California’s AB 1415 Passes in California Legislature

On September 8, 2025, the California legislature passed Assembly Bill 1415 (“AB 1415”), legislation intended to expand the Office of Health Care Affordability (“OHCA”) review process to require filings from private equity (“PE”) groups, hedge funds, and management services organizations (“MSOs”) involved in certain health care transactions.¹ The bill is now being prepared for delivery to California Governor Gavin Newsom. Once delivered to his desk, Governor Newsom will have either 12 days or, if delivered after September 12, 2025, until October 12, 2025, to sign or veto the bill. AB 1415 shares some similarities with components of last year’s failed AB 3129, which would have imposed review requirements on PE investors and hedge funds investing in health care companies. Unlike AB 1415, AB 3129 would have provided the state Attorney General (“AG”) (rather than OHCA) with review authority, and would have granted the AG formal approval rights over transactions. Governor Newsom vetoed AB 3129 last year, stating that it would be more appropriate for OHCA, rather than the AG, to oversee PE and hedge fund investments in health care.² It remains to be seen whether AB 1415’s expansion of OHCA oversight will align more with Governor Newsom’s view and result in the bill’s enactment.

Overview of Bill. OHCA’s current review process requires written notice from each health care entity that is involved in a material change transaction. “Health care entities” are defined to include providers, payers, fully integrated delivery systems, pharmacy benefit managers, and certain affiliates of health care entities acting on behalf of payors. While OHCA does not have formal approval rights over transactions, upon receipt of a notice, OHCA currently has discretion to either (1) issue a waiver to a cost and market impact review (“CMIR”), or (2) initiate a CMIR if it determines that a transaction may have anti-competitive effects or negatively impact patient care. A CMIR may result in significant delays to closing, exceeding eight months from the date of an entity’s initial notice.

If signed into law, beginning on January 1, 2026, AB 1415 would also require written notice from “noticing entities” entering into certain material transactions:

1. “Noticing entities” include (i) a PE group³ or hedge fund;⁴ (ii) a newly created business entity created for the purpose of entering into agreements or transactions with a health care entity; (iii) an MSO;⁵ and (iv) an entity that owns, operates, or controls a provider, regardless of whether the provider is currently providing health care services or has a pending or suspended license.
2. Noticing entities undergoing either of the following types of transactions with a health care entity, MSO, or entity that owns a health care entity or MSO would be required to file a notice: transactions that (i) sell, transfer, lease, exchange, option, encumber, convey or otherwise dispose of a material amount of the health care entity or MSO’s assets; or (ii) transfer control, responsibility, or governance of a material amount of the assets or operations of the health care entity or MSO. MSOs must also provide notice of any transaction described in the preceding clauses (i) and (ii) between the MSO and any other entity, irrespective of whether a health care entity or other noticing entity is involved.

Under OHCA’s current review process for health care entities, notices of material transactions must include a wide range of detailed information regarding the entities involved in the transaction and the anticipated impacts of the transaction, as well as supporting documentation including certified financials and corporate governance documents for each entity involved in the transaction. AB 1415 would expand the range of entities and transactions subject to notice requirements, but, as described in further detail below, the bill does not specify the form of written notice that must be provided for “noticing entities.” AB 1415, however, does require that OHCA adopt regulations that eliminate duplicative reporting requirements for entities captured under more than one of its provisions.

AB 1415 would additionally provide OHCA with authority to establish data reporting requirements for MSOs to support the office’s evaluative functions.

Implications. If signed into law, AB 1415 would represent a significant expansion of OHCA’s authority. The passage of AB 1415 comes amidst apparent efforts from OHCA to ramp up enforcement, issuing its first CMIR in June 2025 (see Prior Prior Ropes & Gray Alert). While PE groups, hedge funds, and MSOs have indirectly been subject to OHCA’s review by virtue of their involvement in covered transactions, OHCA does not currently impose independent filing requirements on these entities (as they are not considered “health care entities” subject to review). OHCA’s efforts to expand its oversight of PE investments are part of a broader trend in state health care transaction laws. Massachusetts, for example, enacted a bill this year that expanded its health care transaction review process to increase reporting requirements and scrutiny of PE investments in health care (see Prior Ropes & Gray Alert). Connecticut also introduced (but ultimately failed to pass) several bills seeking to restrict PE ownership in health care entities. See S.B. 1507; H.B. 5319; S.B. 567; S.B. 1480.

