California Amends AB 1415, Bill That Expands OHCA’s Healthcare Transaction Review Authority

Our prior On the Subject summarized the proposed changes to the OHCA transaction review process in the version of AB 1415 that was introduced on February 21, 2025. The amended bill includes the following material changes:

• Removes MSOs and Parent Entities From “Health Care Entity” Definition
  AB 1415 originally included MSOs and parent entities of providers as types of “health care entities.” The amended version removes both MSOs and parent entities from the definition of health care entity and adds them to the newly defined term “noticing entity,” which refers to entities that have an obligation to report certain material transactions between themselves and a health care entity. “Noticing entity” also includes private equity groups, hedge funds, and entities created for the purposes of entering into agreements or transactions with health care entities.
• MSO Monitoring
  The amended bill states that OHCA will establish MSO data reporting requirements “as necessary to carry out the functions of the office” and adds MSOs to an existing list of entities that OHCA will research and evaluate to determine whether the current OHCA transaction review process captures all entities that “significantly affect health care cost, quality, equity, and workforce stability.”
• Health System Definition
  The amended bill broadens the new definition of “health system” to include a combination of one or more hospitals and one or more providers, rather than a combination of one or more hospitals and one or more physician organizations. The definition also includes a combination of one or more providers, rather than a combination of one or more physician organizations.

KEY TAKEAWAYS

• MSO Acquisitions: Under the amended bill, MSOs would no longer fall within the definition of health care entity, which critically impacts the applicability of the OHCA transaction review requirements to changes of ownership or control of an MSO. Under the initial version of AB 1415, if a buyer acquired equity in an MSO in California, the transaction would potentially be reportable to OHCA because there would be a change in control of a health care entity. Under the amended bill, an MSO sale is unlikely to be reportable, as long as no assets or control of another health care entity are transferred.
• Parent Entities: The removal of certain parent entities (“an entity that owns, operates, or controls a provider, regardless of whether the provider is currently operating, providing health care services, or has a pending or suspended license”) from the definition of health care entity would narrow the types of transactions potentially subject to OHCA’s reporting requirements. However, such entities would still have an obligation to report to OHCA if they enter into a material transaction with a health care entity.
• MSO Data Reporting: While the amended bill removes MSOs from the definition of health care entity, it allows OHCA to develop data reporting requirements for MSOs. While the language of the bill is silent as to the nature of these reporting requirements, OHCA likely would want to better understand the relationships between MSOs and other health care entities.
• Private Equity Group and Hedge Fund Reporting Requirement: No material changes were made to the language requiring private equity groups and hedge funds (and their downstream affiliates) to report certain transactions if the counterparty in a transaction is a health care entity. AB 1415 would specifically require the private equity group or hedge fund to submit notice to OHCA, which would involve the submission of a substantial amount of information regarding the private equity group or hedge fund, including financial statements, organizational charts, and information regarding past healthcare transactions consummated by the private equity group or hedge fund.