Oregon Medical Association supports anti-private equity law, ASRM, SART, don’t take position
BY RON SHINKMAN
Oregon has enacted one of the toughest laws regarding private equity’s role in owning and operating medical practices, but how it will impact IVF clinics remains to be seen.
SB 951 was signed into law by Oregon Gov. Tina Kotek on June 9. It prohibits any employee of a professional medical corporation from controlling or directing the “professional judgment of a licensee who is practicing within the professional corporation.” It also placed restrictions on how non-compete and non-disparagement clauses for physicians who leave medical groups may be structured.
The intent of the law is to close a loophole that mandates majority ownership by physicians of a medical corporation but does not specify the corporate roles of physicians and non-physicians within the entity. According to the law firm Bass Berry & Sims, the law specifically focuses on restricting how employees of a management services organization that contracts to run a medical organization can influence the operations of the latter.
According to the Oregon Capital Chronicle, some private equity firms have exerted control over medical practices by hiring physicians directly – sometimes from out of state – and then listing them as the practice owners. These proxy owners could then order the other physicians to boost their workloads.
“You would have to restructure the management services organization relationships that are currently in place,” Angela Humpheys, co-chair of Bass Berry’s healthcare private equity division, told Inside Reproductive Health, adding that the doctors within the practice would be allotted virtually all of the important decisionmaking power.
“Hiring and firing of providers would have to be within the sole authority of the practice owners, along with setting staffing levels, setting clinical standards and policies, and even setting policies for patient billing,” she said.
Another issue facing private equity firms is that the law makes it difficult to consolidate the operations of numerous clinics into a single corporate entity within generally accepted accounting practices, according to Humphreys.
Another source familiar with the law said that could impact practice valuations, but that it was too early to tell if that would be the case.
What Prompted the Law
The legislation was prompted by the purchase in late 2020 of the Oregon Medical Group. Under ownership by Optum, an affiliate of the UnitedHealth Group, as many as 32 physicians left that practice due to disagreements over how it was being run. That led to the Oregon Medical Group having to inform many patients that they could no longer remain with the practice, according to the Portland Oregonian.
Oregon’s path on this issue could be thorny for private equity firms, which have taken significant stakes in fertility practices and platforms in recent years. According to banking firm Harris Williams, at least 18 major IVF clinic networks or platforms in the U.S. have investments from private equity firms.
“SB 951 will have disruptive effects for private equity firms and managed service organizations, making it more challenging for investors to do business in the state,” the law firm Debevoise & Plimpton said in a recent debrief.
Too Soon To Gauge Impact on Fertility Sector
But how the fertility sector will be affected specifically remains to be seen. Despite the potential impact of the law, it has drawn few headlines to date. While the Oregon Medical Association supported SB 951, the American Society for Reproductive Medicine did not take a position on the law, according to spokesperson Sean Tipton.
Dr. Micah Hill, the current president of the Society for Assisted Reproductive Technology, declined to comment on the law.
Beth Zoneraich, the chief executive officer of Pinnacle Fertility, which was funded in part by the private equity firm Webster Partners, did not respond to a request seeking comment. Pinnacle operates two IVF clinics in Portland, Ore., the state’s most populous city, after it entered into an affiliation agreement with ORM Fertility in 2022.
Although many components of the law go into effect on January 1, 2026, medical practices with existing contracts with management services organizations do not have to make structural changes to abide by the law until the start of 2029, Humphreys noted.
“There is plenty of time to work on structures to come into compliance,” she said.
UPDATE: Comments by Angela Humphreys were added post-publication.
