FILE: The construction staging area can be seen outside the Oregon Capitol in Salem in December 2021.
Bob Payne / OPB
Oregon lawmakers are considering a bipartisan bill that would create some of the strictest limits in the nation on corporate ownership of primary care and specialty medical clinics.
The bill has already passed the House and senators on the healthcare committee voted Monday to pass it on to the full Senate for consideration. Some of the bill’s toughest provisions would not apply to hospitals, health systems and nursing homes, which are already largely exempt from Oregon’s restrictions on the corporate practice of medicine. We hear more details from OPB health reporter Amelia Templeton.
Note: The following transcript was created by a computer and edited by a volunteer.
Dave Miller: From the Gert Boyle Studio at OPB, this is Think Out Loud. I’m Dave Miller. Oregon lawmakers are considering a bipartisan bill that would create some of the country’s strictest limits on corporate ownership of primary care and specialty medical offices. The [bill] has already passed in the House. Yesterday, senators on the Health Care Committee agreed to send it to the full Senate for consideration. OPBs health reporter Amelia Templeton has been looking into this issue and joins us now to talk about it. Welcome back.
Amelia Templeton: Thanks so much.
Miller: I want to start with the background here. How common is it for large companies or private equity firms to buy or to own medical practices in Oregon?
Templeton: I don’t know. We know about individual deals thanks to a relatively new program in Oregon, the Health Care Market Oversight Program, which reviews and tracks transactions over a certain size. So we know, for example, that Amazon recently acquired a chain of primary care practices, One Medical, which included locations in Portland. We know that a primary care network in Corvallis is currently in the process of being acquired by Optum, which is a subsidiary of UnitedHealth Group, the largest health company in the country.
We know about individual deals. But in terms of how far into the market this has reached, we don’t really know. There’s not great data here in Oregon. There’s a sense that Oregon is maybe not as far along on this sort of private equity acquisition, corporate acquisition and consolidation of healthcare as other parts of the country. But it is absolutely happening here.
Miller: And also not as far along means that we, then, could be ripe for acquisitions. What prompted Democratic State Representative Ben Bowman to introduce this bill? What does he say is the problem that he wants to solve?
Templeton: I think he says he is trying to maintain local control of Oregon’s independent primary care and specialty care clinics by people here in the state of Oregon and by physicians in the state of Oregon. His concern is that with private equity and corporate ownership, decision-making is no longer in the hands of somebody with a medical degree. And that, increasingly, it becomes profit driven and profit driven in ways that can increase the cost of care for patients and also increase the cost of care for payers including the State of Oregon.
And Bowman points to data that ultimately comes from PitchBook, a private source that tracks private equity investments, suggesting that the pace of these acquisitions, specifically around certain kinds of specialty clinics and primary care, really has increased dramatically in the last 10 years.
Miller: What did you hear from proponents of this bill about the effects that private equity ownership would have on the provision of care?
Templeton: I heard a lot of interest and sympathy for the argument that Bowman is trying to make, that there is real value to local control, specifically of medical practices and health care. And [proponents say] it’s important to make sure that decision-making is putting the patient first and that keeping practices in control of physicians is one way to do that. And what was really interesting is that the Democrats in the House who voted on this bill, very much lined up behind it. There are also quite a few Republican representatives who also took that side and shared that argument.
One of them was Kevin Mannix, a longtime conservative lawmaker, the architect of Oregon’s mandatory minimums. He gave his strong endorsement on this bill before the vote.
Kevin Mannix [recording]: As we debated this and discussed this, I thought about my law practice and then I realized in the State of Oregon historically, forever, lawyers are not allowed to have their firm owned by non lawyers. And the principle behind it was so that we will exercise our independent judgment on behalf of our clients and not have external forces affecting that independent judgment for our clients.The only people that own us, in a way, are our clients that we represent and we represent their best interests.
Miller: I mean, I was struck by many details, but here’s one that I was struck by, in your reporting. Under long-standing and existing state law, Oregon physicians have to have a majority stake in independent practices known as professional corporations. That’s still on the books. So why would this new law be necessary?
Templeton: That’s called Oregon’s Corporate Practice of Medicine Doctrine. [It] bans corporate practice of medicine. That law is written in a way that there are just a million and one ways to get around it. It’s essentially been defunct, because it’s been so easy to come up with a way to structure your business so that the law doesn’t apply.
So the new law makes it clear that no matter how you structure your practice, this majority ownership requirement - 51% or more physicians - does apply, with a couple of exemptions for telemedicine organizations, for behavioral health, for a number of other groups.
