6:34
  Jennifer Hutchens: Interestingly, there was an Oregon House legislation I referenced earlier that was just adopted last month. I think it clarifies and amends the Oregon Senate bill in a few key areas.
• 6:46
  Jennifer Hutchens: The Oregon House legislation actually lessens the Oregon Senate restriction in some important ways by allowing MSOs and their agents to serve as directors and officers of practice entities provided, and very importantly, that they are compensated for their services as a director or officer at fair market value. The Oregon House legislation also creates greater flexibility in the non-compete arena, allowing those agreements to be enforced against medical licensees in certain circumstances. Additionally, the Oregon state legislation prohibited MSOs from using equity transfer restriction agreements except in very narrow circumstances. These agreements, which are commonly used in physician-owned professional corporations involving private equity, they ensure that ownership stays with the licensed practitioners that are acceptable to the PE sponsor.
• 7:36
  Jennifer Hutchens: The Oregon House legislation importantly clarifies that MSOs can require an equity transfer if the shareholder breaches the management sources agreement. So our read is that the Oregon House legislation and likely further clarifications down the line are really necessary to recalibrate, in part, the very strong position that was originally taken by the Oregon legislature. It's not uncommon in our experience to see these types of course corrections and, of course, our Dechert healthcare team is watching this closely as we are advising our clients actively in this space.
• 8:13
  Jennifer Hutchens: We're not advising them just on compliance but also, importantly, on projections for their future investment activities, not just in Oregon but around the United States.
• 8:22
  Markus Bolsinger: That is very interesting. Thank you. So, what are the implications for private equity investment operating or looking to invest or otherwise transact in Oregon? Let's start there first.
• 8:34
  Jennifer Hutchens: Yeah, we're seeing this question a lot. So, from my perspective, the immediate implication is that private equity sponsors are reassessing how they structure healthcare deals in the state of Oregon, of course. We're actively working with several PE platforms with multi-state operations that include Oregon.
• 8:52
  Jennifer Hutchens: Investors are definitely needing to carefully analyze ownership structures, board roles and decision-making processes to ensure compliance. Now is the time to make sure all i's are dotted and t's are crossed, as there's a huge spotlight going on because of Oregon.
• 9:07
  Markus Bolsinger: Is this effective immediately? Or what's the timeline?
• 9:11
  Jennifer Hutchens: Great question. I think it's important to note for our investors that existing arrangements do have a grace period. The Oregon Senate framework applies to new contracts starting January 1, 2026, so a few months away at this point, and to existing contracts starting January 1, 2029. So, while there's some time to adapt, sponsors should definitely begin reviewing their existing MSO agreements now to identify any areas that may require adjustment.
• 9:40
  Markus Bolsinger: Thanks, Jennifer. Are there any exceptions or safe harbors under that Senate Rule, or for MSOs or investors?
• 9:48
  Jennifer Hutchens: Yes, the good news is there are some limited exceptions. The Oregon Senate legislation does allow MSOs to provide support-like functions, so that might be in the form of revenue cycle management, accounting and even contract negotiation in some cases, as long as that bright-line rule of not touching clinical decisions or overall practice governance is still obeyed. And so we're really drilling down with our clients on those nuances and best practices. And as I said earlier, a lot of those best practices have really been our standing advice for some time.
• 10:22
  Jennifer Hutchens: There is also, Markus, a narrow range of circumstances with regard to the non-compete side of things, so the non-disclosure and non-disparagement agreements, where they are valid and enforceable in cases involving negotiated settlements or post-employment agreements.
• 10:35
  Jennifer Hutchens: So, it's a pretty narrow instance, not necessarily applicable to a traditional private equity structure, but probably worth mentioning for those employment folks listening on the line.
• 10:45
  Markus Bolsinger: And switching, looking from the other side, what are the broader implications of that Oregon law for access to care and physician autonomy?
• 10:54
  Jennifer Hutchens: It's a great question. I think about this a lot as I think about sort of intent of the legislatures at the state level and even the federal level, as we think these things through. From my perspective, the intent of these legislations is largely to preserve physician autonomy, which they highlight promotes high-quality and accessible care from their perspective. Critics suggest that these kinds of laws can actually, ironically, reduce access to care by making it harder for independent practices to scale or stay financially viable without external capital that can be found in the form of infusion of private investment from private equity, for example. Further, if investors decide to pull out of certain seats to entirely avoid some of these restrictions and the uncertainty, the state at hand actually risks losing access to capital and resources, and as I said earlier, those resources can ultimately help drive development in the healthcare field. So, it really is a balancing act where we're trying to promote care integrity but without stifling innovation or operational efficiency.
