California’s Office of Health Care Affordability (OHCA) has finalized regulations implementing Assembly Bill 1415 (AB 1415), providing additional guidance regarding the application of California’s healthcare transaction notice requirements to private equity groups, hedge funds, management services organizations (MSOs), and other entities involved in healthcare transactions. The final regulations become effective November 2, 2026.
As discussed in our prior alert, California MSO Transaction Notification Requirements Begin January 1, 2026, AB 1415 expanded OHCA’s transaction notification regime effective January 1, 2026. Among other changes, AB 1415 added private equity groups, hedge funds, MSOs, certain newly created business entities, and entities that own, operate, or control providers as “noticing entities.”1 The statute left important implementation questions to OHCA, however, including the thresholds and circumstances under which these entities would be required to file notice.
Following proposed regulations issued in May 2026, and revised proposed regulations issued in September 2026, OHCA has now finalized its implementing regulations. The regulations establish filing thresholds for the newly covered noticing entities, identify additional circumstances constituting material change transactions, and expand the information and documentation required in a filing.
Key takeaways include:
- Private equity and hedge fund investments of 10 percent or more may be subject to notice. The 10 percent threshold is a material change transaction test; a filing obligation also depends on whether the healthcare entity or MSO involved satisfies the applicable filing criteria. Certain acquisitions below 10 percent may also qualify based on the rights obtained by the investor.
- Venture financings may separately implicate OHCA’s change-of-control rules. Even where a venture investor does not qualify as a “private equity group,” changes in governing-body voting power or significant supermajority, veto, or similar rights may constitute a material change transaction for an otherwise covered healthcare entity.
- MSOs are subject to new transaction-specific thresholds and triggers. AB 1415 already defined MSOs and made them noticing entities; the regulations now establish which MSOs are required to file and identify the MSO-related transactions that constitute material change transactions.
- Newly covered filers face expanded disclosure requirements. The regulations require additional organizational, portfolio, financial, and transaction information, including disclosures tailored to private equity groups, hedge funds, and MSOs.
- Early OHCA screening remains important for deal planning. Parties should account for the 90-day notice period, potentially significant disclosure obligations, and the possibility of a Cost and Market Impact Review (CMIR).
Private Equity and Hedge Fund Investments: 10 Percent Is the New Threshold
One of the most significant changes from OHCA’s May 2026 proposal is the threshold applicable to private equity and hedge fund investments. A transaction constitutes a material change transaction if it involves a private equity group or hedge fund and results in the private equity group or hedge fund holding 10 percent or more of the assets, equity, debt, or liabilities of a healthcare entity or MSO satisfying the applicable regulatory thresholds. The rule also expressly includes groups of investors, private equity groups, or hedge funds2 investing collectively to hold 10 percent of the assets or equity of the healthcare entity.3 The May proposal would have set the threshold at 5 percent.
Crossing the 10 percent threshold does not, by itself, mean that an OHCA filing is required. Rather, the regulations require two related inquiries: first, whether the healthcare entity or MSO involved in the investment meets the applicable filing criteria; and second, whether the investment constitutes a material change transaction under the private equity and hedge fund provisions. More specifically, the investment must involve a healthcare entity that satisfies the applicable revenue, asset, or geographic criteria under Section 97435(b)(1)-(3), or an MSO that satisfies the separate criteria under Section 97435(b)(5).4 The investment must then satisfy the private equity and hedge fund material-change transaction test, including the 10 percent threshold or the alternative specified-rights test.5
Venture capital investors should not necessarily assume that the private equity provisions are inapplicable. A “private equity group” is statutorily defined as an investor or group of investors that primarily engages in raising or returning capital and that invests, develops, disposes of, or purchases equity interests in assets, either as a parent company or through another entity the investor wholly or partially owns or controls.6 Although the definition excludes certain passive investors, it does not expressly exclude venture capital funds.