We include further details regarding the potential implications of AB 1415 below:

1. New notice requirements would increase filing burdens, especially for more complex multi-party transactions. Depending on the entities involved, and regulations to be adopted by OHCA, AB 1415 may require that several filings be submitted for a single transaction. The bill does not include details regarding the form of written notice that must be provided for “noticing entities,” or whether such notice will be similar to those required for health care entities. The written notice for health care entities requires a substantial amount of documentation related to ownership, financials and operations. To the extent that written notice requirements for “noticing entities” are similarly onerous, PE entities, hedge funds and MSOs will need to budget significant time and resources to preparing these notices and may need to become comfortable with sharing detailed ownership and financial information in their filings.
2. Data reporting requirements and filings may be subject to public disclosure. As noted above, the bill provides OHCA with authority to impose data reporting requirements on MSOs. The bill, however, is silent regarding the nature of such reports and whether they will be subject to public disclosure. The bill is also silent with respect to the confidentiality of written notices by “noticing entities,” and whether they would be subject to the same confidentiality terms as health care entity notices. Health care entity notices are currently posted on OHCA’s website once deemed complete, but supporting documentation (e.g., financials, corporate governance documents) is only shared with the public if requested through a Freedom of Information Act (“FOIA”) request or upon initiation of a CMIR (see Prior Ropes & Gray Alert). Health care entities can request confidentiality of certain portions of their submission, but given that transparency is a central tenet of OHCA’s enabling legislation, OHCA has reported that such confidentiality requests are often a sticking point in its review.⁶ To that end, until further clarification is provided, PE groups, hedge funds, and MSOs should be prepared for their written notices to potentially be subject to public disclosure, and should work closely with counsel to support requests for confidentiality.
3. MSO transactions would be subject to review. While the OHCA review process does not currently require review of changes of ownership of MSOs (provided that a transaction is not otherwise subject to review), the inclusion of MSOs under OHCA’s purview has been a topic of debate throughout the development of OHCA’s review process.⁷ AB 1415 does not capture MSOs as “health care entities,” but the legislation makes clear that any asset sale, equity transfer, or transfer of control or governance of an MSO will be subject to review by OHCA. The bill further adds MSOs to the list of entities that OHCA must evaluate and conduct ongoing research on, due to their ability to significantly affect health care cost, quality, equity and workforce stability. MSOs in the state should therefore be prepared for additional scrutiny from OHCA.

Assuming AB 1415 is signed into law by Governor Newsom, many open questions remain regarding its implementation. Health care investors in the state should continue to closely monitor this bill, and subsequent rulemaking by OHCA, given the potential implications on the investment landscape in California.

1. ^{The Assembly first passed the bill on May 15, 2025; the Senate passed the bill, with amendments, on September 4, 2025, and the Assembly concurred in such amendments on September 8, 2025, marking its official passage in the legislature.}
2. ^{See Gov. Newsom Veto Message; Prior Ropes & Gray Alert.}
3. ^{AB 1415 defines “Private equity group” to mean “an investor or group of investors who primarily engage in the raising or returning of capital and who invest, develop, dispose of, or purchase any equity interest in assets, either as a parent company or through another entity the investor or investors completely or partially own or control.”}
4. ^{AB 1415 defines “Hedge fund” to mean “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.”}
5. ^{AB 1415 defines “MSO” to mean “an entity that provides management and administrative support services for a provider in support of the delivery of health care services, excluding the direct provision of health services. Management and administrative support services shall include provider rate negotiation, revenue cycle management, or both. A management services organization does not include entities that own one or more health facilities, as defined in subdivision (a) or (b) of Section 1250.” See Cal. Health & Saf. Code § 1250(a) & (b).}
6. ^{Brett Friedman, Ranee Adipat & Jaclyn Freshman, What 2024 Tells Us About Calif. Health Transaction Reviews, Law360 (Jan. 13, 2025), https://www.law360.com/articles/2282752/what-2024-tells-us-about-calif-health-transaction-reviews.}
7. ^{In its initial draft regulations, OHCA explicitly included MSOs in the definition of “health care entity”; however, in the Final Regulations approved by OHCA on December 18, 2023, MSOs are not included in the definition of “health care entity.” OHCA Assistant Deputy Director Sheila Tatayon confirmed at a Board Meeting that MSOs are not considered “health care entities”, but that MSOs may be captured to the extent they are involved in transactions with health care providers that would otherwise trigger notice obligations. See Prior Ropes & Gray Alert.}