Selling a California Med Spa After SB 351 and AB 1415: What Sellers and Buyers Need to Know

California has always been one of the stricter states on who can own and control a medical practice, so selling a med spa there was never a simple asset deal. Two 2025 laws, both effective January 1, 2026, add another layer when the buyer or the management arrangement involves private equity, a hedge fund or an MSO. If you are planning to sell, or you are thinking about buying or investing in a California clinic, you should understand both.

This post summarizes SB 351 and AB 1415 as law firms and public sources describe them, flags what is still unsettled, and walks through what a seller can do now. It is not legal advice, and any real transaction needs a California healthcare transactional attorney.

SB 351: Limits on Investor Control of Clinical Practice

SB 351 strengthens California's corporate practice of medicine and dentistry doctrine as it applies to private equity groups and hedge funds. In summary, it does the following.

• Protects clinical judgment: private equity groups and hedge funds involved in any manner with a California physician practice, including indirectly through asset purchases or MSO structures, may not interfere with a physician's professional judgment, for example by dictating which diagnostic tests are ordered, whether referrals are needed or how many patients a physician treats.
• Reserves certain decisions to licensed physicians: commentators describe a list of functions that cannot be handed to a non-physician investor or its MSO, including the content and ownership of medical records, hiring and firing tied to clinical competence, entering payer contracts and agreements with other providers, billing and coding decisions, and approval of medical equipment and supplies.
• Limits restrictive covenants: practice management contracts with these investors may not bar a provider from competing after leaving or from commenting on quality of care, utilization, ethical challenges or revenue strategies. Confidentiality clauses for investors' material nonpublic information, and enforceable noncompetes tied to a sale of the business, remain allowed.
• Gives the Attorney General enforcement power: the California Attorney General may seek injunctive and other equitable relief and attorney's fees, which can reach investors, not just practitioners.
• Does not require a restructure: the law does not force existing investor-owned arrangements to change their ownership structure, but practices and MSOs are expected to review their agreements. Physician ownership in a private equity-backed MSO is not itself prohibited.

What SB 351 Means If You Are Selling

Whether SB 351 touches your sale depends heavily on who the buyer is. If you are selling to an individual physician or a physician-owned group with no private equity or hedge fund involvement, SB 351 does not apply directly, though California's existing corporate practice rules still govern what can be sold to whom. If the buyer is a private equity-backed platform, or will manage the clinic through an investor-backed MSO, expect the buyer's counsel to test your structure and your contracts against SB 351.

Several points are specific to sellers.

• Your sale noncompete still works: the law preserves enforceable noncompetes tied to a sale of the business. It limits employee-style noncompetes inside the management arrangement, so a buyer can still ask the seller to stay out of the market.
• Clinician agreements get looked at: existing noncompete and nondisparagement terms in agreements with your providers may be unenforceable or risky in an investor-backed structure. Expect them to be audited and possibly rewritten.
• Control is a diligence question: if your management company, rather than the physician-owned PC, has been deciding hiring, billing, payer contracts or equipment, a buyer will see that as a legal problem, not just a deal point.
• Earnouts need care: a deal term that ties a seller's payout to medical revenue can drift into fee-splitting territory. Have counsel structure any contingent payments carefully.

AB 1415: Advance Notice to the State

AB 1415 expands the review of health care transactions run by California's Office of Health Care Affordability, known as OHCA. Before 2026, certain provider transactions already required notice to the state. AB 1415 adds private equity groups, hedge funds, newly formed entities created to transact with health care entities, management services organizations and entities that own or control providers to the list of parties that must give notice for material transactions.

• Timing: notice is generally due 90 days before closing. After a complete filing, OHCA reports whether a deeper cost and market impact review is needed, which can add months. Build this into any deal that might be covered.
• Healthcare entity size: under OHCA's regulations as summarized, the dollar thresholds start at $25 million in annual revenue or California assets, with a lower $10 million level in some situations involving larger entities.
• Investor triggers: a private equity or hedge fund filing is generally required if the fund acquires 10 percent or more of a health care entity or MSO, or gains control rights such as the power to appoint leadership, veto decisions or approve debt. Passive lenders and limited partners are generally carved out.
• MSO triggers: MSOs face their own tests, including whether they serve a health care entity above the dollar threshold, serve two or more providers with a combined $10 million in California revenue, or involve a transfer of control. Related transactions can be aggregated over a ten-year lookback, which matters for roll-ups.
• Provider definition: as summarized, physician organizations count only at 25 or more physicians, and dental and some other practices are excluded from the definition of provider.

Does AB 1415 Reach a Single Med Spa Sale?

