Governor Newsom signed California Assembly Bill 1415 (AB 1415) into law, which significantly expands the state’s health care transaction oversight and strengthens the authority of the Office of Health Care Affordability (OHCA) to monitor, review, and publicly report on deals impacting cost, competition, quality, and equity. This law takes effect on January 1, 2026.

The law expands the scope of entities required to notify the OHCA of transactions resulting in a “material change” in ownership, governance, control, or assets. It also includes a wider range of deal structures, such as those common in private equity-backed physician practice and management services organization (MSO) models, and formalizes a 90‑day advance notice period, which can impact deal timing, certainty, and disclosures. Additionally, it establishes data‑submission requirements for MSOs and clarifies definitions for “private equity group” and “hedge fund,” bringing many financial sponsors and investment vehicles into the state’s health care transparency and market‑impact framework, even if they do not directly own licensed providers.

Although some transactions are exempt from duplicative notice due to oversight by other regulators, AB 1415 increases regulatory process risk for acquisitions, affiliations, and control transactions across California’s provider and payer landscape. Stakeholders—including private equity funds, portfolio companies, lenders, payers, and management platforms—should anticipate earlier public visibility into deals and greater scrutiny of cost and competition effects.

For background on California health care transaction requirements related to OHCA, please see our prior article here. For information on Senate Bill 351, a separate law imposing restrictions on private equity in health care, please see our summary here.

Scope and Reach

Existing law required “health care entities” to notify OHCA of certain material asset or control transfers. AB 1415 expands this scope in three ways. First, it expressly includes MSOs, recognizing their central role in modern provider consolidations and physician practice management. Second, it adds “noticing entities”—such as private equity groups, hedge funds, newly formed acquisition vehicles, MSOs, and entities that own, operate, or control providers—requiring them to provide written notice of qualifying transactions that affect a health care entity or MSO. Third, it codifies an advance notice window of at least 90 days before entering into a covered transaction, during which OHCA may make the notice and submitted materials public if additional review triggers are met. This means both operating entities and their financial sponsors can be primary reporters, capturing upstream control structures, indirect ownership changes, and common roll‑up or platform strategies.

Broad Range of Equity and Asset Transactions

The law targets transactions that sell, transfer, lease, encumber, or otherwise dispose of a material amount of assets, or that transfer control, responsibility, or governance over a material portion of assets or operations. This broad language applies to classic asset or equity deals, corporate affiliations, contracting or governance arrangements that shift effective control, and restructurings or roll‑ins at the platform level. OHCA is directed to adopt regulations setting thresholds—such as revenue, market share, or other relevant criteria—and to eliminate duplicative reporting where entities are captured under more than one provision.

Certain transactions remain outside the notice obligation because they are subject to review by other regulators. These include deals subject to Department of Managed Health Care or Insurance Commissioner review, nonprofit transactions under the Attorney General’s existing jurisdiction, and county government acquisitions. These carve‑outs reduce overlap but do not diminish OHCA’s separate authority to analyze market trends and conduct cost and market impact reviews where appropriate.

Private Equity Implications

For private equity funds, AB 1415 is a significant development. The statute defines “private equity group” broadly to include investors who raise or return capital and invest in equity interests directly or through controlled entities, while excluding passive limited partners not participating in management or control.

“Hedge funds” are similarly defined as pools of investor‑managed capital, with explicit exclusions for passive capital providers and traditional debt financiers. By designating these investors as “noticing entities,” the law shifts certain reporting obligations and exposure to the sponsor level, not just to the portfolio company or provider. In practice, sponsors should expect to build an OHCA notice track into California‑related deals, even where the acquisition vehicle is newly formed or where the licensed provider sits beneath an MSO structure intended to comply with corporate practice of medicine restrictions.

This has two immediate operational consequences. First, deal timing in California will require an additional 90‑day runway before closing a covered transaction. Second, diligence must expand beyond licensure, reimbursement, and antitrust to include potential market‑share and cost‑growth impacts within OHCA’s remit, along with an assessment of whether the transaction crosses thresholds that will invite deeper inquiry. For sponsors pursuing platform roll‑ups, tuck‑ins, or affiliation models, aggregation effects and sequential filings should be anticipated and staged.

MSOs

AB 1415 expressly recognizes MSOs as central actors in the delivery system. MSOs must now provide notice of covered agreements or transactions not only when dealing with health care entities but also when transacting with any other entity in a way that results in a material change.

For example, MSOs, including those owned by a public company or other strategic owner, must provide advance notice of at least 90 days before entering into a transaction involving the sale, transfer, or disposal of material assets or the transfer of control or governance of material assets. Moreover, OHCA is directed to establish data and information submission requirements for MSOs to support cost, quality, equity, and workforce analyses. This is a notable shift for MSOs that historically operated outside many provider‑specific reporting frameworks. It may require new data infrastructure, contractual flow‑downs with physician practices, and alignment with payer and provider reporting obligations.

Physician organizations above certain size thresholds—or those deemed high‑cost outliers—fall within the statutory definition of provider, meaning their consolidations and affiliations can be subject to review even without hospital or plan involvement.

Public Transparency, Cost Targets, and Enforcement

When conditions for further review are met, notices and supporting materials may be made public, potentially drawing scrutiny from competitors, payers, labor, and patient advocates. Concurrently, OHCA has a mandate to set and enforce statewide and sector‑specific health care cost targets, analyze price and labor trends, and promote alternative payment models.

While AB 1415’s notice provisions are distinct from formal cost‑target enforcement actions, these authorities are interrelated. Entities exceeding cost targets can be required to submit performance improvement plans and face escalating administrative penalties for noncompliance.

For consolidating systems, MSO platforms, and sponsor‑backed physician organizations, the combined effect is higher expectations for demonstrating quality, equity, and affordability benefits, and a more complex risk calculus if integration or pricing strategies could contribute to cost growth.

Practical Effects on Deal Process

For MSOs and investors, the law translates into measurable process changes. California transactions involving providers, physician organizations, MSOs, and related ownership vehicles should assume a mandatory pre‑closing notification step and potential public disclosure. Timelines need to accommodate a minimum 90‑day notice period and any follow‑on information requests. Transaction agreements should incorporate covenants to prepare and submit notices, allocate responsibility for engagement with OHCA, and address interim operating restrictions consistent with OHCA’s expectations. Given the possibility of public disclosure, parties should plan communications and manage confidentiality expectations, recognizing that some materials may become part of the public record.

MSOs and sponsor‑backed physician platforms should prepare for heightened reporting and data demands. Diligence should extend to mapping market shares across service lines and regions, evaluating cost‑growth trajectories, and stress‑testing pro‑competitive justifications and integration efficiencies. For MSOs, sponsors should confirm readiness to comply with data‑submission requirements and align provider agreements to ensure access to needed information.

Reed Smith will continue to track developments related to California’s Office of Health Care Affordability and its oversight of health care transactions. If you have any questions about this law or topic, please do not hesitate to reach out to the authors of this article or to the health lawyers at Reed Smith.