California OHCA Issues Revised Pre-Transaction Notice Review Emergency Regulations Implementing AB 1415: What Changed, What Is Now Clear, What Remains Unresolved

This alert compares the May and September drafts. It explains the statutory and procedural posture, identifies what the September revisions changed, isolates what is now clear, flags what remains unresolved, and sets out concrete next steps. AB 1415’s statutory notice obligations have applied since January 1, 2026, and the implementing regulations are days from taking effect. Clients with California health care transactions closing in late 2026 or 2027 should review those deals against the September text now.

Executive Summary

• The rules are about to take effect. OHCA filed the emergency package with OAL on September 22, 2026. That filing opened a five-calendar-day public comment period concurrent with a ten-calendar-day OAL review. If OAL approves the package, the regulations will take effect in early October 2026. As emergency regulations, they remain in force for up to five years pending permanent rulemaking under Health and Safety Code § 127501.2.
• OHCA doubled the private equity/hedge fund passive-ownership trigger to 10%; the control-rights trigger still has no size floor. A private equity group or hedge fund must now file a material change notice with OHCA if the transaction gives it 10% or more (up from 5%) of a qualifying entity’s assets, equity, debt, or liabilities. Separately, an acquisition of any amount triggers a filing if paired with any one of eight enumerated control rights.
• OHCA restored the statutory MSO definition and converted its narrowing criteria into a filing threshold. The four-part test that previously defined “management services organization” (“MSO”) now determines only which MSOs must file. OHCA also broadened two of those criteria: the hospital-owned criterion now requires “one or more” physician organizations instead of “two or more”; and the affiliation test now refers to “a payer” instead of “a health plan.”
• OHCA fixed a key drafting ambiguity, withdrew the “health care entity” expansion, expanded document demands, and consolidated confidentiality. OHCA deleted the “including, but not limited to” language that had made the private equity control indicia merely illustrative. OHCA also deleted the May draft’s expansion of “health care entity” to any entity that “owns, operates, or controls a provider.” The September text adds document demands covering executive options and deal-contingent compensation. It also consolidates the confidentiality rules in a standalone section.
• Significant questions remain open. The control-rights prong has no size floor. The text does not address lenders or collective and co-investment structures. It also leaves unclear the scope of the “usual and regular course of business” exclusion for MSO arrangements. Other open issues include opco/propco real estate structures, ten-year transaction aggregation, open-ended tolling of OHCA’s review clock, and duplicate-filing relief. OHCA also has not implemented the MSO data-reporting mandate in Health and Safety Code § 127501.5.

I. Statutory and Procedural Background

OHCA and the CMIR program

SB 184 (2022) established OHCA within HCAI and charged it with monitoring health care cost trends and reviewing material change transactions. The Legislature found that market conditions drive escalating health care costs, “particularly in geographic areas and sectors where there is a lack of competition due to consolidation, market power, venture capital activity, the role of profit margins, and other market failures.” The Legislature declared its intent to increase transparency of mergers, acquisitions, and corporate affiliations that may affect competition and affordability. Health and Safety Code § 127507 requires covered “health care entities” (i.e., payers, providers, and fully integrated delivery systems) to give OHCA written notice of material change transactions. They must give notice at least 90 days before “entering into” the transaction (interpreted by OHCA as the “closing” of the transaction). Section 127507.2 authorizes OHCA to conduct a CMIR. OHCA implemented the program through regulations at Title 22, California Code of Regulations, § 97431 et seq.

AB 1415’s expansion

The Legislature enacted AB 1415 as a compromise after Governor Newsom vetoed AB 3129 in 2024; AB 3129 would have required California Attorney General consent (and a potential veto) for private equity health care deals. AB 1415 instead works within OHCA’s existing framework and authority to increase oversight over health care transaction, but does not provide the California Attorney General with individual veto power of the transaction.

