On October 11, 2025, Governor Gavin Newsom signed into law Assembly Bill 1415 (“AB 1415”), which amends the California Health Care Quality and Affordability Act (the “Act”) to require pre-transaction clearance and data reporting from private equity groups, hedge funds, and management services organizations (“MSOs”), and certain other entities involved in healthcare transactions. Effective January 1, 2026, the law represents a significant expansion of the authority of the California Office of Health Care Affordability (“OHCA”), which already has broad review power over transactions involving many different provider and payor entities.
As discussed in our posts[1] throughout this year, AB 1415 was introduced alongside other California and West Coast state measures intended to address private equity and MSO involvement in healthcare transactions and operations. Its enactment follows Governor Newsom’s approval of SB 351 last week, which codifies restrictions on private equity and hedge fund involvement or influence in clinical decision-making. Together, these laws expand the state’s focus on ownership transparency, transaction oversight, and the role of non-licensed entities in healthcare operations and investments.
Overview of AB 1415
AB 1415 amends the California Health and Safety Code to broaden the scope of entities subject to OHCA’s existing transaction-notice framework.
Under current law, “health care entities,” which include providers such as hospitals and other facilities, large physician groups, ambulatory surgery centers, clinical laboratories and imaging centers, payer entities such as Knox-Keene plans, licensed health insurers and third party administrators, and fully integrated delivery systems, must give written notice to OHCA at least 90 days before completing a transaction involving a material change in ownership, governance or assets (among other transactions). Upon receiving notice, OHCA may waive or initiate a lengthy Cost and Market Impact Review (“CMIR”) to assess effects on cost, competition, and access. The parties may not close a transaction within scope until a waiver is issued or OHCA completes the CMIR process.
The new law extends those notice and clearance obligations to additional parties—termed “noticing entities”—including (i) private equity groups and hedge funds, (ii) MSOs, (iii) newly created business entities created for the purpose of entering into agreements with a health care entity, and (iv) other entities that own, operate, or control providers, regardless of whether the providers are currently operating or have pending or suspended licenses.
Key Provisions
Definitions of Private Equity, Hedge Funds and MSOs (Section 127500.2)
AB 1415 introduces definitions for several categories of entities newly subject to oversight:
- “Private equity group” means “an investor or group of investors who primarily engage in the raising or returning of capital and who invest, develop, dispose of, or purchase any equity interest in assets, either as a parent company or through another entity the investor or investors completely or partially own or control.”
- “Hedge fund” means “a pool of funds managed by investors for the purpose of earning a return on those funds, regardless of the strategies used to manage the funds.”
- “Management services organization” means “an entity that provides management and administrative support services for a provider in support of the delivery of health care services, excluding the direct provision of health services,” which may include “provider rate negotiation, revenue cycle management, or both.”
While existing law potentially could capture certain transactions that involve MSOs, private equity and hedge fund entities, depending on the facts involved, these definitions formalize OHCA’s jurisdiction over private investment and management structures operating in the healthcare market and effectively treats them as health care entities subject to the notice requirement.
Data Reporting by MSOs (Section 127501.5)
The statute adds Section 127501.5, providing that “the office shall, in a manner prescribed by the office, establish requirements for management services organizations to submit data and other information as necessary to carry out the functions of the office.”
This provision authorizes OHCA to collect information from MSOs for its analytical and policy functions under the Act.
Notice and Clearance Obligations for Noticing Entities (Section 127507)
Section 127507 now requires each “noticing entity” to provide OHCA with written notice at least 90 days before entering into agreements or transactions with health care entities, MSOs or entities that control such entities that do either of the following:
- “Sell, transfer, lease, exchange, option, encumber, convey, or otherwise dispose of a material amount of the health care entity’s or management services organization’s assets”; or
- “Transfer control, responsibility, or governance of a material amount of the assets or operations of the health care entity or management services organization.”
A management services organization must also provide notice of any agreement or transaction described above even when the counterparty is not itself a noticing entity.
As mentioned above, if a notice is required, then applicable parties must await clearance from OHCA (i.e., issuance of a waiver or completion of a CMIR) to be able to consummate the transaction.
The statute directs OHCA to adopt regulations eliminating duplicative reporting where multiple provisions apply to the same transaction. It remains to be seen whether in issuing new regulations, OHCA will take a similar approach to the existing regulations in providing greater clarity as to transactional circumstances that meet the materiality thresholds for the above-described transaction types.
Implementation
AB 1415 takes effect January 1, 2026. In the coming months, OHCA is expected to issue implementing regulations defining the form and content of required notices and clarifying the treatment of data submitted under the amended Act.
Importantly, the law does not establish an approval mechanism or grant OHCA the authority to affirmatively block transactions (unlike other recent legislative proposals), but instead broadens the range of entities required to file pre-closing notices and submit information to the state.
Looking Ahead
The enactment of AB 1415 continues a legislative theme of increased regulatory oversight over private investment and involvement into healthcare business in the state, particularly as it relates to its effects on the cost and accessibility of healthcare services.
While we await OHCA’s implementing regulations, all stakeholders in the healthcare industry (not just hedge funds, private equity, portfolio companies thereof, and MSOs) should be proactive in examining the new requirements under AB 1415 as it relates to transactions set to close in the coming months that involve (whether directly or indirectly) California healthcare aspects. While private equity is a notable focus of this law, as we mentioned above, “noticing entities” include several other types of parties and entities, including certain newly created business entities and provider affiliates.
FOOTNOTES
[1] See Major Regulatory Updates from the West Coast: New California and Washington Approaches to Healthcare Private Equity and MSO Regulation | Healthcare Law Blog, Oregon Targets Corporate Practice of Medicine with Enacted Bill: What SB 951 Means for MSOs, PE-Backed Physician Groups, and Physicians | Healthcare Law Blog