Possibly not, but you should not assume. A single-location clinic with a physician-owned PC and revenue well under $10 million, sold to an individual buyer, is unlikely to cross the thresholds. A sale to a platform that is rolling up multiple clinics under an MSO is different, because the MSO tests, the investor triggers and the ten-year aggregation rule can apply even when the individual clinic is small. None of the summaries we reviewed address med spas specifically, and OHCA's regulations were reported approved only in early October 2026, so the practical edges are still being worked out. Have counsel run the threshold analysis on the actual deal before you assume you are outside it.

What Is Actually Being Sold in a California Med Spa Deal

California requires that the entity practicing medicine be a physician-owned professional corporation, so a non-physician owner generally cannot sell the medical practice itself to another non-physician. In an MSO-PC structure, the pieces typically trade separately.

• The MSO and its assets: the brand, lease, equipment, systems, non-clinical contracts and the management services agreement. A non-physician buyer can typically acquire these, subject to the new investor rules.
• The professional corporation: the entity that holds the medical practice and patient relationships. It can be sold to a licensed physician, not to a lay buyer, and the sale involves records, goodwill and continuity of care in ways counsel needs to structure carefully.
• The management services agreement: the contract connecting the two. A buyer will read it for who controls what, how the fee is set and whether it can be terminated or transferred.
• Medical records: the PC owns them. They transfer with the practice, under privacy and patient-notice rules, and should not sit with the MSO.

What a Careful Buyer Will Check

• Who owns the PC, whether that physician is real and engaged, and whether any agreement lets the MSO replace them or restrict a sale.
• How the management fee is set. A flat, fair-market fee is easier to defend than a percentage of collections.
• Who actually decides hiring and firing of clinicians, payer contracts, billing and coding, and equipment.
• Where patient revenue lands, and whether the PC and MSO accounts are separate.
• Whether the medical director, management and consulting agreements are separate, current and signed.
• Whether provider noncompete and nondisparagement terms need to be rewritten.
• Licensure and delegation: current standing orders, protocols and chart review for every provider.
• Whether the deal triggers an OHCA notice, and how much time that adds.

How a Seller Can Prepare Now

• Get an independent review of your PC/MSO structure and agreements before you go to market, not after a buyer finds the problem.
• Fix control issues early. If the MSO has been making decisions the PC should make, move them back and document it.
• Replace percentage-of-collections fees with a fair-market fee supported by an analysis, if your state and structure allow, and document the change.
• Clean up provider agreements, especially noncompete and nondisparagement clauses.
• Make sure the medical record, protocols and chart-review documentation actually live with the PC.
• Keep clean financials that separate PC and MSO revenue and expenses.
• Ask counsel early whether the buyer's structure triggers AB 1415, and plan the closing timeline accordingly.

Where MedGrid Fits

A clinic that was built correctly is much easier to sell. MedGrid connects California clinics with a California-licensed physician, forms the physician-owned professional corporation and the management company around it, and keeps the structure clean: one physician per PC, revenue landing in the PC's own account, a flat fair-market management fee rather than a percentage of collections, separate medical director, management and consulting agreements, and the practice reviewing its agreements with its own independent counsel. Those are the things a buyer's diligence team asks about first. If you are planning an exit and want a read on how your current structure will look to a buyer, that is a good conversation to have with us before you list the clinic. This is a description of how we build, not legal advice on your transaction.

Frequently Asked Questions

• What California law changed selling a med spa?: Two laws that took effect January 1, 2026: SB 351, which limits private equity and hedge fund control over physician practices, and AB 1415, which expands advance notice requirements for certain health care transactions to investors and MSOs.
• Does SB 351 stop me from selling to a private equity-backed buyer?: No. It does not prohibit sales. It limits the control an investor can exercise over clinical decisions and restricts certain contract terms, so the structure and the agreements have to fit its rules.
• Can the buyer still require me not to compete after the sale?: Yes. The law preserves enforceable noncompetes tied to a sale of the business, while limiting employee-style noncompetes in management arrangements.
• Do I have to notify the state before I sell?: Only if the transaction is covered. Summaries describe dollar thresholds, investor ownership triggers and MSO tests, with notice due 90 days before closing. Small single-location sales may fall below them, but MSO layers and roll-up buyers can change that, so have counsel check.
• Can a non-physician buy my California med spa?: A non-physician generally cannot own the professional corporation that practices medicine, but can typically buy the MSO and its business assets, subject to the new investor rules and your structure.
• What should I do first if I want to sell in the next year?: Have a California healthcare transactional attorney review your PC/MSO structure and agreements, fix any control or fee issues, and run the notice-threshold analysis for the kind of buyer you expect.

This article is general educational information, not legal advice. It summarizes public law-firm and agency descriptions of California SB 351 and AB 1415 and the related OHCA regulations as of the publication date. The regulations are new, thresholds and procedures may change, and none of the summaries we reviewed address med spas specifically. Consult a licensed California healthcare transactional attorney before buying, selling or investing in a clinic.