OHCA finalizes regulations expanding oversight of PE and MSO transactions

On October 2, 2026, the California Office of Administrative Law approved emergency regulations issued by California’s Office of Health Care Affordability (OHCA) to implement Assembly Bill (AB) 1415 and significantly expand California’s healthcare transaction notice regime. The regulations, which will become effective on November 2, 2026, implement new reporting requirements for management services organizations (MSOs), private equity (PE) groups, hedge funds, and other “noticing entities.” They also establish new reporting triggers for certain PE, MSO, and healthcare real estate transactions and expand the information parties must provide to OHCA.

Background

Material change transaction notice requirement

OHCA’s transaction review process took effect on April 1, 2024, and originally required healthcare entities, including providers, payers, and fully integrated delivery systems, to notify OHCA of certain material transactions at least 90 days before closing. Whether a healthcare entity must file notice generally depends on its California assets and revenue and the transaction structure. Certain transactions are exempt from the filing requirement, including:

• Transactions occurring in the usual and regular course of business;
• Transactions among entities already under common control, such as certain internal corporate restructurings; and
• Transactions that are already reportable to certain other California agencies, such as nonprofit health facility transactions that are reviewable by the California attorney general.

Timing and process

After a notice is submitted to OHCA, the agency will conduct an initial review to determine whether to conduct a cost and market impact report (CMIR) to evaluate the potential competitive impacts of the transaction. This initial review period lasts around 45 to 60 days, but the clock for OHCA to conduct its review does not begin until the agency deems the filing complete. Thus, the actual timeframe for OHCA’s initial review may be longer than 60 days. If OHCA decides to waive the CMIR, the parties may close the transaction immediately. If OHCA decides to proceed with a CMIR, the transaction will likely be delayed for at least several months while the agency produces a preliminary report, holds a public comment period, and produces a final report. The transaction may not close until 60 days after the final report is issued.

Recent changes with respect to MSOs and noticing entities

Generally

Effective January 1, 2026, AB 1415 expanded OHCA’s implementing statute to create new reporting obligations for “noticing entities,” which include:

• PE groups and hedge funds;
• Newly created business entities created for the purpose of entering into agreements or transactions with a healthcare entity;
• MSOs; and
• Entities that own, operate, or control a provider, regardless of whether the provider currently is operating or providing healthcare services or has a pending or suspended license.

These noticing entities have independent reporting obligations to provide notice of certain transactions to OHCA. The new regulations implement these expanded reporting requirements and provide additional detail regarding which transactions are reportable, which parties to the transaction are required to file, and what information must be submitted.

Additional categories of material change transactions

OHCA’s existing rules specify certain transactions that are considered reportable “material change transactions,” which generally include:

• Transactions valued at $25 million or more;
• Transfers of 25% or more of the California assets or control of a healthcare entity;
• The formation of certain new California healthcare entities or joint ventures projected to have at least $25 million in annual revenue or assets; and
• Transactions expected to increase the annual revenue of a healthcare entity by either $10 million or 20%.

In some instances, related or similar transactions completed during the prior 10 years must be considered in determining whether a notice is required to be submitted for the current transaction, meaning that a series of smaller acquisitions, each of which is not reportable in and of itself, may be reportable when aggregated together for purposes of determining whether the aggregate transaction meets the relevant materiality thresholds.

The new regulations create additional material change transaction categories for certain PE group and hedge fund transactions, MSO transactions, and healthcare real estate transactions. For real estate transactions, certain sales or transfers of property where healthcare services are provided may be reportable if the property is transferred separately from the healthcare business and the surviving healthcare entity is required to lease or pay rent for the property following the transaction (e.g., a sale-leaseback).

Transactions involving PE groups and hedge funds

Under the new regulations, a PE group or hedge fund must submit a notice to OHCA if it is party to one of the PE-specific material change transactions described below with a healthcare entity with California annual revenue or California assets of at least $10 million, or with a qualifying MSO under OHCA’s definitions:

• A transaction resulting in a PE group or hedge fund holding 10% or more of the assets, equity, debt, or liabilities of the healthcare entity or MSO.
• A transaction resulting in a PE group or hedge fund receiving certain governance, operational, or financial rights over the healthcare entity or MSO, including rights related to:
  • Appointing or replacing leadership of the healthcare entity or MSO;
  • Veto authority over healthcare entity or MSO decisions;
  • Changes to healthcare services or arrangements with MSOs or payers;
  • Incurrence of indebtedness;
  • Management or operation of the business;
  • Charging fees to the healthcare entity or MSO;
  • Purchase and leaseback of healthcare real estate; or
  • Use of capital and net income of the healthcare entity or MSO, including control over budgets, capital expenditures, distributions, or reserves.

Transactions involving MSOs

Under the statute, an MSO is defined as an entity that provides management and administrative support services for a provider in support of the delivery of healthcare services. Management and administrative support services must include either provider rate negotiation, revenue cycle management, or both, so MSOs that do not provide these specific services may be exempt from the transaction notice requirements. Because “provider” has a specific definition under the statute, MSOs that provide services to entities that are not considered providers (e.g., physician groups with fewer than 25 physicians) may also be exempt from the transaction filing requirements.