AB 1415 added a parallel notice obligation in § 127507(c)(2) that focuses on the “noticing entity” side of a transaction (while still maintaining the “health care entity” notice obligation). Section 127507(h) defines a “noticing entity” to include: (1) a private equity group or hedge fund; (2) a newly created business entity formed to transact with a health care entity; (3) an MSO; and (4) an entity that owns, operates, or controls a provider. The fourth category applies regardless of the provider’s operating or license status. A noticing entity must give notice of certain transactions with a health care entity or MSO, or with an entity that owns or controls either. The obligation applies if the transaction disposes of, or transfers control, responsibility, or governance of, a “material amount” of the health care entity’s or MSO’s assets or operations. An MSO also must give notice of any such transaction with any other entity. AB 1415 does not define “material amount.” Instead, it directs OHCA to adopt regulations establishing thresholds, governing the CMIR process, and eliminating duplicative reporting. AB 1415 also added statutory definitions of “private equity group,” “hedge fund,” and “MSO.” Separately from the CMIR provisions, AB 1415 added § 127501.5, which directs OHCA to establish MSO data-submission requirements. These regulations do not implement § 127501.5.

Emergency authority and the procedural posture

OHCA’s emergency rulemaking rests on a statutory deeming provision rather than an independent factual emergency showing. Health and Safety Code § 127501.2(a) provides that, until January 1, 2027, any necessary rules implementing the Act “may be adopted as emergency regulations.” The statute further provides that such adoption “shall be deemed to be an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare.” The deeming provision matters. Under the ordinary Administrative Procedure Act standard, a finding of emergency must describe “specific facts” demonstrating an emergency and the need for immediate action. The finding also must show “by substantial evidence” the need for the regulation. Under that standard, “[t]he enactment of an urgency statute shall not, in and of itself, constitute a need for immediate action.” Because § 127501.2 deems these implementing regulations an emergency, OHCA is positioned to proceed without the fact-specific § 11346.1(b) showing that would otherwise apply. OHCA nonetheless issued a Finding of Emergency with the September 11 text and filed the package with OAL on September 22, 2026. OAL must complete its review within ten calendar days and allow a five-calendar-day public comment period.

If OAL approves the package, then the regulations take effect when filed with the Secretary of State, reportedly in early October 2026. As emergency regulations, they remain in force for up to five years unless OHCA adopts permanent regulations through ordinary rulemaking within that period.

A related development

California’s new Uniform Antitrust Premerger Notification Act (SB 25), signed February 10, 2026, takes effect January 1, 2027. It will require parties making a federal Hart-Scott-Rodino (“HSR”) filing to submit a copy to the California Attorney General. Transactions subject to an HSR filing therefore may require both a California AG submission and an OHCA filing. Those reviews will occur independently and focus on different standards, and could extend closing timelines.

II. What Changed Between the May 15 and September 11 Drafts

OHCA kept the May framework but made targeted changes in response to comments. The table below summarizes the most consequential changes. The paragraph following the table lists the provisions OHCA carried forward.

Carried forward from May with little or no change

The September text retains the $10 million and $25 million revenue and asset thresholds, the 90-day pre-close notice, and the eight enumerated private equity/hedge fund control rights. It also retains the new REIT factor in the CMIR decision and the “urgent situation” ground for expedited review. The director keeps remand authority (up to 30 calendar days, tollable), and the 45- and 60-day determination clocks remain subject to tolling. The post-determination response log and the expanded disclosures also carry forward. Those disclosures cover affiliates and governing-body members, 5%-ownership organizational charts, and private equity debt ratios. They also cover quality and equity ratings, anticipated cost savings, and planned transactions within 12 months. The September text also broadens the PE portfolio-documentation demand to reach health care entities and MSOs “owned, controlled, or financed” by the participating asset managers and their funds.

