2026 Notice Requirements and Fair Market Value

The legal landscape for MSO arrangements shifted meaningfully on January 1, 2026. Two compliance priorities now sit at the front of any new structure: the state's expanded transaction-notice regime and a disciplined, documented approach to the management fee.

AB 1415 and Advance Notice to the State

Assembly Bill 1415, effective January 1, 2026, expanded California's healthcare-transaction oversight. 

Under the expanded framework, private equity groups, hedge funds, MSOs, and certain entities newly formed to carry out healthcare deals may be required to provide advance written notice to the state—generally at least 90 days before executing a qualifying management services agreement or transaction—and to observe the waiting period before closing. The notice runs to California's healthcare market oversight body. The practical effect is that MSO formation and acquisition timelines must now build in a regulatory waiting period that did not previously exist, and parties should determine early whether a contemplated deal triggers the requirement.

This is a developing area, and related measures continue to draw the Attorney General's attention—particularly arrangements that lock physicians into continuity or non-compete style commitments. Anyone structuring an MSO in 2026 should confirm the current scope and thresholds before relying on any assumption about whether notice is required.

Fair Market Value, Documented

The second priority is evidentiary. The management fee should be supported by a current fair market value analysis showing that the compensation is reasonable for the services rendered—not inflated to move profit from the physician-owned PC to the investor-owned MSO. A contemporaneous FMV audit or valuation does double duty: it keeps the fee defensible under the fee-splitting and anti-kickback rules, and it becomes the practice's first line of defense if a regulator later asks how the number was set.

The Through-Line

Across all four parts, one principle holds the structure together: business interests may build, fund, and operate the enterprise, but licensed physicians must retain genuine control of medicine. An MSO that respects that line—in its entities, its contract, its governance, and its regulatory filings—can scale lawfully in California. One that blurs it invites exactly the scrutiny the structure was meant to avoid.

Considering an MSO structure, or reviewing an existing one against the 2026 rules?

West Coast Health Law advises healthcare practices and investors on MSO-PC formation, management services agreements, and California regulatory compliance. Contact our office today to discuss your matter!

This article is provided for general informational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship. For guidance on a specific matter, contact West Coast Health Law.

West Coast Health Law offers a FREE consultation which you may schedule by clicking the button on our website.