California’s OHCA Releases Proposed Regulations Implementing AB 1415: What PE Groups, Hedge Funds, and MSOs Need to Know

On May 22, 2026, California’s Office of Health Care Affordability (OHCA) released proposed revisions to the Cost and Market Impact Review (CMIR) regulations (the “Proposed Revisions”). Since Assembly Bill 1415 (AB 1415) went into effect on January 1, 2026, the Proposed Revisions have been eagerly anticipated to clarify new filing requirements for private equity (PE) groups, hedge funds, and management services organizations (MSOs). The Proposed Revisions provide some important clarification on OHCA’s anticipated disclosure obligations, but also appear to expand filing requirements under OHCA’s statutory review framework for health care entities and introduce new ambiguities around the filing process.

Notably, several of the Proposed Revisions have drawn early criticism from industry participants who view them as exceeding the scope of AB 1415’s statutory mandate—particularly the low materiality thresholds for PE transactions and the expansion of the “health care entity” definition to categories not expressly contemplated by the statute. These developments come amid a broader wave of regulatory and enforcement activity in California regarding PE-backed health care arrangements—including renewed scrutiny under the state’s corporate practice of medicine (CPOM) doctrine¹—raising the stakes for investors in this area.

The Proposed Revisions are subject to public comment through June 11, 2026, and OHCA plans to discuss comments received at its June 24, 2026 Board meeting. Finalized regulations are expected to take effect in August 2026, after which transactions will be subject to any new requirements that are finalized from the Proposed Revisions.

Key takeaways from the Proposed Revisions and what they mean for investors are summarized below.

PE Group, Hedge Fund and MSO Filing Requirements

As discussed in our prior Alert, AB 1415 expanded OHCA’s review process to require direct filings from PE groups, hedge funds, and MSOs (collectively, “noticing entities”) involved in material health care transactions. Although AB 1415 took effect at the beginning of the year, many questions remained regarding filing requirements for noticing entities, including materiality thresholds and the form of required notices. OHCA issued interim guidance advising that, pending amended regulations, noticing entities must provide at minimum “written notice” of a transaction to OHCA. OHCA reported that it has begun receiving such written notices from noticing entities.²

The Proposed Revisions clarify requirements for noticing entity transactions in four key areas: (i) the definition of MSO; (ii) entity revenue and asset thresholds; (iii) transaction materiality thresholds; and (iv) filing content.

1. MSO Definition. The Proposed Revisions narrow the applicability of filing requirements to MSOs. AB 1415 defines MSOs as entities that provide “management or administrative support services” for a provider in support of health care delivery. Under AB 1415, management and administrative support services are defined expressly to include provider rate negotiation, revenue cycle management (RCM), or both. The Proposed Revisions further require that an MSO meet at least one of the following criteria:
   1. The MSO is owned by a hospital and has two or more physician organizations as clients or affiliates;
   2. The MSO employs the physician-owner of, or has a service and compensation agreement with the physician-owner of, at least one physician organization;
   3. The MSO shares directors, officers, investors, or other natural persons able to exercise control over a health care entity; or
   4. The MSO is affiliated³ with at least two of the following: A) a health plan; B) two or more physician organizations; or C) a hospital.

As modified, the MSO definition is relatively narrow and appears aimed at entities with significant structural or governance ties to health care providers—particularly platform-style MSOs that serve as intermediaries between institutional investors and clinical operations. The emphasis on shared governance, physician employment relationships, and organizational control reflects a regulatory focus consistent with concerns raised in the California Attorney General’s (AG’s) recent Aspen Dental opinion, in which a California Court of Appeal scrutinized a non-clinical entity’s operational and financial control over affiliated dental practices.⁴

Importantly, based on a plain reading of the statutory definition in AB 1415, the following would not be captured as an MSO:

1. Dental Services Organizations (dental services are not captured under OHCA’s current review process);
2. MSOs that do not provide RCM or provider rate negotiation services to professional entities; and
3. MSOs that only provide services to entities outside the statutory definition of “provider.”⁵ For example, physician organizations with fewer than 25 physicians (that are not high-cost outliers) are not included in the definition of “provider.”

Accordingly, MSOs transacting in California should carefully review both the statutory and regulatory definitions (once finalized) of “MSO” to determine whether they are subject to OHCA filing requirements.

