A significant change in California’s Office of Health Care Affordability (OHCA) transaction-notice requirements will take effect on January 1, 2026.
AB 1415 establishes new pre-closing notification requirements for private equity funds, hedge funds, and management services organizations involved in certain acquisitions, affiliations, or contractual arrangements with California healthcare providers.
I. Existing Transaction-Notice Requirements for Healthcare Entities
Due to California’s restrictions on the corporate practice of medicine (CPOM), many private equity and venture capital-backed healthcare companies utilize a management services organization (MSO) and professional corporation (PC) structure. If you are not familiar with the MSO/PC structure, you can read more about it in The Corporate Practice of Medicine: Essential Guidance for Digital Health Companies and Investors. Historically, OHCA’s transaction-notice requirements only applied to healthcare entities, such as large physician practices (e.g., the PCs); however, most private equity and venture capital transactions in California have happened at the MSO level to avoid CPOM restrictions. As a result, transactions involving only the MSO, such as acquisitions, could proceed without OHCA notification, provided the underlying PCs remained unchanged.
II. Expansion of Notice Obligations to New “Noticing Entities”
As of January 1, 2026, OHCA’s notice requirements will be expanded beyond healthcare entities to include new “noticing entities,” which include: a) MSOs, b) private equity groups or hedge funds, c) business entities created for the purpose of entering into agreements or transactions with a healthcare entity, and d) entities that own, operate, or control a provider, regardless of whether the provider is currently operating, providing healthcare services, or has a pending or suspended license.
By including an MSO as a “noticing entity,” AB 1415 closes the gap that previously allowed many healthcare transactions to proceed without OHCA review. This change dramatically broadens the types of healthcare deals that must now be evaluated for OHCA notification.
III. Reportable Transactions for Noticing Entities
The newly defined “noticing entities” under AB 1415 must report any transaction between the noticing entity and a healthcare entity or MSO, or an entity that owns or controls the healthcare entity or MSO, that do either of the following: a) sell, transfer, lease, exchange, option, encumber, convey, or otherwise dispose of a material amount of the healthcare entity’s or MSO’s assets to one or more entities; or b) transfer control, responsibility, or governance of a material amount of the assets or operations of the healthcare entity or MSO to one or more entities. Notably, MSOs must report qualifying transactions between the MSO and any other entity, even when the transaction does not involve a healthcare entity, which captures a broad range of upstream and corporate-level changes.
IV. Timeline Considerations
The required notice to OHCA must be submitted at least 90 days prior to closing. OHCA may also toll this period if it requests additional information. For transactions that become subject to the rule as of January 1, 2026, this timing effectively requires significant lead-time, and impacted parties should build OHCA review into their deal timeline from the outset.
V. Regulatory Scrutiny and Potential CMIR Review
Importantly, clients should anticipate heightened regulatory scrutiny. OHCA has the authority to conduct a cost and market impact review (CMIR), request further documentation, and refer its findings to the Attorney General for further review of any unfair methods of competition, anticompetitive behavior, or anticompetitive effects.
Wilson Sonsini’s Digital Health practice advises companies with healthcare transactions and can assess whether a transaction meets the new thresholds and requires a notice under the law. For more information, please contact Andrea Linna, Nawa Lodin, Seamus Taylor, or any member of Wilson Sonsini’s Digital Health practice.
