California Governor Newsom Signs Law to Limit Private Equity Influence in Healthcare
California Governor Gavin Newsom has signed into law SB 351, a bill aimed at curbing the influence of private equity groups and hedge funds in healthcare practices. The law, introduced by State Senator Christopher Cabaldon, received bipartisan support and will come into effect on January 1, 2026.
The new law aligns with existing California case law and guidance from the Medical Board of California. It prohibits non-licensed entities from exercising control over hiring practices and coding/billing procedures for patient services. This includes preventing private equity groups and hedge funds from interfering with physicians' and dentists' professional judgment in healthcare decisions.
Contracts between these entities and healthcare practices that allow or impose noncompete or nondisparagement clauses related to the prohibited conduct are also banned. The law is part of a national trend among states to strengthen corporate practice of medicine doctrines and limit non-licensed entities' influence in clinical decision-making.
Governor Newsom's signing of SB 351 marks a significant step in protecting healthcare professionals' autonomy and patient care in California. The law will be enforced by the state attorney general starting January 1, 2026.
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