California Enacts New Laws Restricting Health Care Transactions Involving Alternative Investment Firms

California Governor Newsom recently signed two laws, AB 1415 and SB 351, which impose new restrictions and requirements for health care transactions involving alternative investment firms. These laws are part of a broader trend across the country, where states are increasing oversight of health care transactions and imposing new hurdles for parties seeking to acquire or sell health care operations.

Key Takeaways:

• AB 1415 expands the scope of parties and transactions subject to notice requirements, requiring hedge funds, private equity groups, and management services organizations (MSOs) to submit pre-transaction notice to the Office of Health Care Affordability (OHCA) 90 days prior to the transaction.
• SB 351 codifies and strengthens California's existing restrictions on corporate control over medical and dental practices, prohibiting hedge funds and private equity groups from interfering with the professional judgment of physicians or dentists in making health care decisions.
• The laws will take effect on January 1, 2026, and health care companies and investors are advised to review existing management agreements and expected transactions for compliance before then.
• These California statutes follow similar recent laws targeting private equity involvement in health care and imposing new transaction notice requirements in New York, Oregon, Indiana, and Massachusetts.
• At least 15 states currently have health care-specific transaction notice requirements.

Statistics:

• 15 states have health care-specific transaction notice requirements.
• 5 states have introduced the Uniform Antitrust Pre-Merger Notification Act, which requires notifying and potentially submitting documents to the state Attorney General related to transactions in any industry.
• The laws will take effect on January 1, 2026.

Sources:

• AB 1415 - California Health Care Quality and Affordability Act
• SB 351 - California's existing restrictions on corporate control over medical and dental practices
• Newsom's signing statements for AB 1415 and SB 351
• Crowell & Moring's article on California Enacts New Laws Restricting Health Care Transactions Involving Alternative Investment Firms.