• 12:02
  Markus Bolsinger: I like that.
• 12:05
  Markus Bolsinger: Emphasizing care integrity, innovation and efficiency all together. So that was Oregon, now switching gears a little bit. I'm sure the general fear by people in the healthcare space is that other states could follow Oregon's lead and implement similar legislation.
• 12:19
  Markus Bolsinger: Is that right?
• 12:20
  Jennifer Hutchens: For sure.
• 12:23
  Jennifer Hutchens: What we've been really saying and really advising is that Oregon could be seen as a canary in the coal mine here. Our team is definitely keeping a pulse on that 50-state landscape that you referenced earlier, Markus.
• 12:33
  Jennifer Hutchens: We're seeing increased legislative and regulatory scrutiny in a litany of states - Massachusetts, Washington, New Mexico, Indiana - each of these states, for example, has passed or proposed laws that enhance governmental oversight of healthcare transactions or otherwise notably limit corporate ownership of medical providers. That said, no state has taken measures as extensive as Oregon, particularly the stated enforcement framework.
• 13:05
  Jennifer Hutchens: efforts to tighten the CPOM laws have actually previously failed at certain instances and gained a fair amount of attention, and that would include California, Illinois, Minnesota and Colorado, although there are several states that are actually renewing those attempts. This remains an incredibly dynamic and noteworthy area for us to monitor.
• 13:23
  Markus Bolsinger: I bet it is, Jennifer, thank you. Could you comment briefly, going from the state level to the federal level, if there's anything similar happening at that federal level?
• 13:33
  Jennifer Hutchens: Yes, I think this is important to emphasize.
• 13:35
  Jennifer Hutchens: I haven't seen as much activity in the press discussing the federal legislation, and I think it's important to note because when you have this patchwork of state laws it's always difficult, from an operational perspective, to really understand what that bottom-line guidance should be. Federal clarity, of course, would help tremendously. We're still not there yet, but maybe more to come. At the federal level, there are lawmakers like Senator Ed Markey of Massachusetts, for example, a state I referenced earlier, that are pushing for the Federal Health Over Wealth Act. The proposed federal legislation would impose transparency and structural limits on private equity ownership and healthcare, requiring private equity-owned healthcare facilities to publicly report certain proprietary and strategic matters. That would include discretionary spending and changes to employee and executive compensation. This would be a tremendous, sweeping change if it ever went anywhere.
• 14:33
  Jennifer Hutchens: The proposed federal act would also grant the U.S. DHHS authority to review and potentially revoke investment licenses from private equity firms found to engage in practices such as implementing significant pricing increases, insufficient staffing, or actions that, from their standpoint, may be viewed from a public policy matter as negatively impacting access to healthcare services. This Health Over Wealth Act was introduced and referred to the Congressional Committee on Finance a while back now. It was back in July of 2024. It hasn't progressed further since then, but our team is actively monitoring this space as well.
• 15:13
  Jennifer Hutchens: And given the level of state activity, federal action is certainly not outside the realm of possibility, and I think that's regardless of presidential administration or political lines. So all in all, Markus, while Oregon may be an outlier for now, it could very well be setting the tone for broader change across the country.
• 15:31
  Markus Bolsinger: Let's put this into perspective for multi-state operators. How do the Oregon laws play into their overall compliance strategy?
• 15:40
  Jennifer Hutchens: It's definitely been an interesting time to practice healthcare law.
• 15:44
  Jennifer Hutchens: It feels like we're oftentimes putting together a puzzle. For private equity investors operating across multiple state lines, which is very much the case in the sense of roll-ups and other types of operational efficiencies looking to be gained, in my experience, the practical reality is the challenge of actually harmonizing a patchwork of laws towards compliance. You might have one set of restrictions let's say in Oregon, looser rules in another state, and yet another state that's considering similar legislation, or multiple versions of similar legislation.
• 16:15
  Jennifer Hutchens: This really has meant that the deal teams are working alongside our legal teams performing state by state analyses, adjusting government structures sophisticated for each jurisdiction and anticipating that other states could adopt Oregon-like provisions in the future. And I don't see this at all as necessarily just a legal calculation. It's operational.
