Bill Text: CA SB351 | 2025-2026 | Regular Session | Introduced
Bill Title: Health facilities.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced) 2025-02-12 - Introduced. Read first time. To Com. on RLS. for assignment. To print. [SB351 Detail]
Download: California-2025-SB351-Introduced.html
CALIFORNIA LEGISLATURE—
2025–2026 REGULAR SESSION
Senate Bill
No. 351
| Introduced by Senator Cabaldon |
February 12, 2025 |
An act to add Division 1.7 (commencing with Section 1190) to the Health and Safety Code, relating to health practices.
LEGISLATIVE COUNSEL'S DIGEST
SB 351, as introduced, Cabaldon.
Health facilities.
Existing law generally regulates the licensing and operation of health facilities and other facilities providing health care in this state. Existing law, the Medical Practice Act, creates the Medical Board of California to license and regulate physicians and surgeons. Under existing law, the Dental Practice Act, the Dental Board of California licenses and regulates dentists.
Existing law, the Nonprofit Public Benefit Corporation Law, generally requires a nonprofit public benefit corporation to give written notice to the Attorney General before it sells, leases, conveys, exchanges, transfers, or disposes of its assets, except as specified. Existing law provides specific procedures for health facilities and additionally requires these facilities to obtain the consent of the Attorney General prior to entering into a specified agreement or
transaction.
This bill would prohibit a private equity group or hedge fund, as defined, involved in any manner with a physician or dental practice doing business in this state from interfering with the professional judgment of physicians or dentists in making health care decisions and exercising power over specified actions, including, among other things, making decisions regarding coding and billing procedures for patient care services. The bill would prohibit a private equity group or hedge fund from entering into an agreement or arrangement with a physician or dental practice if the agreement or arrangement would enable the person or entity to engage in the prohibited actions described above. The bill would render void and unenforceable specified types of contracts between a physician or dental practice and a private equity group or hedge fund that explicitly or implicitly include any clause barring any provider in that practice from competing with that practice
in the event of a termination or resignation, or from disparaging, opining, or commenting on that practice in any manner as to any issues involving quality of care, utilization of care, ethical or professional challenges in the practice of medicine or dentistry, or revenue-increasing strategies employed by the private equity group or hedge fund, as specified. This bill would entitle the Attorney General to injunctive relief and attorney’s fees and costs for the enforcement of these provisions, as specified.
Digest Key
Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NOBill Text
The people of the State of California do enact as follows:
SECTION 1.
Division 1.7 (commencing with Section 1190) is added to the Health and Safety Code, to read:DIVISION 1.7. Private Equity or Hedge Fund Ownership of Health Care Practices
1190.
For purposes of this division, the following definitions shall apply:(a) (1) “Hedge fund” means a pool of funds managed by investors for the purpose of earning a return on those funds, regardless of the strategies used to manage the funds. Hedge funds include, but are not limited to, a pool of funds managed or controlled by private limited partnerships.
(2) “Hedge fund” does not include:
(A) Natural persons or other entities that contribute, or promise to contribute, funds to the hedge fund, but otherwise do not participate in the management of the hedge fund or the fund’s assets, or in any change in control of the
hedge fund or the fund’s assets.
(B) Entities that solely provide or manage debt financing secured in whole or in part by the assets of a health care facility, including, but not limited to, banks and credit unions, commercial real estate lenders, bond underwriters, and trustees.
(b) (1) “Private equity group” means an investor or group of investors who primarily engage in the raising or returning of capital and who invests, develops, or disposes of specified assets.
(2) “Private equity group” does not include natural persons or other entities that contribute, or promise to contribute, funds to the private equity group, but otherwise do not participate in the management of the private equity group or the group’s assets, or in any change in control of the private equity group or the group’s
assets.
1191.
(a) A private equity group or hedge fund involved in any manner with a physician or dental practice doing business in this state, including as an investor in that physician or dental practice or as an investor or owner of the assets of that practice, shall not do either of the following with respect to that practice:(1) Interfere with the professional judgment of physicians or dentists in making health care decisions, including any of the following:
(A) Determining what diagnostic tests are appropriate for a particular condition.
(B) Determining the need for referrals to, or consultation with, another physician,
dentist, or licensed health professional.
(C) Being responsible for the ultimate overall care of the patient, including treatment options available to the patient.
(D) Determining how many patients a physician or dentist shall see in a given period of time or how many hours a physician or dentist shall work.
(2) Exercise control over, or be delegated the power to do, any of the following:
(A) Owning or otherwise determining the content of patient medical records.
(B) Selecting, hiring, or firing physicians, dentists, allied health staff, and medical assistants based, in whole or in part, on clinical competency or proficiency.
(C) Setting the parameters under which a physician, dentist, or physician or dental practice shall enter into contractual relationships with third-party payers.
(D) Setting the parameters under which a physician or dentist shall enter into contractual relationships with other physicians or dentists for the delivery of care.
(E) Making decisions regarding coding and billing procedures for patient care services.
(F) Approving the selection of medical equipment and medical supplies for the physician or dental practice.
(b) The corporate form of that physician or dental practice as a sole proprietorship, a partnership, a foundation, or a corporate entity of any kind shall not affect the applicability of this section.
(c) A private equity group or hedge fund, or an entity controlled directly, in whole or in part, by a private equity group or hedge fund, shall not enter into an agreement or arrangement with a physician or dental practice doing business in this state if the agreement or arrangement would enable the person or entity to interfere with the professional judgment of physicians or dentists in making health care decisions, as set forth in paragraph (1) of subdivision (a), or exercise control over or be delegated the powers set forth in paragraph (2) of subdivision (a).
(d) Any contract involving the management of a physician or dental practice doing business in this state by, or the sale of real estate or other assets owned by a physician or dental practice doing business in this state to, a private equity group or hedge fund, or any entity controlled directly or indirectly, in whole or in
part, by a private equity group or hedge fund, shall not explicitly or implicitly include any clause barring any provider in that practice from competing with that practice in the event of a termination or resignation of that provider from that practice, or from disparaging, opining, or commenting on that practice in any manner as to any issues involving quality of care, utilization of care, ethical or professional challenges in the practice of medicine or dentistry, or revenue-increasing strategies employed by the private equity group or hedge fund. Any such explicit or implicit contractual clauses are void, unenforceable, and against public policy. This subdivision shall not impact the validity of an otherwise enforceable sale of business noncompete agreement, but a contract described in this subdivision shall not operate as an employee noncompete agreement.
(e) The Attorney General shall be entitled to injunctive relief and other equitable
remedies a court deems appropriate for enforcement of this section and shall be entitled to recover attorney’s fees and costs incurred in remedying any violation of this section.
(f) This section is intended to ensure that clinical decisionmaking and treatment decisions are exclusively in the hands of licensed health care providers and to safeguard against nonlicensed individuals or entities, such as private equity groups and hedge funds, exerting influence or control over care delivery.
(g) This section does not narrow, abrogate, or otherwise lower the bar on the corporate practice of medicine or dentistry as set forth in the Business and Professions Code or the Corporations Code, or any other applicable state or federal law.
