California has enacted two bills that will significantly impact private equity firms, management services organizations (MSOs), and physician practices operating in the state.
Assembly Bill 1415 (AB 1415) and Senate Bill 351 (SB 351) build on longstanding concerns about the corporate practice of medicine (CPOM) by expanding regulatory oversight of transactions and strengthening statutory prohibitions on non-physician influence over clinical decision-making. Both measures were signed into law by Governor Gavin Newsom and are set to take effect on January 1, 2026, representing the most comprehensive update to California’s CPOM framework in decades.
AB 1415 focuses on transaction oversight and reporting. The bill broadens the scope of entities subject to the Office of Health Care Affordability (OHCA) review by expressly including MSOs, parent entities, private equity funds, and hedge funds within its notice requirements. Under AB 1415, any “material change” transaction involving a California healthcare entity—including changes of control, mergers, or significant asset transfers—will trigger a mandatory 90-day advance notice to OHCA. While the agency does not have explicit authority to block deals, its expanded jurisdiction means that private equity sponsors and MSOs must now plan for additional disclosure, regulatory scrutiny, and potential delays in closing.
SB 351 directly addresses the CPOM doctrine and explicitly extends its reach to private equity firms and hedge funds investing in medical and dental practices. The bill prohibits investors from exercising control over key aspects of clinical operations, such as hiring or firing physicians, approving diagnostic tests, controlling patient records, or dictating payer contracting terms. It also voids restrictive covenants such as non-compete and non-disparagement clauses in agreements between investors and physician practices. SB 351 grants the California Attorney General the authority to enforce these provisions and seek injunctive relief and attorneys’ fees, raising the stakes for non-compliance.
The key requirements and practice impacts of each bill are summarized on this chart:
Together, AB 1415 and SB 351 underscore California’s effort to curb perceived overreach by private equity in healthcare and to preserve physician independence. For private equity firms, MSOs, and physician groups, the new laws require proactive contract review, careful structuring of governance rights, and early regulatory engagement in transactions. Given California’s outsized influence, these developments may also set the tone for similar legislative efforts across the country.
As of this writing, New Jersey has not introduced new CPOM legislation comparable to AB 1415 or SB 351. However, there has been significant talk in the healthcare industry and in regulatory circles about ways in which the government can strengthen its oversight and authority over private equity investment in healthcare.
AB 1415 and SB 351 encompass the types of strengthened controls one would expect, and thus, those involved in private equity transactions in New Jersey should not be surprised if similar bills are introduced here in the coming future. Nevertheless, for the time being, New Jersey continues to enforce a long-standing prohibition on the corporate practice of medicine through professional corporation laws and Board of Medical Examiners regulations. While management services arrangements are permitted, New Jersey requires that only licensed physicians control medical practices, and regulators closely scrutinize agreements that grant non-physicians influence over clinical judgment.
For private equity firms and MSOs active across multiple jurisdictions, this means that although California now imposes explicit statutory regulation, New Jersey’s risk remains grounded in its established regulatory framework, and deal structures must be calibrated to comply with both regimes.