On May 15, 2026, California’s Office of Health Care Affordability (OHCA) released proposed emergency regulatory text implementing AB 1415, the healthcare oversight bill Governor Newsom signed last October and that took effect January 1, 2026. AB 1415 expanded the California Health Care Quality and Affordability Act by creating a new category of “noticing entity” (private equity groups, hedge funds, management services organizations (MSOs), newly created entities, and any entity that owns, operates, or controls a provider) and directing OHCA to bring those parties within the existing pre-transaction notice framework.
AB 1415’s framework, however, left most operational mechanics to OHCA. The proposed regulations now fill in those mechanics. Below, we walk through the substantive changes, identify where the text exceeds AB 1415, and flag two statutory directives left unaddressed.
The new “noticing entity” framework
AB 1415 added subsection (h) to Section 127507, defining a “noticing entity” to include (1) a private equity group or hedge fund, (2) a newly created entity formed for the purpose of entering into transactions with an HCE, (3) an MSO, and (4) an entity that owns, operates, or controls a provider. Noticing entities must file pre-transaction notice when entering into transactions with a healthcare entity (HCE), MSO, or an entity that owns or controls an HCE or MSO.
Importantly, MSOs are not folded into the definition of “health care entity.” They remain in the separate “noticing entity” category. This means MSO transactions are governed by separate triggers, with data reporting and filing obligations operating through different statutory paths.
MSOs: A regulatory test beyond the statute’s own narrowing
AB 1415 defines an MSO as an entity that provides management and administrative support for a provider. AB 1415 then narrows the definition as follows: the services must include provider rate negotiation, revenue cycle management, or both, and entities owning one or more general acute care or acute psychiatric hospitals are excluded. The proposed regulations narrow the definition even further. To qualify as an MSO for the purposes of AB 1415, the entity must also meet at least one of four additional criteria:
- Be owned by a hospital and have two or more physician organizations as clients or affiliates;
- Employ or have an agreement with the physician-owner of one or more physician organizations;
- Share directors, officers, investors, or other natural persons who have the ability to exercise control with respect to an HCE; or
- Be affiliated with at least two of the following: a health plan, two or more physician organizations, or a hospital.
The practical effect is to confine OHCA’s reach to MSOs operating within platform structures, such as traditional PC-MSO arrangements, multi-entity systems, and the like. Stand-alone administrative vendors without governance overlap or hospital ownership likely fall outside the scope of AB 1415.
Private equity and hedge funds: a low threshold and a long list of triggers
Section 127507(c)(2)(A) requires a noticing entity to file when entering into a material change transaction with an HCE or MSO. The statute sets no numeric ownership thresholds, does not define private equity “involvement,” and lists no triggering investor rights.
The proposed regulations fill these gaps. A private equity or hedge fund transaction triggers a filing if it results in the fund holding 5% or more of the assets, equity, debt, or liabilities of a qualifying HCE or MSO, including where investors collectively reach that threshold. Additionally, the filing requirement is triggered if the transaction grants the fund various enumerated rights related to control of these entities: authority to appoint or replace governing-body members, veto decisions, alter operations, purchase and lease back real property, approve indebtedness, manage the entity through services agreements, charge fees, or approve budgets and capital expenditures.
Two features stand out. First, 5% is a low threshold—for comparison, AB 3129 (the vetoed proposed bill that attempted to address PE involvement in healthcare) used 15%, and traditional control benchmarks run higher. Second, the enumerated rights trigger applies on its own, with no minimum ownership stake. This means that a governance arrangement granting veto rights or board appointment authority may make a transaction reportable even where the equity stake is minimal.
MSO transactions and the expanded roll-up theory
The proposed regulations create a new set of MSO triggers. A transaction involving an MSO requires notice if it results in the MSO providing services to an HCE that meets the $25 million threshold, if the MSO would serve two or more providers that collectively generate at least $10 million annually from California patients, or if it involves a transfer of 25% or more of the MSO’s ownership, or a transfer of control, responsibility, or governance.
Importantly, the proposed regulations fold MSOs into the existing ten-year series-of-related-transactions provisions in subsections (c)(7) and (c)(8). Under prior regulations, that aggregation trigger (treating related transactions over the prior decade as a single transaction for threshold purposes) applied to HCEs and their affiliates. The proposed text expressly extends it to MSOs and affiliated entities. This is significant for private equity-backed platforms that build through serial MSO acquisitions: deals that would previously have been evaluated in isolation may now be aggregated to reach the threshold collectively.
A new real estate trigger: regulatory creation, not statutory
A new stand-alone trigger has also been added for real estate sale-leasebacks, which makes a transaction reportable if it results in the sale or transfer of real estate, used by an HCE to provide services, to an entity other than the acquirer or its direct parent, where the surviving HCE must then lease or pay rent for the property.
OHCA also added a corresponding CMIR factor in section 97441(a)(1)(G) for REIT transactions whose terms could weaken the HCE’s financial status. AB 1415 says nothing about real estate. This trigger reflects OHCA’s policy concerns about sale-leasebacks in private-equity-backed healthcare platforms.
Two statutory directives that the proposed regulations do not address
AB 1415 contains two express directives to OHCA that the proposed regulations do not implement.
Anti-duplication regulations
Section 127507(c)(2)(C) requires the office to adopt regulations eliminating duplicative reporting where a noticing entity or HCE must submit notice under more than one provision. The proposed regulations include general cross-reference allowances, but no express anti-duplication mechanism. This omission is notable for transactions triggering multiple categories (e.g., a private equity-backed acquisition involving a sale-leaseback and an MSO arrangement). Without further guidance, parties face uncertainty about whether to submit multiple notices and how each will be processed.
MSO data reporting requirements
Section 127501.5 directs OHCA to establish requirements for MSOs to submit data necessary to carry out the office’s functions. The proposed regulations address only pre-transaction notice; they do not implement this directive. MSOs should expect a separate rulemaking, but, until then, the obligation’s contours remain undefined.
Expanded disclosure obligations
The proposed regulations also expand filing content. For sponsors, the most sensitive new requirements include:
- Portfolio disclosures. Private equity groups and hedge funds must disclose all HCEs and MSOs in the portfolios of participating asset managers, along with the funds those asset managers manage.
- Debt-to-equity disclosures. Filers must disclose debt-to-enterprise-value or debt-to-equity ratios, sources of debt, and post-recapitalization debt ratios for the acquired HCE or MSO.
- 5% ownership transparency. Filers must identify all entities and persons holding 5% or more ownership of any party, including intermediate entities between the ultimate parent and the acquirer.
- Real estate detail. Post-transaction changes to real estate where services are provided (sales, transfers, encumbrances, landlord-tenant arrangements), plus copies of any lease-back agreements.
- Quality and benefit detail. CMS Star Ratings or similar quality assessments, plus anticipated cost savings, quality investments, price reductions, and service expansions.
A new remand option for CMIR challenges
One procedural addition: the director now has express authority to remand a CMIR determination to OHCA based on new information, with up to 30 calendar days for additional review. Under prior regulations, the director’s options were binary: uphold or waive the CMIR. The remand option creates a useful middle ground for challenges raising factual issues that warrant further consideration but do not compel an outright waiver.
Looking ahead
The proposed text is in an informal comment period, after which OHCA will publish formal emergency regulations. AB 1415 is already in effect, and parties closing transactions on or after January 1, 2026, should evaluate whether the new noticing entity obligations apply, even before the regulations are finalized.
