Health facilities.

Senator Cabaldon, with coauthors Blakespear and Patel, advances a new framework aimed at removing private equity groups and hedge funds from influencing clinical decisions in California physician and dental practices by adding a distinct division to the Health and Safety Code. The centerpiece is a prohibition on interference with professional judgment and on exercising control over defined aspects of care and practice management, paired with rules that void certain contractual terms that would enable such interference. The measure also authorizes the Attorney General to seek injunctive relief and recover its fees and costs for violations, and it provides a severability safeguard so that invalid provisions do not nullify the remainder of the division.

Key mechanisms include broad definitions of hedge funds and private equity groups, with carve-outs for natural persons who do not participate in management, debt-financing entities, and certain health care operators such as hospitals or hospital systems and public agencies or their settings. The core prohibitions cover two axes: (1) interference with clinical decisionmaking, including diagnostic testing, referrals, overall patient care, and decisions about patient load or work hours; and (2) exercising control over or delegating powers related to patient records, hiring and firing based on clinical competency, payer-relationship parameters, contract terms governing care delivery and billing, and the selection of equipment or supplies. Contracts or arrangements that would enable these prohibited actions are void and unenforceable, subject to limited carve-outs.

The division further restricts management or asset-sale contracts to prevent post-termination noncompete-like restraints or suppression of competition and prohibits provisions that disparage care quality or revenue strategies, while preserving some related provisions such as otherwise enforceable business sales noncompetes or confidential-information obligations under applicable law. It also clarifies that unlicensed individuals may assist with the decisions described, so long as licensed clinicians retain ultimate responsibility. Enforcement rests with the Attorney General, who can pursue injunctive relief and equitable remedies and recover fees and costs, and the provisions are stated to be severable. The text specifies that the new rules do not narrow existing corporate practice doctrines and do not modify related nonprofit or public-oversight regimes, and it does not itself set an explicit effective date.

The proposal frames its intent as ensuring that clinical decisionmaking remains in the hands of licensed health professionals and safeguarding care delivery from external influence by nonlicensed entities, while maintaining that corporate practice standards remain governed by existing law. Hospitals, hospital systems, and public agencies are expressly scoped through definitional carve-outs, shaping how PE or hedge fund involvement could be structured in practice. Stakeholders—ranging from private equity and hedge fund entities to physicians, dentists, hospitals, patients, and regulatory bodies—face a reoriented contractual landscape, with increased emphasis on autonomy in clinical decisions and on contractual terms governing governance, compensation, billing, and post-employment conduct. Open questions for implementation include how “involved in any manner” will be interpreted in edge cases and how this interacts with broader antitrust considerations and the existing corporate practice framework.