As discussed in our prior alert, The Next Phase of State Healthcare Transaction Regulation: Illinois and Vermont Expand Scrutiny of Healthcare Investments, California is not alone in leaving venture capital outside an express carve-out: Illinois and Vermont similarly do not expressly exclude venture capital investors from their definitions of private equity. By contrast, certain other state regimes, including Massachusetts and Maine, expressly carve out certain venture capital investors that exclusively fund start-ups or other early-stage businesses. Accordingly, whether a particular venture or growth fund falls within California’s definition requires an analysis of the statutory criteria rather than reliance on the investor’s characterization as a venture capital fund.
For investors that qualify as private equity groups or hedge funds, the 10 percent threshold is not the end of the inquiry. An acquisition below the 10 percent threshold may nevertheless constitute a material change transaction where the acquisition is accompanied by an agreement granting the private equity group or hedge fund specified authority over the healthcare entity or MSO, including authority to appoint or replace leadership or governing-body members; veto decisions; alter operations or certain payer or MSO arrangements; purchase healthcare real property and lease it back; cause, require, approve, or veto indebtedness; manage or operate the entity through specified arrangements; charge fees; or control specified uses of capital and net income.7
Additionally, the analysis of a private equity or hedge fund investment should consider both the percentage acquired and the rights granted in connection with the investment.
Venture Financings: Change of Control and Governance Still Matter
Even if a venture capital investor does not qualify as a “private equity group,” a venture financing in a healthcare entity may independently implicate OHCA’s general material change transaction provisions if it results in a qualifying change of control or governance of a healthcare entity that meets the applicable filing criteria. Generally, this requires at least $25 million in annual revenue or California assets, or at least $10 million in annual revenue or California assets where the transaction involves a qualifying counterparty.8
A transaction involving a transfer of control, responsibility, or governance, in whole or in part, of a healthcare entity submitter constitutes a material change transaction.9 This includes transactions transferring 25 percent or more of the voting power of the members of a healthcare entity’s governing body, including through adding or substituting members or another written or oral arrangement.10 A transaction may also constitute a transfer of control where it vests voting rights significant enough to constitute a change in control, including supermajority rights, veto rights, or similar provisions, even if ownership or governing-body representation is below 25 percent.11
These provisions may be relevant to later-stage venture and growth financings where investors receive significant governance rights without acquiring majority ownership. The provisions focus on changes in control or governance of a healthcare entity,12 not merely the MSO.
For venture-backed digital health companies operating through MSO-PC structures, an investment in the MSO does not, by itself, trigger these general change-of-control provisions. Such financings should instead be evaluated under the private equity/hedge fund and MSO-specific provisions discussed above, as applicable, including where the transaction also results in a qualifying change of control of an affiliated healthcare entity.
MSO Transactions: New Material-Change Triggers
As discussed in our prior alert, AB 1415 already defined MSOs and made them noticing entities. What the regulations add are specific filing criteria and material-change circumstances for MSOs. As with the private equity and hedge fund provisions, these operate as two separate inquiries. First, the regulations identify the MSOs subject to the filing requirement. Second, they identify the types of MSO-related transactions that constitute material change transactions. Both must be satisfied for an MSO filing obligation to arise.13
The regulations identify different categories of MSOs potentially subject to filing, including certain MSOs owned by hospitals, MSOs with specified relationships to physician owners or healthcare entities, and MSOs with specified affiliations.14
The relevant material change transactions include transactions resulting in an MSO providing management and administrative support services for a qualifying healthcare entity; transactions resulting in an MSO providing such services for two or more providers that collectively generate at least $10 million in annual California-derived revenue; and transactions involving an MSO and a transfer of control, responsibility, or governance, in whole or in part, of a healthcare entity.15
For MSO-professional entity platforms, the practical significance is that the reportable event may be the establishment of a new management relationship, rather than a traditional acquisition of a healthcare provider. But the existence of a new management services agreement alone does not require notice: the MSO must also be one of the MSOs subject to the filing requirement.16
Other Notable Changes and Filing Considerations
The regulations also make several other changes to OHCA’s transaction framework. Newly covered filers must provide additional transaction, ownership, governance, and organizational information. The requirements include disclosures tailored to the new categories of noticing entities: MSOs must provide specified information regarding their management and administrative support services, while private equity groups and hedge funds must provide information regarding healthcare entities and MSOs directly or indirectly owned, controlled, or financed by participating asset managers and their funds. Additional required materials include organizational charts and specified financial, valuation, governance, portfolio, and transaction information.17
The regulations also add a material change transaction trigger for certain sales or transfers of healthcare real estate where the surviving healthcare entity will be required to lease or pay rent for the property.18 Filers should also consider the public-disclosure implications of the expanded filing requirements: information submitted as part of a notice or CMIR generally is treated as a public record unless designated as nonpublic or confidential and OHCA accepts the designation, with the regulations establishing additional procedures and protections for confidential materials.19
Parties subject to the filing requirement must provide notice at least 90 days before closing, and transactions selected for a CMIR may face a significantly longer review period.20 Parties should therefore account for potential OHCA review early in transaction timelines and documentation.
