California prices medical direction on structure, not hours. The corporate practice bar is real and enforced, the professional corporation has to be owned correctly, and since 1 January 2026 SB 351 adds a second layer. What SB 351 does not do is regulate every management company, and operators are being told otherwise.
SB 351 reaches private equity groups and hedge funds
Health and Safety Code § 1191 opens with its subject: “A private equity group or hedge fund involved in any manner with a physician or dental practice.” Section 1190 defines both terms. The statute adds Division 1.7, sections 1190 to 1192, and took effect 1 January 2026.
This matters because the common summary, that SB 351 restricts “management entities”, is wrong in a direction that costs operators money. A founder-owned MSO is not a private equity group or a hedge fund. It is reached only where it is one of those, or is controlled by one.
If you have been quoted a restructuring on the basis that SB 351 binds your management company, check first whether it does.
What the statute actually names
Section 1191 enumerates what the regulated entity may not control or interfere with. On the professional judgment side:
- Determining which diagnostic tests are appropriate
- Determining the need for a referral to another physician
- Being responsible for the ultimate overall care of the patient
- Determining how many patients a physician sees, or over how many hours
And on the operational side:
- Owning or otherwise determining the content of patient medical records
- Selecting, hiring or firing physicians based on clinical competency
- Setting parameters for contractual relationships with third-party payers
- Making decisions about coding and billing of procedures
- Approving the selection of medical equipment and medical supplies
Enforcement sits with the Attorney General, who may seek injunctive relief and other equitable remedies, plus attorney’s fees and costs incurred in remedying a violation.
Section 1192 is a severability clause. SB 351 expressly does not narrow the corporate practice bar that already existed.
The older constraint is still the harder one
For most operators the binding constraint is not SB 351. It is the corporate practice doctrine California already had.
Business and Professions Code § 2052 makes unlicensed practice unlawful, and § 2400 carries the corporate practice bar. The medical entity must be owned by a California-licensed physician. A non-physician participates through a separately owned management company that supplies everything except clinical decisions.
The division of responsibility is the whole structure. It is worth writing out plainly:
| the professional corporation decides | the management company may provide |
|---|---|
| what is diagnosed and how it is treated | premises, equipment and supplies |
| which patients are appropriate for a service | non-clinical staffing and payroll |
| who is clinically competent to perform it | technology, marketing and billing operations |
| the content and custody of the medical record | administrative support and reporting |
| the treatment menu, as a clinical question | the business plan, as a commercial one |
A management agreement that blurs any row on the left is the problem, whether or not a private equity group is anywhere near it.
What drives the cost in California
- The structure, first. A correctly owned professional corporation with a properly drawn management agreement is the deliverable. States without a CPOM bar do not need it and do not price for it.
- Menu breadth. Weight management and hormone therapy carry monitoring intervals that aesthetics alone does not.
- Good faith exam volume and how it is delivered. Who performs it, and whether the record survives a review two years later.
- Whether the director writes the protocols or just signs them. Authorship and revision are the work.
- Multi-state footprint. A California entity that has to interoperate with entities in permissive states is a harder drafting job than either alone.
Fee ranges in this market are a market observation, not a benchmark, and the structure question dominates them.
Red flags on both sides
From the operator’s side: anyone who tells you SB 351 restricts your founder-owned MSO without checking whether it is a private equity group or hedge fund; a director who will not read the management agreement; a national template that treats California like Florida; or a proposal where the management company sets the treatment menu.
From the physician’s side: an operator who wants the director to sign off on a menu they did not review; who treats the good faith exam as a formality; who asks for a percentage of revenue, which invites fee-splitting scrutiny under § 650; or who resists writing the clinical decisions into the professional corporation’s column.
What this means for you
Start by establishing whether SB 351 reaches you at all. If your management company is founder-owned and not controlled by a private equity group or hedge fund, the statute is not aimed at you, and anyone restructuring you on that basis is solving a problem you do not have. Then do the work that does apply: confirm the professional corporation is owned by a California-licensed physician, and read your management agreement against the two columns above, line by line, asking which side each clause sits on. Fix the clauses that sit on the wrong side. See what medical direction in California involves, or read the SB 351 detail and how the CPOM bar works here.
Related reading
Frequently asked questions
Can a non-physician own a med spa in California?
Not the entity that delivers medical care. California enforces the corporate practice of medicine, so the professional corporation must be owned by a California-licensed physician. A non-physician owns a separate management company that supplies premises, equipment, staffing, technology and administration, and takes a fee for those services.
Does SB 351 apply to my management company?
Only if it is a private equity group or a hedge fund as defined in Health and Safety Code § 1190, or is controlled by one. Section 1191 opens by naming those two entity types. A founder-owned MSO with no private equity or hedge fund involvement is not the subject of the statute, though the pre-existing corporate practice bar still applies to it.
When did SB 351 take effect?
1 January 2026. It was chaptered 6 October 2025 as Chapter 409, Statutes of 2025, and recorded as a non-urgency measure, so it took effect on the following 1 January rather than on signature.
What does SB 351 actually prohibit?
It bars the regulated entity from controlling or interfering with clinical decisions, naming diagnostic tests, referrals, ultimate responsibility for care, patient volume and hours, ownership of medical records, hiring and firing on clinical competency, payer contracting parameters, coding and billing, and equipment selection. The Attorney General enforces it.
Can a California medical director be paid a percentage of revenue?
It invites fee-splitting scrutiny under Business and Professions Code § 650 and is the harder structure to defend. A fixed fee reflecting fair market value for defined services is more defensible, and it survives buyer diligence better.
This is general information, not legal advice. Rules vary by state and change. Confirm your own facts with counsel.