by Rajesh Kothari, CFA
Managing Director & Healthcare Practice Lead
Cascade Partners
Oregon Senate Bill 951 (SB 951), signed into law in June 2025, imposes strict new limits on the corporate practice of medicine. While intended to curb corporate influence over medical decision-making, the legislation unintentionally stifles the growth and efficiency of physician practices — to the detriment of both doctors and their patients.
History of Corporate Practice of Medicine
The corporate practice of medicine emerged in the early 20th century when many U.S. states enacted laws to prohibit corporations from employing physicians.1 The primary goal was to ensure that patient care was the focus of medical decisions rather than corporate profits.1 Over time, these laws have evolved, but the fundamental principle remains the same: to protect the integrity of the patient-physician relationship from corporate interference.1
Yet, the business of healthcare has changed, and the economics of care are a consideration that is on the minds of physicians, nurses, hospital administrators, and patients. As healthcare has moved away from cost-plus reimbursement models, demand for greater efficiency and disciplined cost management has become more critical than ever for every healthcare organization.2 Effective cost management is essential for maintaining financial sustainability, optimizing resource utilization, and enhancing operational efficiency.3 Hospitals, physicians, and other providers are keenly aware of the economic implications of their clinical decisions and are carefully assessing costs and financial impact on their patients and ensuring payer coverage – not because these factors drive care decisions, but because they must. In today’s environment, with persistent calls to lower the overall cost of care and ease the burden of insurance premiums and co-pays, no provider can afford to ignore the economic realities tied to delivering quality care. As a result, we must recognize that physicians and other healthcare providers balance the financial implications of care with the quality of care every day. They do this regardless of the environment – whether it’s a non-profit hospital, a for-profit ASC, or a physician practice. Even in organizations owned by private equity or other for-profit entities, physicians and other licensed healthcare providers are responsible for making clinical decisions.
Limited Ability to Source Capital
One of the most significant consequences of SB 951 is the restriction on physicians’ ability to secure investment capital from institutions, private investors, or even friends and family. Unfortunately, other participants, such as hospitals and health plans, are not subject to these restrictions. By cutting off critical funding sources, the law limits practices’ capacity to invest in essential tools. The latest technology and infrastructure are needed to remain competitive in today’s healthcare environment.4 According to the AMA’s most recent Benchmark Survey, nearly 65% of all physicians surveyed cited access to costly resources as one of the primary reasons for selling their practice. Without access to external capital, physicians face real challenges in adopting advanced medical technologies, enhancing patient care, and expanding the services they provide. Increasingly, physicians feel they are working harder and making less money. And this is precisely what is happening. Since 2000, physician reimbursement has declined by nearly 12%, while the cost of running a practice has increased by 57%, as measured by the CMS Medicare Economic Index. Nearly 64% of physicians indicated that growing administrative burdens and complex payer regulations are driving up practice costs.
Challenges in Creating Economies of Scale
SB 951 also makes it difficult for physician practices to create economies of scale. Practices cannot easily join together without capital to facilitate transactions, which is crucial for achieving operational efficiencies.5 The inability to merge or collaborate effectively means that practices remain fragmented, facing higher operational costs and reduced bargaining power. With a relatively fixed cost of operations, physician practices, like other organizations with fixed costs, benefit from increasing their scale, which the fixed costs support. Just as hospitals have executed consolidated across the country to leverage their fixed costs and improve operating profits, physicians have executed a similar model. Unfortunately, for hospitals, payers, and physician practices, outside capital is often a critical tool for facilitating mergers, acquisitions, and joint venture transactions. SB 951 and similar proposed legislation hurts practices by limiting their ability to grow.
Fragmentation and Negotiation Challenges
The continued fragmentation of physician practices makes it nearly impossible for them to achieve the scale needed to negotiate better rates from payers.6 SB 951 will make independent growth of physician practices impossible. According to the AMA’s Physician Practice Benchmark Survey, among independent physicians who sold their practices over the past decade, 70.8% pointed to inadequate payment rates as a significant factor in their decision. Together with increased administrative and regulatory burdens, these economic pressures and bureaucratic challenges are driving more physicians to abandon independent practice. Without the ability to consolidate, physicians are left with limited negotiating power — often facing lower reimbursement rates and mounting financial costs.
Accelerating the Collapse of Independent Practices and the Impact on Patient Care
Given the restrictions being implemented in Oregon, we expect the number of independent practices owned by physicians to become nearly extinct in Oregon. We anticipate physicians will either close their practices as they reach retirement, move out of state, or become part of hospitals over time, further accelerating the decline of independent practices in Oregon.7 This consolidation will limit patient choice, leaving individuals with access only to the procedures, technologies, and techniques endorsed and approved by the large hospital systems. As independent practices disappear, patients will face fewer options for personalized care — a shift that risks both the quality and diversity of healthcare services available to them.
In markets where hospital consolidation dominates, studies have consistently shown that patients face higher costs, longer wait times, and reduced clinical quality. The loss of independent practices means fewer options for personalized care — a change that ultimately diminishes both the quality and affordability of healthcare.
Conclusion
While Oregon SB 951 is intended to safeguard the integrity of medical decision-making, it fails to recognize that this is a fundamental element of today’s healthcare business, whether it is a non-profit, for-profit, private equity, or physician-owned practice. The unintended consequences of SB 951 pose serious challenges for both physicians and patients. By restricting access to capital, hindering the creation of economies of scale, and perpetuating fragmentation, the legislation undermines the ability of physician practices to grow, compete, and deliver high-quality care. To truly protect patient interests, policymakers must address these issues and pursue balanced solutions that support the growth and sustainability of physician practices, promote better outcomes across the healthcare system, and consider the financial impact as part of today’s healthcare model.
1) The Corporate Practice of Medicine: Protecting Patient Care and Physician Autonomy, AMA, 2022; 2) The Importance of Effective Cost Management in Healthcare, Healthcare Financial Management Association, 2021; 3) A Guide to Assessing the Efficiency of Health Systems, World Health Organization, 2008; 4) Oregon SB 951, 2025 Enactment; 5) Physician Practice Consolidation and Economies of Scale, Health Affairs, 2019; 6) Market Consolidation, Payer Negotiation, and Health Costs, National Bureau of Economic Research, 2020; 7) Hospital Consolidation, Pricing, and Quality Outcomes, RAND Corporation, 2021