Under the regulations, MSOs must also satisfy at least one of the following criteria:

• Be owned by a hospital and have one or more physician organizations as clients or affiliates (note that a physician organization must have 25 or more physicians);
• Employ or contract with the physician-owner of one or more physician organizations;
• Share one or more directors, officers, investors, or other individuals capable of exercising control with a healthcare entity; or
• Be affiliated with at least two of the following: a payer, two or more physician organizations, or a hospital.

If an MSO falls under the statutory definition and satisfies the criteria set forth in the regulations, it may be required to submit a notice to OHCA if it enters into one of the following transactions with another MSO or a healthcare entity satisfying the applicable filing thresholds:

• Transactions that result in the MSO providing management and administrative support services to a healthcare entity with at least $25 million in annual revenue or California assets;
• Transactions that result in the MSO providing management and administrative support services for two or more providers that collectively generate at least $10 million in annual California-derived revenue; or
• Transactions that involve a transfer of control, responsibility, or governance, in whole or in part, of a healthcare entity.

Transactions involving other noticing entities

Newly created business entities created for the purpose of entering into agreements or transactions with a healthcare entity, as well as entities that own, operate, or control a provider (regardless of whether the provider is currently operating or providing healthcare services, or has a pending or suspended license), must provide notice to OHCA if they are party to any aspect of a material change transaction with a healthcare entity that satisfies one of the applicable filing thresholds under the regulations or with a qualifying MSO.

Narrative and documentation requirements

The regulations expand both the information that must be disclosed in a notice as well as the supporting documentation that must be provided:

• General information. Among other things, the notice must describe the transaction, its goals and material terms, its anticipated public benefits and competitive impacts, and any measures taken to mitigate its potential adverse effects. The notice must also describe expected changes to ownership, governance, voting rights, decision-making authority, management, and operations; any similar or related transactions completed during the prior 10 years; and the nature, scope, and anticipated timing of any material change transactions pending or planned during the following 12 months.
• PE group, hedge fund, and MSO disclosures. PE groups, hedge funds, and MSOs also face additional disclosure obligations in the new regulations. Among other things, PE groups and hedge funds must identify all healthcare entities and MSOs directly or indirectly owned, controlled, or financed by the participating asset managers and the funds they manage. They also must provide information regarding the financing of any acquired healthcare entity or MSO, including debt-to-enterprise-value or debt-to-equity ratios, the source of the debt, and the post-recapitalization debt ratio. MSOs must identify the healthcare entities for which they provide management and administrative support services, and must publicly describe the types of services they offer, the services they provide to healthcare entities involved in the transaction, and their geographic service areas.
• Required documentation. The regulations also require substantial supporting documentation. Depending on the specific transaction, this may include organizational charts extending through the ultimate parent and identifying owners of 5% or more of the equity of the submitting party, transaction agreements, related real estate or leaseback agreements, third-party and internal valuation materials, three years of certified financial statements, corporate governance documents, Hart-Scott-Rodino filings and attachments if applicable, and documents or presentations provided to investors or governing bodies that support the parties’ description of the transaction.

Confidentiality

Information submitted to OHCA generally is public unless confidential treatment applies. To obtain confidential treatment for materials that are not automatically protected, a submitter must show that the information is nonpublic and explain why confidential treatment is warranted, how long protection is needed, and how the information has been maintained as confidential.

Certain documents are automatically deemed confidential provided the submitter marks them as such, specifically stock purchase agreements, compensation documents, contract rates, transaction valuation documentation, and unredacted résumés.

Takeaways

• Parties to a transaction should identify all potential filers at the outset and coordinate their submissions. Parties that are unsure whether they must file, or whether to file one notice or several, can email OHCA at CMIR@hcai.ca.gov. OHCA will not deem a notice complete until all healthcare entities and noticing entities required to file have submitted the required information, meaning a delayed or incomplete filing by one party can delay the review period for the entire transaction. OHCA’s initial review periods may also be tolled while it awaits additional information from the transaction parties or third parties, so the submitters should try to respond to OHCA’s requests as soon as possible. Transacting parties should build the 90-day pre-closing notice requirement and potential additional review time into the deal timeline.
• Parties should not assume that a minority PE group or hedge fund investment falls outside OHCA’s review. Any control rights a PE group or hedge fund receives from the transaction, including significant veto, approval, governance, or operational rights, may require the PE group or hedge fund to submit notice regardless of the amount of equity acquired.
• OHCA filings may require public disclosure of information extending beyond the transaction itself. For PE sponsors in particular, that may include:
  • Names of healthcare entities and MSOs directly or indirectly owned, controlled, or financed by participating asset managers and funds;
  • Information regarding ownership and governance of the PE group, hedge fund, or MSO;
  • Information on similar or related acquisitions completed during the prior 10 years; and
  • Information on material change transactions that are pending or planned during the 12 months following submission of the notice.
• In certain instances, OHCA may enforce the material change transaction filing requirements by reviewing press releases and other public announcements regarding the transaction and sending parties a letter requesting an explanation of why no notice was submitted. Transacting parties should continue to consult with counsel to determine whether a notice is required to be submitted to OHCA and should be prepared to respond if OHCA reaches out for an explanation.
• OHCA’s regulations signal increased scrutiny of the treatment of real property in healthcare transactions. Parties should evaluate all sale-leaseback and other real estate components of their transactions, particularly where a real estate investment trust or other similar structure could affect the financial condition of the healthcare entity or access to care.