Governor Newsom Signs Into Law Two Healthcare Bills Aimed at Private Equity, Hedge Funds, And MSOs

Earlier this month, California Governor Gavin Newsom signed into law Assembly Bill 1415 (“AB 1415”) and Senate Bill 351 (“SB 351”) — which seek to strengthen the state’s oversight and control over private equity groups, hedge funds, and management services organizations (“MSOs”) in the healthcare industry.¹ The new laws will take effect on January 1, 2026.

AB 1415: Establishing a New Transaction Reporting Requirement to the Office of Health Care Affordability

On October 11, 2025, Governor Newsom signed into law AB 1415, legislation intended to expand the Office of Health Care Affordability (“OHCA”) review process to require filings from private equity groups, hedge funds, and MSOs involved in certain healthcare transactions. Under the new law, “noticing entities” will be required to provide OHCA with 90 days advance written notice of certain transactions with a (1) healthcare entity; (2) MSO; or (3) an entity that owns a healthcare entity or MSO.

AB 1415 defines a noticing entity to include:

• A private equity group or hedge fund;
• A newly created business entity created for the purpose of entering into agreements or transactions with a healthcare entity;
• An MSO; or
• An entity that owns, operates, or controls a provider, regardless of whether the provider is currently operating, providing healthcare services, or has a pending or suspended license.

Transactions subject to the new law include:

• The sale, transfer, lease, exchange, option, encumber, convey, or otherwise disposal of a material amount of the healthcare entity’s or MSO’s assets to one or more entities; or
• The transfer of control, responsibility, or governance of a material amount of the assets or operations of the healthcare entity or MSO to one or more entities.

AB 1415 will also require OHCA to (1) establish requirements for MSOs to submit data and other information in a manner prescribed by OHCA; and (2) make publicly available all information and materials submitted by a noticing entity in connection with a covered transaction.

SB 351: Restricting Private Equity and Hedge Fund Influence on Healthcare Entity Decision-Making

On October 6, 2025, Governor Newsom signed into law SB 351, which codifies the state’s existing guidance for the restrictions on the corporate practice of medicine and adds a new enforcement mechanism for the California attorney general. More specifically, SB 351 prohibits private equity groups or hedge funds from interfering with the professional judgment of a physician or dentist, including decision-making about what diagnostic tests are performed and when to make referrals to other licensed health professionals. The prohibition also extends to decisions about how many hours physicians or dentists work or how many patients they see at a given time.

Importantly, private equity groups and hedge funds will be restricted from influencing key operational decisions. The new law prohibits them from interfering with certain decisions about staffing, coding and billing practices, approving the selection of medical equipment and supplies, or controlling contracts that physicians or dentists (or their practices) enter into with third parties.

SB 351 also prohibits certain non-compete and non-disparagement clauses in contracts involving medical and dental practice acquisitions.

Notably, before SB 351 passed in the legislature, it underwent two amendments that significantly narrowed its scope. First, the term “private equity group” was defined to exclude natural persons who contribute funds to a private equity organization but do not otherwise participate in management. This exemption may act as a carveout for passive investors. Second, the bill was revised to state that an unlicensed person or entity may “assist” or “consult” with physician or dental practices on management and business decisions as long as the licensed provider retains “ultimate responsibility for, or approval of” such decisions.

AGG Observations

The notice requirement under AB 1415 may subject firms to burdensome filing obligations. While the law does not explain what form of notice will be required, OHCA could impose similar requirements to those for healthcare transactions that are already under the agency’s purview. Those filings often require extensive financial information by the filing party, which can take significant time and resources to prepare. Although AB 1415 will require OCHA to make filings by noticing parties publicly available, it remains unclear what information, if any, the agency will keep confidential — whether proactively or upon request. Stakeholders should prepare for the possibility that even sensitive information will become publicly available.

With regard to SB 351, stakeholders should pay close attention to the new restrictions on clinical and non-clinical decision-making when considering new acquisitions or reassessing existing business models.

These new laws are part of a broader trend of increased scrutiny around private equity and hedge fund investments in healthcare in California.

[1] The full text of the new laws are available here: Today’s Law As Amended – AB-1415 California Health Care Quality and Affordability Act; Today’s Law As Amended – SB-351 Health facilities.