III. What Is Now Clear

• Who files, and on what basis. The framework now has seven filer thresholds. Health care entities file under the revenue, asset, and shortage-area thresholds in § 97435(b)(1)-(3). Noticing entities file under (b)(4)-(7) and have no revenue or asset threshold of their own. The counterparty’s qualification triggers their obligation. The regulations now define “submitter” and “transaction.”
• The private equity ownership trigger is now 10%. In response to comments, OHCA doubled the passive-ownership threshold. That change materially narrows the ownership branch’s reach over minority investments.
• The eight private equity control indicia are the operative test. By deleting “including, but not limited to,” OHCA resolved the superfluity we flagged in May. Subsection (c)(9)(A) captures passive ownership at 10% or more. Subsection (c)(9)(B) captures acquisitions coupled with any one of eight enumerated authorities.
• The MSO definition excludes health systems, and OHCA withdrew the “health care entity” expansion. Because the regulation now uses the statutory MSO definition, an entity that owns a licensed health facility is not an MSO. Deleting the “owns, operates, or controls a provider” clause removes the strongest argument that the May draft’s “health care entity” definition exceeded AB 1415. That concept now appears only in the statutory “noticing entity” definition and the (b)(7) filer category.
• The ordinary-course and common-control exclusions expressly cover MSOs. This change at least partly addresses the concern that the regulations would sweep in routine MSO transactions without an ordinary-course carve-out.
• The asset and control circumstances look to the health care entity, and the serial-transaction circumstances now include MSOs. OHCA aligned (c)(3) and (c)(4) to the health care entity submitter. Subsections (c)(7) and (c)(8) now expressly reach MSOs.
• The regulations now codify the process and timelines. The 90-day clock runs to closing for all filers, including noticing entities. A notice is complete only when every required party has filed. OHCA then has 45 days to clear the deal or 60 days to open a CMIR. A CMIR runs 90 days, extendable by 30. A 10-business-day comment period on the preliminary report follows, and OHCA must issue a final report within 15 days after comments close. Each of these periods is subject to tolling. Parties must report amendments or cancellations within five business days.
• Confidentiality has a defined process. The regulations deem confidential marked versions of stock purchase agreements, compensation documents, contract rates, valuation documentation, and unredacted resumes. A filer seeking confidentiality for other material must justify the request. OHCA will not protect publicly available information.
• Filers can reference each other’s submissions and use existing documents. A submitter may cross-reference another party’s filing for the same transaction. A letter of intent suffices until a definitive agreement supersedes it. Language reporting applies only to providers.

IV. What Remains Unclear or Unresolved

For private equity and hedge funds

• The control-rights prong lacks a size floor. Under (c)(9)(B), any acquisition of assets, equity, debt, or liabilities triggers a filing if paired with one enumerated right. Standard minority protections would qualify (e.g., a board seat, a consent right over new debt, or a management or monitoring fee). As a result, the 10% threshold in (c)(9)(A) may not provide relief for most negotiated minority deals.
• Lenders and private credit. The prong reaches acquisitions of “debts” and the right to approve or veto indebtedness. Read literally, the prong could capture a credit fund that makes a loan with customary negative covenants. Yet the statutory “hedge fund” definition carves out entities that solely provide or manage debt financing (banks, credit unions, commercial real estate lenders, bond underwriters). The text does not reconcile the two.
• Collective investing. The aggregation sentence in (c)(9)(A) refers to investors “investing collectively” to hold 10% of “the assets or equity.” It does not define collective investing or address co-investment vehicles or syndicates. Nor does it account for the “debt” and “liabilities” referenced earlier in the same paragraph.
• Breadth of “private equity group.” The statutory definition could reach family offices, venture funds, and other capital-raising investors. The regulation does not narrow it.

For MSOs

• Ordinary course versus a new management arrangement. MSOs may invoke the “usual and regular course of business” exclusion. Yet (c)(10)(A) still captures a new management services agreement with a § 97435(b)(1) health care entity, without any minimum level of control or scope. The text gives no guidance on renewals, amendments, added service lines, or price changes.
• The (c)(10)(C) cross-reference. Section 97435(c)(10) addresses transactions “involv[ing] a management services organization.” Yet the revised (c)(10)(C) now turns on a transfer of control “of a health care entity.” The text does not indicate whether OHCA intended this change. As a result, a strategic, non-PE acquisition of an MSO that does not transfer control of a health care entity may fall outside the listed circumstances. The statute, however, independently reaches the disposition of a material amount of an MSO’s assets.
• Measuring “collective” provider revenue. The detailed revenue methodology in § 97435(d) applies only to subsection (b); the text does not specify the measurement period or method for the $10 million collective revenue test in (c)(10)(B).
• MSO data reporting. OHCA has not yet implemented the MSO data-submission mandate in § 127501.5 and will likely address it in later rulemaking.

