REGULATION

California puts MSOs under a microscope

A new year brings a fresh start, a renewed commitment to our personal goals, and, of course, new laws that could impact our businesses, like the ones that just took effect in California.

What happened: California just flipped the switch on two laws targeting private equity-backed platforms and management services organizations (MSO) in healthcare: SB 351 and AB 1415. Not names that exactly roll off the tongue, but both laws come with serious implications for the dental industry.

SB 351 puts teeth behind California's corporate practice of medicine/dentistry rules. It prohibits any private equity group or hedge fund "involved in any manner" with a physician or dental practice from interfering with clinical judgment or exercising control over activities that look suspiciously like standard DSO operations—coding and billing decisions, payer contracting parameters, patient record control, and clinical hiring decisions based on competency.

AB 1415 expands who must give written notice prior to closing certain transactions involving health-care entities or MSOs, which it defines in terms DSOs will recognize immediately: entities providing management support, including "provider rate negotiation, revenue cycle management, or both." The law requires written notice 90 days before closing certain transactions involving healthcare entities or MSOs. If regulators opt to conduct a cost and market impact review, implementation gets delayed 60 days after their final report. Translation: Your deal timeline just got less predictable.

Why it matters: These laws land exactly where DSOs feel it—governance and deal friction.

• First, governance is now a "show your work" exercise. SB 351 narrows the lane for influence over practices, adding risk that your standard agreements with clinics, board rights, or operating cadence could be read as directing the clinical operations the statute flags: coding, billing, payer contracting, and productivity expectations.

• Second, transaction timelines in California just became harder to forecast. AB 1415 expands who must notify regulators, and the review process can stretch beyond simple filing. Even when the state can't block deals outright, you're managing closing risk, disclosure risk, and timing risk that didn't exist two years ago.

The national angle: California may be a preview of things to come nationwide. Other states are already moving in parallel, reviving corporate practice rules with modern MSO language while adding transaction oversight that slows consolidation.

• Oregon's SB 951 explicitly targets private equity-backed MSO control dynamics.

• Massachusetts enacted H.5159 last year, strengthening market review around healthcare transactions.

• Indiana rolled out new ownership reporting requirements and authorized investigations into concentration of ownership in healthcare. 

What you can do now: For multi-state DSOs, now is the time to prepare for the coming patchwork of state-level "who controls what" tests plus more pre-close notice regimes.

• Run a control rights audit. Map every decision your DSO touches and document where licensed clinical leadership has final authority, and compare against state-level rules.

• Rethink restrictive covenants. If you rely on noncompetes or non-disparagement clauses in California, review whether SB 351 puts them in the penalty box.

• Create a state overlay playbook. California clauses won't satisfy Oregon or Massachusetts. Build modular governance and services agreements that flex state-by-state without repapering your entire platform every legislative session.

Bottom line: The DSOs that win here will treat clinical autonomy as a designed system with documentation, enabling them to move faster when the next state legislature starts asking questions. which puts a premium on education and case presentation.