California has now passed two laws that will have an effect on how investors, health care entities and management services organizations (MSOs) interact. We discussed the other new law, SB 351, and its provisions here. This second new law, Assembly Bill  1415 (AB 1415), requires health care entities, MSO and other “noticing entities” to report certain transactions and agreements to California’s Office of Health Care Affordability (OHCA).

The OHCA was created in 2022 with the aim of promoting high-value health care, slowing the growth in health care spending and assessing the state of consolidation in the health care market. Under its existing mandate, hospitals and certain other health insurers and facilities must report certain transactions to the OHCA. AB 1415 will expand that responsibility to require reporting by noticing entities, MSOs and health care entities for certain transactions. Under AB 1415 the term “noticing entities” includes:

• Private equity groups or hedge funds;
• Business entities created for the purpose of entering into agreements or transactions with health care entities;
• MSOs; and
• Entities that own, operate or control a health care provider.

AB 1415 requires that noticing entities, MSOs and health care entities provide a written notice to the OHCA at least 90 days prior to entering into an agreement or transaction for all agreements or transactions that do either of the following:

• Sell, transfer, lease, exchange, option, encumber, convey or otherwise dispose of a material amount of the health care entity’s or MSO’s assets to one or more entities.
• Transfer control, responsibility or governance of a material amount of the assets or operations of the health care entity or MSO to one or more entities.

The Health Care Affordability Board within the OHCA has the authority to adopt rules that set criteria that would exempt certain providers from notice requirements or set threshold amounts that qualify as “material.” The current rules set annual revenue or assets ownership thresholds for reporting. But it is likely that there will be new rules adopted in response to this new legislation that may have lower threshold amounts. The reporting requirement also does not apply to specific situations that are already required to be reviewed by either the insurance commissioner, the director of the Department of Managed Health Care or the attorney general. The new law also directs the board to adopt rules and policies to eliminate reporting duplication if an entity is required to submit notifications under more than one provision.

Both this AB 1415 and SB 351 go into effect on January 1, 2026. The exact requirements and details of these new laws will become clearer as the deadline approaches. If you are a medical spa or MSO in California, you will want to keep a close eye on announcements as they come out and to work closely with your legal and compliance advisors.

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