OHCA Releases Revised Emergency Regulations Implementing AB 1415 Reporting Requirements For Private Equity (PE) And Management Services Organizations (MSOs)

California’s Office of Health Care Affordability (“OHCA”) has been active this calendar year in the emergency rulemaking process as it seeks to implement AB 1415’s private equity (“PE”) and management services organization (“MSO”) reporting requirements.¹ In our last update, we examined OHCA’s May 15, 2026 proposed regulations, which included a 5% ownership threshold for PE and hedge fund investors, new MSO qualifying criteria, a real estate sale-leaseback trigger, and other changes to the cost and market impact review (“CMIR”) process.² On September 11, 2026, OHCA advanced this rulemaking process through a new emergency filing, which differs from the May proposal in a few key respects.³ This article compares the two versions and summarizes what has changed, and what has not, since OHCA’s May proposal.

PE and Hedge Fund Ownership Threshold

The most significant change between the two drafts is the ownership threshold that triggers a notice obligation for private equity groups and hedge funds. As we reported in May, OHCA’s initial proposal set that threshold at 5% or more of the assets, equity, debt, or liabilities of a qualifying health care entity or MSO, a figure lower than the 15% threshold that would have applied under previously introduced legislative proposals.⁴ The emergency regulatory text sets the threshold at 10% or more, whether held by a single fund or collectively by a group of investors, private equity groups, or hedge funds investing together.

The revised threshold remains below previous targets but is double the figure in the May proposal, meaning some transactions involving minority PE or hedge fund investments below 10% will no longer be reportable on that basis alone. The emergency text also narrows which MSO counterparties trigger this rule. Indeed, the May proposal applied the threshold to any transaction with a health care entity or, more broadly, with “a management services organization,” while the updated proposal limits the MSO counterparty to one that itself satisfies the MSO-specific filing threshold. The enumerated governance-rights trigger we described in May remains unchanged: a PE or hedge fund transaction still triggers a filing regardless of ownership percentage if the fund obtains rights such as the ability to appoint or replace leadership, veto material decisions, alter service lines, approve or veto debt, manage or operate the entity, charge fees, or control the use of capital or net income.

MSO Definition

One prong of the MSO qualifying criteria moved in the opposite direction. Our May article noted that the proposed regulations required a hospital-owned MSO to have two or more physician organizations as clients or affiliates before it would qualify as an MSO under the rule. The emergency text lowers that threshold to one or more physician organizations, which brings a broader set of hospital-owned MSO arrangements within the definition than under the May draft.

The other MSO qualifying criteria and transaction triggers described in May carry forward in this version largely unchanged. The revenue-based triggers, an MSO providing management and administrative services to a qualifying health care entity, an MSO serving two or more providers that collectively generate at least $10 million annually from California patients, or any transaction transferring control, responsibility, or governance of the MSO, remain in this September proposed text. The ten-year related-transactions look-back also remains, and continues to apply to a series of related transactions involving the same health care entities, MSOs, or affiliated entities.

Real Estate Sale-Leasebacks

The stand-alone real estate sale-leaseback trigger we described in May, which is not specified in AB 1415 itself, appears in the emergency regulations with one refinement. The May proposal already applied the phrase “regardless of whether... currently operating, providing health care services, or has a pending or suspended license” to the general definition of a health care entity, but the real estate trigger itself was silent on operating status. The emergency text imports that same qualifier directly into the real estate trigger, so it now expressly applies regardless of whether the affected provider or fully integrated delivery system is currently operating, currently providing health care services, or has a pending or suspended license.

CMIR Process

The three CMIR-related changes described in May, which include (i) a new factor examining whether a transaction involves a real estate investment trust on terms that could weaken a health care entity’s financial position, (ii) OHCA’s express authority to remand a CMIR determination for further review, and (iii) an expanded ground for expedited review based on an urgent situation not of the filer’s own making, all appear in the emergency text substantially as proposed. The emergency text confirms a 30-calendar-day period for OHCA to complete its review following a remand, consistent with the May proposal.

Items Still Not Addressed

The two statutory directives identified as unaddressed in May also appear to be missing in the September draft. Section 127507(c)(2)(C) of the Health and Safety Code requires OHCA to adopt regulations eliminating duplicative reporting when a transaction triggers notice under more than one provision, but the emergency text permits only general cross-referencing between related filings, without a mechanism to consolidate overlapping obligations. Section 127501.5’s directive that OHCA establish MSO data reporting requirements also remains unimplemented. Both items may be addressed in a later phase of rulemaking, including the regular rulemaking process that will run in parallel with the emergency regulations if approved by the Office of Administrative Law.

Moving Forward

In sum, OHCA’s newly released proposed regulations implementing AB 1415 keep much of the framework revealed in OHCA’s earlier proposal in May, but do have some important tweaks relevant to the question of whether certain MSO or PE-related parties will have to file a notice to OHCA. As for next steps, OHCA plans to file the emergency rulemaking package with the Office of Administrative Law (“OAL”) at least five working days after its September 11, 2026 notice. OAL will then allow five calendar days for public comment and has ten calendar days from the filing date to approve or reject the package. If approved, the emergency regulations take effect immediately for five years while OHCA separately pursues a regular rulemaking process, including a full public comment period, to adopt permanent regulations. Given the compressed timeline, parties exploring or looking to consummate a healthcare-related transaction would be wise to examine OHCA’s latest proposal and assess its applicability now. AB 1415 has been in effect since January 1, 2026, and the current emergency regulatory text represents the operative framework unless and until it is modified through the regular rulemaking process.

Footnotes

1 See our prior article covering the passage of AB 1415 in October 2025: Governor Newsom Signs AB 1415 Expanding OHCA Oversight | Sheppard.

2 See our prior article on OHCA’s May 2026 proposed regulations: OHCA Releases Proposed Emergency Regulations Implementing AB 1415 Reporting Requirements for Private Equity (PE) and Management Services Organizations (MSOs).

3 See OHCA’s Notification of Proposed Emergency Regulatory Action, dated September 11, 2026: CMIR-Advance-Notification-of-Proposed-Emergency-Regulatory-Action.pdf

4 See our prior article and blog series discussing AB 3129, which was passed by the California state legislature but ultimately vetoed by Governor Newsom in September 2024: Update: Governor Newsom Vetoes California’s AB 3129 Targeting Healthcare Private Equity Deals.