In October 2025, California enacted significant legislative reforms that directly impact healthcare companies involved in private equity (PE) sales, hedge fund investments, and certain transactions involving management services organizations.
Assembly Bill 1415 (AB 1415), set to take effect on January 1, 2026, expands the scope of the Office of Health Care Affordability’s (OHCA) authority over health care transactions. This law represents a fundamental shift in regulatory oversight for organizations in the healthcare sectors, particularly those engaged in PE-backed deals, and it is essential to understand the operational and strategic implications before moving forward with any sale or acquisition.
Historically, OHCA’s transaction review process required specified health care entities to provide at least 90 days’ advance notice before closing material transactions. Transactions were generally exempt from OHCA’s review process if they did not meet certain revenue thresholds, asset values, or control-change percentages, or if they were subject to review by other agencies. Importantly, PE groups and hedge funds investing in health care were largely outside of OHCA’s direct filing obligations unless they were operating in conjunction with regulated entities. AB 1415 closes that gap by expressly bringing these investors, alongside certain management services organizations (MSOs), within OHCA’s jurisdiction for particular transactions.
The legislation also defines the “noticing entities” that it regulates. This new category includes private equity groups, hedge funds, MSOs, newly formed business entities created to enter into agreements or transactions with a health care entity, and entities that own or operate a provider.
Under AB 1415, noticing entities will be required to provide detailed transaction notices to OHCA when engaging in agreements or deals involving the sale of a material portion of assets or the transfer of control over a health care entity or MSO. These filings will likely require disclosure of significant operational and financial information, such as organizational charts, prior transactions, and financial statements.
For healthcare companies that are the targets of such sales (or that are themselves acting as acquirers through PE/hedge fund-backed structures), the inclusion of PE groups and hedge funds in OHCA’s oversight means that transactions could face extended timelines and deeper scrutiny. OHCA retains the right to conduct a cost and market impact review (CMIR) after receiving a pre-transaction notice from the parties to a contemplated transaction. Even though OHCA does not have the unilateral authority to block deals outright, this process can delay closing by several months, making early compliance and regulatory strategy an essential part of deal planning.
The treatment of MSOs under AB 1415 also demands close attention. Not all MSOs will be captured by AB 1415’s rules. For instance, MSOs providing services only to entities outside OHCA’s definition of a “provider,” such as certain small physician groups or home health agencies, may remain outside the reporting requirements. However, MSOs that work with providers subject to OHCA’s authority will have reporting obligations when acting as a “noticing entity” contemplating a covered transaction with a health care entity, as well as when the MSO itself is contemplating a covered transaction with any other entity (including another “noticing entity”). MSOs are defined broadly as organizations providing management and administrative support services for providers in support of delivering healthcare services. This definition is narrowed slightly by the requirement that such services must include provider rate negotiation, revenue cycle management, or both. This refined definition is important for healthcare companies (including digital health, telehealth and other virtual care companies operating under “MSO-PC” structures) as well as other types of companies, including for example, life sciences companies that have subsidiaries performing services in healthcare delivery channels that meet the definition of MSOs – such entities will need to assess whether a sale or acquisition transaction at the company level may trigger notice under the law, as the law’s breadth means that even sales or control changes involving nonclinical management entities could trigger filings. Companies that use MSOs to handle administrative functions for healthcare delivery channels should assess their exposure under this new reporting regime.
The complex ownership structures often involved in PE-backed healthcare deals may also now face more scrutiny, particularly in cases where transactions are executed through newly created entities. Under AB 1415, such “special purpose” entities are required to file notice if engaging in reportable transactions, eliminating a previous workaround where investors might attempt to bypass notice requirements by forming a new corporate vehicle for acquisition.
For healthcare entities, this expanded regulatory reach raises several strategic considerations. First, transaction timelines must incorporate the possibility of extended regulatory review. Since OHCA reviews can introduce delays and additional expenses, deal structures should account for potential holding periods and additional legal and regulatory review costs before closing. Second, compliance preparation will now require more robust data management and readiness, given the detailed nature of information likely to be requested. Third, investor relations (including communications with PE partners) should address the implications of the new law, as transparency and coordination will be key in navigating the reporting process smoothly.
Moreover, AB 1415 is part of a broader national trend toward heightened oversight of PE and hedge fund involvement in healthcare. Other states, such as Colorado, Connecticut, Oregon, and Texas, have proposed measures targeting these investment structures, and Massachusetts recently increased its own scrutiny over healthcare mergers and acquisitions. For multi-state healthcare operators and companies with national portfolios, compliance strategies will need to harmonize California’s requirements with those emerging elsewhere.
As the January 2026 effective date approaches, OHCA is expected to issue implementing regulations and update its submission processes. These rules will likely clarify specifics such as timing requirements, revenue thresholds, and precise notice contents for newly included entities. Stakeholders, particularly those in the complex and integrated healthcare investment space, should closely monitor this regulatory rulemaking.
In practice, companies engaged in or preparing for PE or hedge-fund backed transactions should undertake a thorough review of their organizational and transactional structures now. This includes mapping out relationships with MSOs, confirming whether they meet the statutory definitions, and identifying any newly formed entities likely to be involved in acquisitions. Legal and compliance teams should work with investment partners to establish protocols for timely and accurate notice filings, minimizing the risk of delays or compliance failures.
AB 1415 signals a clear policy intent: California wants greater visibility into the financial players influencing its healthcare delivery systems. For healthcare and life sciences companies participating in PE sales, hedge fund transactions, or MSO ownership changes, the message is equally clear: the regulatory environment is becoming more complex, and proactive compliance planning is no longer optional but essential. By investing in preparation and staying engaged with OHCA’s evolving guidance, organizations can position themselves to navigate the regulatory shifts successfully while maintaining deal momentum and strategic objectives.