2. Entity Revenue and Asset Thresholds. Under OHCA’s existing framework, only health care entities meeting certain minimum California revenue or asset thresholds are required to file. AB 1415 raised questions about whether noticing entities would be subject to similar thresholds. The Proposed Revisions, however, do not impose independent revenue or asset thresholds on noticing entities, indicating that PE groups, hedge funds, and MSOs meeting other filing criteria will be required to file regardless of their California revenue or assets.
3. Material Transaction Thresholds. The Proposed Revisions establish materiality thresholds for noticing entity transactions, detailed below. These thresholds are notably low compared to other states’ health care transaction laws, potentially requiring filings for PE investments of 5% or more (in the aggregate) in a health care entity, but without specifying how such interests should be calculated up the ownership chain.
   1. Transactions involving a PE group or hedge fund must file if they meet any of the following criteria:
      1. Result in the PE group or hedge fund (or group of collective investors) holding 5% or more of the assets, equity, debt, or liabilities of a health care entity or MSO.
      2. Result in the acquisition of assets, equity, debts or liabilities of a health care entity or MSO, including by agreement where a PE group or hedge fund has authority to (i) appoint/replace leadership or governing body members of the health care entity or MSO; (ii) veto decisions made by a health care entity or MSO; (iii) alter operations by expanding or reducing health care services offered by the health care entity or changing arrangements with the MSO or payers; (iv) purchase the real property of a health care entity where services are provided and lease property back to the health care entity; (v) cause, require, approve or veto the incurrence of indebtedness by the health care entity or MSO; (vi) manage or operate a health care entity or MSO (e.g., through management agreements, administrative service agreements, consulting agreements, or affiliated MSOs); (vii) charge fees to the health care entity or MSO; or (viii) spend the capital and net income of a health care entity or MSO (e.g., approving, directing, restricting, or controlling budgets, capital expenditures, distributions).
   2. Transactions involving an MSO must file if they meet any of the following criteria:
      1. Result in an MSO providing management or administrative support services for (i) a health care entity with $25 million in California assets or revenue; or (ii) two or more providers that collectively generate $10 million annually from California patients; or
      2. Involve a transfer of control, responsibility or governance of an MSO (25% or more voting power) or a change in 25% or more of the MSO’s ownership.

      Notably, many of the PE group governance and control rights enumerated above—such as appointing leadership, vetoing decisions, managing operations through affiliated MSOs, and controlling budgets—mirror the types of arrangements that have drawn scrutiny under California’s corporate practice doctrine for potentially enabling non-clinical entities to exercise inappropriate control over clinical practice. The Proposed Revisions’ focus on these control indicators suggests that OHCA’s regulatory concerns are closely aligned with the policy rationale underlying California AG's recent enforcement actions.

4. Notice Contents. As noted above, OHCA currently accepts simple “written notice” from noticing entities pending enactment of amended regulations. The Proposed Revisions establish expectations for future notice content. We anticipate that OHCA will release new notice forms on its online portal after finalizing regulations this summer.

Under the Proposed Revisions, noticing entities are generally required to provide disclosures comparable to those required of health care entities (e.g., business name, ownership, governance, and transaction descriptions). In addition, the Proposed Revisions require that noticing entities provide the following:

1. MSOs. MSOs must include a description of services provided to the health care entity involved in the transaction and the geographic service area(s).
2. PE Groups and Hedge Funds. PE groups and hedge funds must include documentation showing (i) the names of all health care entities or MSOs in participating asset managers’ portfolios; and (ii) the ratio of debt to enterprise value or debt to equity, source of any debt, and post-recapitalization debt ratio for any acquired health care entity or MSO.

The Proposed Revisions also require all submitters (including both noticing entities and health care entities) to disclose more detailed ownership and governance information, including:

1. Names of (i) all affiliates (including MSOs), parents and subsidiaries; and (ii) all members of submitter’s governing body (e.g., board of directors, managing partners, LLC managers);
2. Ownership structure, including all persons with 5% or more ownership of the entity for (i) any acquiring or merging entity (including all intermediate entities between the ultimate parent company and acquiring entity, and entities controlled by the acquiring entity at the time of the transaction); and (ii) any acquired or merging entity, including all persons with 5% or more ownership of the entity and controlled entities that will exist post-transaction; and
   1. The Proposed Revisions clarify that organizational charts (for all entities) must show “all entities or persons with 5% or more ownership of the entity.” This requirement would presumably necessitate disclosure of general partner and limited partner investors in PE groups’ investment funds, along with co-investors in specific transactions.
3. Voting rights, decision-making authority and management/compliance structures of the submitter and parties to the transaction.