What Healthcare Companies and Investors Should Do Now
Healthcare companies and investors contemplating transactions with a California nexus should incorporate the new regulations into transaction screening and diligence at an early stage. The analysis should proceed in two steps: first, determine whether the relevant healthcare entity or noticing entity satisfies the applicable filing criteria; and second, determine whether the transaction constitutes a material change transaction. Parties should screen minority and venture financings, as well as traditional acquisitions, review changes to ownership and governance rights, and evaluate new MSO management arrangements. They should also account for potential OHCA review in transaction timelines and documentation, including the 90-day notice period and possibility of a CMIR. For healthcare entities in particular, the analysis should not begin and end with whether a transaction is characterized as an acquisition: the identity and status of the parties and the ownership and governance changes resulting from the transaction can each affect the OHCA filing analysis.
Wilson Sonsini advises companies with healthcare transactions and can assess whether a transaction meets the legal requirements. For more information, please contact Andrea Linna, Nawa Lodin, Seamus Taylor, or any member of Wilson Sonsini’s Digital Health practice.
[1] Cal. Health & Safety Code § 127507(h)(1)-(4).
[2] Similar to “private equity group”, “hedge fund” is broadly defined as: 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. Hedge funds include, but are not limited to, a pool of funds managed or controlled by private limited partnerships or other types of private corporate or partnership formations. HSC § 127500.2.
[4] The applicable healthcare-entity filing criteria include: (i) annual California-derived revenue of at least $25 million or California assets of at least $25 million; (ii) annual California-derived revenue of at least $10 million or California assets of at least $10 million, where the transaction involves another healthcare entity satisfying the $25 million threshold or certain qualifying noticing entities; or (iii) for a provider or fully integrated delivery system, provision of healthcare services in a designated California primary care health professional shortage area. MSOs are subject to separate filing criteria under Section 97435(b)(5). (22 CCR § 97435(b)(1)-(5)).
[5] 22 CCR § 97435(b)(4), (c)(9).
[6] Cal. Health & Safety Code § 127500.2(s).
[7] 22 CCR § 97435(c)(9)(B)(i)-(viii).
[9] 22 CCR § 97435(c)(4).
[10] 22 CCR § 97435(e)(1).
[11] 22 CCR § 97435(e)(2).
[12] “Health care entity” is defined as a payer, provider, or fully integrated delivery system. The implementing regulations further clarify the scope of covered entities, including certain exclusions for physician organizations with fewer than 25 physicians, unless they qualify as high-cost outliers. (Cal. Health & Safety Code § 127500.2(k); 22 CCR § 97431(g)).
[13] 22 CCR § 97435(b)(5), (c)(10).
[14] 22 CCR § 97435(b)(5)(A)-(D).
[15] 22 CCR § 97435(c)(10)(A)-(C).
[16] 22 CCR § 97435(b)(5).
[17] 22 CCR § 97438(b)-(c).
[18] 22 CCR § 97435(c)(11).
[19] 22 CCR § 97437(a)-(d).
[20] 22 CCR § 97435(a)-(b); Cal. Health & Safety Code § 127507.2.