For real estate and aggregation

• Opco/propco structures. The sale-leaseback trigger still exempts only transfers to the acquirer or its direct parent. A transfer to an affiliated property company that is not a direct parent therefore appears covered. A purely internal transfer among entities already under common control may fall instead within the corporate-restructuring exclusion in § 97431(l)(2).
• Ten-year aggregation. Circumstances (c)(7) and (c)(8) aggregate related transactions over ten years for threshold purposes, but the text does not define “related” or “same or related health care services.” OHCA also may consider below-threshold transactions in a CMIR.

Process

• Duplicate filings. AB 1415 directs OHCA to adopt regulations eliminating duplicative reporting. The regulations instead rely on an email pre-filing process and cross-referencing, without a single consolidated notice. Because a notice is complete only when every required party files, one party’s delay affects every filer.
• Open-ended timelines. The 45- and 60-day periods toll while OHCA awaits third-party information or while another agency or court reviews the deal. OHCA also may toll remand review if it “needs additional time.” Neither tolling provision has an outside limit.
• Coordination with other reviews. The regulations do not coordinate with Attorney General nonprofit-transaction review or with the new SB 25 premerger notification effective January 1, 2027.
• Apparent drafting glitches. Section 97439(c) still cross-references § 97438(d) for confidentiality, although that material has moved to § 97437. Section 97431(g)(4) cites § 127500.2(p)(6) for “high-cost outlier,” while § 97431(q) cites § 127500.2(r) for “physician organization.” OHCA may correct these in the regular rulemaking.

V. Practical Implications for Affected Parties

• Health care entities. The core $25 million and $10 million revenue/asset thresholds, the 90-day pre-close notice, and the CMIR timelines are unchanged. The enhanced disclosures (organizational charts, quality metrics, compensation documentation) increase filing burden and diligence lead time.
• Private equity groups and hedge funds. The 10% threshold and the clarified control indicia narrow the ownership trigger and sharpen the control trigger. Significant burdens remain, however. The control prong has no size floor, and the regulations require portfolio-wide identification and debt-ratio disclosures.
• MSOs. MSOs face the broadest exposure. The submitter criteria are wider, and the collective-revenue trigger is low. MSOs must now document every health care entity they serve. They also carry a standalone statutory obligation to notice covered transactions with any counterparty. A separate data-reporting regime under § 127501.5 is still forthcoming.
• Transaction planning generally. A CMIR can extend the pre-closing timeline well beyond the 90-day notice period. Parties therefore should build OHCA review risk into letters of intent and definitive agreements through outside dates, cooperation covenants, cost allocation, and termination rights.

VI. Key Takeaways and Next Steps

1. Review the transaction pipeline. Test California transactions expected to close through mid-2027 against the final (b)(1)-(7) thresholds and (c)(1)-(11) circumstances. Focus on private equity minority investments that carry governance rights, new or expanded MSO arrangements, and sale-leasebacks.
2. Build 90+ days into deal timelines. Measure the 90-day notice period back from closing and add a buffer for completeness review, tolling, and a possible CMIR, which can extend well beyond 90 days.
3. Coordinate filings across parties early. Identify every required filer, including acquisition vehicles and parent entities. Agree on who files what and use cross-references where appropriate. Consider a pre-filing inquiry to OHCA at [email protected].
4. Integrate the process into negotiations. Add OHCA-specific closing conditions, cooperation covenants, filing-cost allocation, and outside dates that account for tolling. Where commercially acceptable, consider structuring private equity governance rights to avoid (c)(9)(B).
5. Prepare the disclosure package in advance. Assemble 5% ownership charts, affiliate and governing-body lists, portfolio and debt-ratio information, valuation materials, and executive incentive documents. Prepare confidentiality justifications and redacted public versions at the same time.
6. Mind parallel regimes. Account for Attorney General nonprofit-transaction review where applicable and for SB 25’s California premerger notification, effective January 1, 2027.
7. Engage in the coming rulemaking. The OAL emergency comment window is short. Stakeholders should prepare to comment when OHCA opens the regular rulemaking. Priority topics include the (c)(9)(B) size floor, MSO ordinary-course guidance, opco/propco structures, and duplicate-filing relief.