These updates would significantly expand current filing requirements by mandating disclosure of sensitive upper-tier ownership and business information from PE groups, hedge funds, MSOs and health care entities—including all persons with 5% or more ownership up to the ultimate parent, such as general partner and limited partner investors in a PE group’s investment funds. Depending on the updated notice form’s requirements, such information could by default be posted publicly on OHCA’s website unless the submitter requests (and OHCA grants) confidential treatment. As discussed in our prior article, OHCA has pushed back on confidentiality requests given that transparency is a central tenet of its review framework. Parties transacting in California should therefore be prepared to disclose detailed ownership information and to provide robust justifications for any confidentiality requests.

Additional Proposed Updates

Beyond the requirements for noticing entities, the Proposed Revisions also expand and revise filing requirements for health care entities more broadly. Key changes include:

1. Health Care Entity Definition. The Proposed Revisions expand the regulatory definition of “health care entity” to include any entity that owns, operates, or controls a provider—regardless of whether the provider is currently operating, providing health care services, or holds a pending or suspended license. While AB 1415 defines “noticing entity” to include such entities, the statute does not contemplate their inclusion as “health care entities.” It is unclear whether this represents a drafting error or an intentional expansion of the health care entity definition by OHCA.
2. REIT and Sale-Leaseback Transactions. The Proposed Revisions update filing requirements to address health care real estate investment trust (REIT) and sale-leaseback transactions:
   1. Transaction Materiality Thresholds. Filings are required for any transaction resulting in the sale or transfer of real estate where a health care entity provides services, if (i) the transfer is to an entity other than the entity acquiring the health care entity or its direct parent; and (ii) the surviving health care entity must lease or pay rent for the real estate.
   2. Filing Contents. Filings must include the following information regarding health care real estate:
      1. Real estate where health care services are provided, including sales, transfers to affiliates, encumbrances or updates to landlord-tenant agreements.
      2. Copies of any lease-back agreements.
   3. CMIRs. The factors for initiating a cost and market impact review are revised to include transactions involving a REIT that could weaken a health care entity’s financial status or place access to care at risk.
3. Expedited Review. Currently, entities may request expedited OHCA review if they are experiencing severe financial distress or there is a substantial likelihood of a significant reduction in critical health care services. The Proposed Revisions additionally permit such requests where an expedited review would best serve the “public interest” due to an “urgent situation” (e.g., a public health emergency, natural disaster, or legal mandate). OHCA retains discretion to grant or deny such requests.
4. CMIR Remand Process. The Proposed Revisions create a new “remand” process: if parties challenge OHCA’s determination to conduct a CMIR and submit new information, the OHCA Director may remand the determination for further review. Upon remand, OHCA has up to 30 days to conduct an additional review, after which the Director may either uphold the original determination or issue a waiver.

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The Proposed Revisions reflect an expansive interpretation of AB 1415 that will likely face significant pushback from industry stakeholders during the public comment period. OHCA also appears to be using this rulemaking to advance its broader regulatory agenda. Notably, however, the Proposed Revisions leave several AB 1415 provisions unaddressed, including requirements for MSO data submissions and mechanisms to eliminate duplicative reporting. Taken together with the renewed enforcement focus on corporate practice—as underscored by the state’s recently enacted corporate practice law Senate Bill 351, and the California AG’s recent Aspen Dental action—these developments signal a multi-front regulatory environment in which PE-backed health care arrangements in California face increasing scrutiny. While OHCA’s filing and disclosure requirements are a distinct regulatory mechanism from CPOM enforcement, the two reflect a common policy concern: ensuring that institutional investment in health care does not compromise clinical independence or patient care. Health care entities and investors in California should continue to closely monitor any further revisions to these regulations, evaluate their investment structures for compliance with OHCA’s evolving filing obligations, and prepare for the broader implications of the state’s heightened regulatory landscape.