• 16:38
  Jennifer Hutchens: It's strategic, since that structured compliance in one state may need to be unwound or altered elsewhere.
• 16:47
  Markus Bolsinger: Shifting to another regulatory issue, how does Oregon's law align with the antitrust considerations and the ongoing consolidation trends in healthcare?
• 16:57
  Jennifer Hutchens: Wow, that's a really interesting and timely question, especially given all of the activity in this space.
• 17:03
  Jennifer Hutchens: So, on one hand, laws like the Oregon legislation push back against consolidation by complicating corporate roll-ups as we've indicated here. But on the other hand, it may encourage hospitals and large health systems, for example, who are exempt from many CPOM rules, to acquire smaller practices, potentially raising antitrust considerations about market dominance. I have definitely been in one or more very fascinating conversations with our antitrust team here at the firm about these ripple effects.
• 17:37
  Markus Bolsinger: So, after talking about Oregon going all states going to federal, let's go to some practical advice for our PE sponsors who are listening in. What should PE healthcare professionals focus on in this evolving area with their existing portfolio companies?
• 17:55
  Jennifer Hutchens: I think that they should really prioritize focusing their efforts on conducting impact analyses across all Oregon-based or Oregon-facing portfolio companies. And in our experience, that involves revisiting deal diligence processes, even the way that they approach threshold questions, and mapping out transition plans for any affected MSO relationships.
• 18:18
  Jennifer Hutchens: We're seeing them really prioritizing, as well, briefing fellow leadership and investment committees on legal exposure, timing impacts to pending or contemplated transactions and long-term compliance strategies.
• 18:34
  Jennifer Hutchens: No one is putting their head in the sand on this, Markus. This is really a tremendously important time in the evolution of the look by the states at these issues, and there is definitely more to come in this space, such that our clients are really needing to keep that active pulse on what's going on.
• 18:54
  Markus Bolsinger: Speaking about that, so that's what they're doing with the existing portfolio companies. What do you think they should be doing with respect to new investments and their pipeline?
• 19:04
  Jennifer Hutchens: Yeah, first and foremost, they need to understand that what worked before might no longer be viable, and I know that that's a hard ... when you have a plug-and-play roadmap that has worked well, it's a hard thing to swallow. But knowing how much compliance risk that some of this carries, it's definitely an approach that we are working with our clients to customize, but to tackle head on. We have found that that means reassessing compliance structures, especially involving MSOs, evaluating those governance rights, those board seats, the restrictive covenants. And if a target medical company operates in multiple states where, of course, you're seeing different CPOM regimes, especially operations in states that have shown this increased interest in that more aggressive regulation or proposed regulation, definitely could create some additional operational complexity and need for flexibility. I will say there's also a reputational element here. Private equity firms face scrutiny from some regulatory bodies and healthcare experts despite their track record of driving innovation and efficiencies. To overcome that scrutiny, private equity firms are really needing to demonstrate that they're both adding value and thereby indirectly maintaining or improving clinical integrity.
• 20:21
  Jennifer Hutchens: That means building governance structures that empower clinicians and comply with these state-specific rules. Finally, it also means a push to improve PR in this area. Opponents of corporations in healthcare are worried about the impact on local healthcare quality and access when, in actuality, private equity investment can, in fact, foster innovation in local healthcare and help lower costs, which could potentially improve access to healthcare in many instances. Private equity sponsors need to continue to promote that message, and that's one that everyone can really get behind at the end of the day.
• 21:00
  Markus Bolsinger: That's a great one to end on, Jennifer, thank you. Oregon is clearly signaling that its top priority is making sure that Oregonians are getting the best and most accessible healthcare possible which, like you say, is a winning proposition for all. Whether this is the start of a national trend or regional outlier remains to be seen. Of course, the team at Dechert prides itself on helping leaders lead by keeping our finger on the pulse - like what I did there? - of the fast-paced and dynamic healthcare industry. We stand ready to face the challenges of this evolving healthcare regulatory landscape for our healthcare PE clients. More to come, for sure, in this rapidly changing space. It was awesome to have you on the first PE Rx episode, and I hope there will be many more to come covering the cutting-edge intersection of healthcare and PE. Stay tuned, y'all. Thank you.
• 21:59
  Voiceover: Thank you for listening to Dechert's Committed Capital. Please subscribe, and for more information, visit dechert.com.