4 minute read | November.11.2025
California has expanded its transaction review regime for many healthcare transactions and codified its longstanding corporate practice of medicine (CPOM) prohibition, reinforcing existing tools intended to address private investment into healthcare delivery.
AB 1415 expands the current requirements to provide pre-closing notice of certain healthcare transactions to require filings by private equity (defined broadly to also include venture capital), hedge funds and management services organizations (MSOs). It also captures some MSO transactions even if there is no healthcare entity involved. SB 351 aims to restrict private equity groups (including venture capital firms) and hedge funds from interfering in the independent clinical decision-making of physicians and dentists.
California has had a suspensive filing regime in place for over a year, requiring pre-closing notice for certain healthcare transactions to the Office of Health Care Affordability (OHCA). However, the current process is limited to certain health care transactions where a “healthcare entity,” is a party to, or the subject of, the transaction, the transaction involves a “material change” in ownership and other threshold criteria are met.
Effective January 1, 2026, AB 1415, the California Health Care Quality and Affordability Act, which mandates such pre-close filings, will expand to require filings from “noticing entities,” including private equity groups, hedge funds and MSOs entering into transactions with healthcare entities or MSOs. The amended law also gives OHCA the ability to request data from MSOs outside of the deal context.
SB 351 prohibits private equity groups and hedge funds from interfering with professional judgment or exercising impermissible control over medical and dental practices. For example, SB 351 states that the private equity group or hedge fund should not control, or be delegated the power to, select, hire or fire clinicians based on clinical proficiency, set parameters for third-party payor contracts, make decisions regarding billing and coding of procedures, or approve selection of medical equipment or supplies. SB 351 also restricts use of certain non-compete and non-disparagement provisions in management services agreements.
The California Attorney General is authorized to enforce the new law.
AB 1415 meaningfully broadens who must file and what types of transactions are subject to the OHCA filing and waiting period. For example, the new scope could require filings for MSO-to-MSO transactions, or private equity acquisitions or controlling investments in MSOs, where there is no related transaction with a healthcare entity, thus capturing transactions that previously did not require pre-closing notice.
Due to the expansion, more transactions will need to comply with the OHCA review process before the transaction can close. Based on the pace of OHCA reviews to date, parties to MSO transactions and other newly in-scope transactions that will close after January 1, 2026, should plan at a minimum for a 90-day pre-close period after submitting their notice, and be aware that transactions selected for cost and market impact review (CMIR) could add substantial additional time.
OHCA does not have the power to challenge a transaction to which it objects, although it may refer such transactions to the California attorney general for a potential challenge under antitrust or other laws. Parties engaging in such transactions will need to be prepared to present advocacy for why their transactions will not reduce competition, affordability or access to healthcare services in California.
For the most part, no. In fact, SB 351 features the same examples of impermissible interference with professional judgment and other activities that can constitute impermissible control as the California Medical Board’s long-standing guidance, available on its website.
However, it is a good reminder to MSOs that there is scrutiny of private investment in healthcare. Establishing a compliant MSO- PC structure is crucial to mitigating CPOM risk, but is not the end of the exercise. “De-risking” a MSO-PC arrangement as much as possible requires ongoing implementation efforts that appropriately balance the respective roles and responsibilities of the parties involved.
Given the new restrictions in SB 351, MSOs operating in California should also consider reviewing existing management services agreements to determine whether any updates are required with respect to non-compete or non-disparagement provisions.
If you have any questions, please contact Amy Joseph, Craig Falls, Santi Assalini, Tony Chan, Jeremy Sherer, Kristin Petersen or another Orrick team member.