The Source Blog

The 2025–2026 legislative session has produced two major regulatory oversight bills regarding private equity in healthcare. SB 351, introduced by Senator Christopher Cabaldon (D) on February 12, 2025, and currently set for its second hearing, focuses on strengthening California’s ban on the corporate practice of medicine. Similarly, AB 1415, authored by Assemblymember Mia Bonta (D), seeks to expand the authority granted to the Office of Health Care Affordability (OHCA) in monitoring healthcare transactions. Below we discuss the intricacies of each bill, the potential impact on the state’s healthcare market, and the recent hearings on both bills.

Background

Over the past two decades, healthcare provider acquisitions through private equity transactions in California have grown substantially, with a staggering $14.53 billion in deals. The debate over private equity in healthcare continues, with supporters touting its ability to provide critical financial and efficiency improvements. Opponents, however, point to ever-growing healthcare costs partnered with decreased quality of care ramp up regulation and oversight. In 2023, the Private Equity Stakeholder Project found that private equity firms often elect cost cutting techniques in an effort to grow their financial investments, effectively deprioritizing quality of care.

During last year’s legislative session, AB 3129 was introduced with hopes of strengthening California’s regulation of healthcare acquisitions. The bill focused on expanding state oversight by requiring approval by the Attorney General for healthcare acquisitions involving a variety of private equity group or hedge fund transactions types. On September 28, 2024, Governor Newsom vetoed the bill noting his belief such transactions should continually be vested in OHCA, not the AG. In much the same vein, AB 1415 and SB 351 seek to respond to ongoing corporate influence in California’s healthcare market.

SB 351

SB 351 focuses on regulation of private equity interference in clinic decision making. In 2024, the American Journal of Medicine’s article Private Equity and Medicine: A Marriage Made in Hell, reported a decrease in physicians’ autonomy following private equity acquisitions through pressure to complete more fee-generating treatments/tests, upcoding, and decision making rooted in profitability instead of in health outcomes. SB 351 would work to ban such types of clinical decisions by private equity groups by prohibiting their ability to determine the appropriateness of diagnostic testing, specialist referrals, and the hours a provider must work or clients they must see in a given day.

Additionally, SB 351 would bolster physician control over administrative tasks such as patient medical record ownership, retention of highly qualified staff, contracts with third-party payers, billing decisions, and purchases of needed medical equipment. Similarly, SB 351 would prohibit non-compete clauses that prevent providers from competing following termination of employment as well as clauses preventing public reporting of care quality concerns. Much like SB 3129, SB 351 would vest authority with the Attorney General, allowing for the ability to seek injunctions, attorney’s fees, and other apt remedies. In an effort to respond to public opposition of the bill, SB 351’s authors emphasized that it is not meant to further narrow existing state law by using existing laws to further regulate the corporate practice of medicine.

AB 1415

AB 1415 seeks to expand OHCA’s oversight authority of healthcare transactions by equity groups by expounding on what types of groups fall under the definition of a “health care entity” and “provider”. If enacted, AB 1415 would apply a host of new categories to the term “health care entity” such as management service organizations (MSO); hospital systems; and combinations of one or more hospitals, physician organizations, or insurers would qualify as an entity. Likewise, “provider” would be expanded to include a host of individuals such as those on suspended licenses, those who do not provide care services, and those who “own, operate, or control another entity”. The bill essentially seeks to subject individuals from a slew of fields and sectors within healthcare to oversight by OHCA.

In a major change from AB 3129’s language, AB 1415 does not seek to grant OHCA or the Attorney General with the power to stop or require additional conditions on transactions. Instead, AB 1415 simply seeks to expand the scope of what must be reviewed by OHCA.

Recent Legislative Bill Hearings

Senate Committee Hearing

On April 21, the Senate Business, Professions and Economic Development Committee held a Bill Hearing for a number of items of legislation, including SB 351.  At the hearing, Senator Cabaldon, the bill’s sponsor, highlighted that he was not opposed to private equity investment in healthcare, and sees where it can be critical for provider survival and modernization, but noted the rapid growth in private equity investment and the potential for the focus to be on profit over patient care.  The Senator also noted high levels of physician dissatisfaction and turnover in private equity owned practices, but stressed he does not want to disincentivize investment.  The Senator stated that the prohibitions on corporate practice of medicine already exist in medical and dental practice acts, which can be enforced by the associated boards, but the bill would just give new enforcement tools for these prohibitions.

Testimony in support of the bill included a physician who highlighted negative experiences with private investors interfering with clinical care to maximize profits.  A number of organizations voiced support for the bill, including a large number of healthcare professional groups, and a representative from the California Attorney General’s office.

Testimony in opposition to the bill reflected many of the same concerns noted last year in the face of AB 3129. Comments noted a belief that SB 351 would discourage healthcare investment, could compound access to care issues in care deserts, and unfairly focuses on private equity investors.  Concerns were noted regarding the bill’s ambiguity around prohibitions that may work to inadvertently interfere with business aspects of facilities but do not actually affect clinical decision-making. Additionally, some critics argue the bill’s aim of private equity entities but not alternative healthcare investors is allowing for a regulatory double standard. Expanding the Attorney Generals’ authority in such a manner elicits concerns over the fairness of the bill for private equity groups.  The testimony was in opposition to the current version of the bill, but left open the possibility that amending the bill could address these concerns.

Members of the Senate Committee pointed out that the bill doesn't prevent medical or dental practices from seeking or entering into a contract with private equity, it just places limits on those types of arrangements if they limit the ability of the healthcare professional to exercise independent medical decision making.  Furthermore, that the prohibitions in this bill are already in the medical and dental acts, meaning that this bill isn’t making new laws, but rather just adding an enforcement arm beyond the medical and dental boards.  Others on the Committee took issue with the bill, stating it goes too far in limiting management decisions that aren’t directly healthcare related (such as hiring and firing, purchasing decisions, and other administrative decisions), and that the law shouldn’t hinder the ability of an owner to make these types of decisions in order to protect their investments.

Assembly Committee Hearing

On April 22, 2025, the Assembly Health Committee held a Bill Hearing that included AB 1415.  Bill sponsor Assemblymember Mia Bonta (D) testified about the importance of OCHA, especially in light of rising California healthcare costs, and noted how this bill will give OCHA the ability to collect the data it needs to properly do its job of addressing healthcare costs.  Additional testimony in support of the bill noted that the need to achieve the goals of lower costs, better outcomes, and improved equity, requires the ability to collect data, to subject health systems to cost growth targets, and to focus on mergers involving private equity.

Opposition testimony noted that hospitals in the state are already struggling financially due to rising costs, therefore these changes could unduly burden facilities, harm patient care, increase compliance requirements, and uncertainty due to ambiguity and duplicative regulations. Furthermore, concerns regarding expansion of OHCA’s authority persist, noting fears of regulatory overreach.  A number of organizations voiced concern about the bill.

Committee members stated concerns that some of the hospitals OCHA is currently focused on may not actually be that financially stable, and that OCHA should focus on what their existing task is before expanding.  Others responded that the bill isn’t about expanding OCHA's authority, but rather about giving them the information they need to make decisions about cost targets.

Next Up

As of publication of this blog post, SB 351 had successfully passed both the Senate Judiciary and Business and Professions Committees. AB 1415 has been read for a second time following amendments by the author based on public comment. Both bills reflect California’s continual efforts to reduce the potential negative impacts corporate influence can have on healthcare. California is not alone in this trend as there is a significant national trend to expand regulatory oversight of private equity in healthcare. We will continue to monitor these and other bills and will keep you updated on the 2025-2026 legislative session.

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