Miller: How do opponents of this bill respond to the basic argument that having corporate control of medical practices means that those practices have this inherent conflict between their patient’s health, their patient’s best interests, and their shareholder’s pockets, their shareholder’s best interests?
Templeton: I think they argue that the American healthcare system is so complex that this law is sort of trying to take an outdated old tiny ideal and apply it in a situation where it’s really not relevant anymore. And one of the strongest points that they make is that hospitals and health systems are exempt from this law. So Providence in Oregon, OHSU, Legacy, those large health systems, which often include some degree of primary care practices as well as their big hospitals, are not going to be subject to this law.
And of course, in those hospitals, there are often administrators with MBAs who are also making important decisions around patient care. So I think they point to that as an example of just how complex our current system is and how we’re trying to regulate one part of the system using this ideal around preventing profit seeking. But [opponents say] it doesn’t really take into account what American healthcare looks like today.
Miller: Why are hospitals and nursing homes exempt from this?
Templeton: I think it’s a really good question. The short answer is there was an Attorney General opinion in the 1970s that held that hospitals could directly employ doctors even though they didn’t have 51% physician ownership because they have sort of a separate licensing process with the state to provide health care.
Miller: I want to turn to another piece of this bill that, you’ve written, is novel and actually particularly controversial. It includes limits on something called management services organizations. What are these?
Templeton: Well, it really depends on who you ask - the proponents of the bill or the opponents. But management service organizations at least started out as sort of back office, administrative help and support for medical practices. They help with things like billing which, in medicine, is incredibly complicated. They might help provide equipment, logistics, that type of thing.
The argument is that, in recent years, investors and in particular private equity investors have used these management service organizations to get around bans on the corporate practice of medicine and to essentially acquire and control lots of individual private practices around the country. And then to go beyond just providing administrative support to them, but to actually dictate how they practice medicine, and to be a sort of lever for the private equity investors to try to increase revenues and reduce expenses.
Miller: How central are these companies to American medicine right now?
Templeton: You know, before I started reporting on this bill, I was really not very familiar with them. But they are pretty common and pretty important. And if you look up any individual practice, you’ll often find there’s the name of the individual practice and then there’s often a second name on the website, which might be the name of the network that they’re a part of. Often that bigger network, that bigger national network is an MSO or a management service organization.
And one of the people that has come out strongly in favor of this bill is former Governor John Kitzhaber, also a former physician. And he really broke down how this whole arrangement works and these management service organizations. And he used an example of this well known oncology practice in the Portland area, Compass Oncology.
John Kitzhaber [recording]: And let me use Oregon-based Compass Oncology as an example. Compass, in a sense, is a hostage of its MSO which is US Oncology. US Oncology buys its drugs, it employs its executive director, it employs its staff, it owns their building and their equipment. Now US Oncology, in turn, is owned by McKesson, a distribution company with annual revenues of around $375 billion.
Templeton: And McKesson, in turn, is backed by a number of private equity groups. So Kitzhaber is concerned that this means that a group like Compass is now subject to pressure to increase returns for those investors. What’s interesting is that, at this hearing where Kitzhaber testified, the president of Compass Oncology also testified, Scott Rushing. And he very strongly objects to this characterization. And he showed up to essentially say, “Look, we need these MSOs in order to compete with hospitals, in order to survive as independent practitioners. We need access to capital for our complicated equipment and drugs and the expertise that they bring to the table.”
Scott Rushing [recording]: I have never turned a patient away for inability to pay. The second thing is, they have never gotten in my business of taking care of my patients. They are not practicing corporate medicine. They don’t tell me how many patients to see a week. They don’t tell me which drugs I can give.
Miller: Amelia, does any other state have a law like what Oregon lawmakers are now considering?
Templeton: A number of states have very strong prohibitions in the corporate practice of medicine, states like Texas, California, New York, Washington, Florida, Illinois, and New Jersey. However, this is the first bill that I’m aware of in the nation, and I’ve talked to quite a few experts, that really tries to restrict these MSOs and that tries to modernize the corporate practice of medicine, [with] prohibitions to respond to private equity. And so I think, however this goes, people around the country are watching.
Miller: Where does this bill stand right now? I mean, what’s the potential timing?
Templeton: Well, it could go to the Senate floor for a vote Friday or potentially Monday of next week.
Miller: Amelia, thanks very much.
Templeton: You’re welcome.
Miller: Amelia Templeton is OPBs health reporter.
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