If you operate a California med spa through a management services organization, there is a reasonable chance your agreement was drafted before SB 351 and says things it should no longer say.
The law was signed October 6, 2025 and took effect January 1, 2026. It does not create a new structure. It restricts what the management side of an existing one is allowed to control — and it hands the Attorney General enforcement tools.
What SB 351 actually does
SB 351 targets control. It prohibits private equity groups and hedge funds from controlling the clinical decisions of physician and dental practices, and prohibits management entities from interfering in clinical matters — including treatment decisions, patient volume quotas, and staffing decisions that should turn on clinical competency.
The Attorney General may seek injunctive relief, attorneys’ fees, and penalties.
That last sentence is why this is different from the usual “structure it carefully” advice. California moved corporate practice of medicine from a doctrine you argue about after something goes wrong to a statute with a named enforcer.
Why so many agreements are now wrong
The friendly PC and MSO model has been standard in California for years. The problem is that many MSAs were drafted to give the management side as much control as possible, because that is what investors and operators wanted.
Provisions that now deserve a hard look:
| Provision | Why it is a problem |
|---|---|
| MSO sets treatment protocols | Clinical governance belongs inside the PC |
| Patient volume or production targets | Reads as a quota influencing clinical judgment |
| MSO hires, fires, or disciplines clinicians | Staffing tied to clinical competency is a clinical decision |
| MSO controls the service menu | What is offered clinically is a clinical determination |
| MSO sets appointment length | Time per patient is a clinical judgment, not a scheduling one |
| Broad power of attorney over PC equity | Effective ownership of the practice by the management side |
| MSO controls clinical records | Records custody belongs with the PC |
None of these were unusual. Several were standard. That is precisely the point — the law changed around a widely used template.
The uncomfortable question
Here is what most operators do not want to examine: if your MSO stopped exercising every power its agreement grants it, would the business still run the way you expect?
If the honest answer is no — if the management entity is actually deciding what gets treated, how fast, and by whom — then the separation was already form over substance. SB 351 did not create that exposure. It made it enforceable by a party with subpoena power.
What compliance looks like
The compliant architecture is unchanged: a physician-owned professional corporation holding clinical governance, and an MSO providing genuine administrative services under a management services agreement.
What has to change is the boundary:
- Clinical governance lives in the PC. Protocols, treatment decisions, clinical staffing, records.
- The MSO does administration. Facilities, non-clinical staffing, marketing, billing support, technology.
- Remove quotas and production targets that touch clinical output.
- Fees at fair market value for services actually delivered.
- Physician owner with real authority, including succession provisions that do not amount to management control.
- Document the practice, not just the paper. If the PC is meant to set protocols, there should be evidence the PC set them.
One caveat worth flagging: some advisers are reading SB 351 to require replacing standing orders with patient-specific orders in aesthetic settings. That is an aggressive reading rather than settled interpretation. Ask your counsel where they land — do not adopt it from a blog, including this one.
The transaction angle
Separately, AB 1415 expanded health care transaction oversight, with advance notice to the Office of Health Care Affordability required for a range of transactions. If you are buying, selling, or taking investment in a California practice, notification timing is now part of the deal calendar — not an afterthought.
What to do now
- Pull your MSA and read it against the control provisions above.
- Ask whether the PC’s physician owner actually exercises the authority the documents describe.
- Check whether any compensation is tied to clinical volume.
- Confirm where clinical records live and who controls them.
- Have California healthcare counsel review before an enforcement inquiry does.
How MDside works in California
MDside operates the clinical side — the professional corporation, the licensed providers, the protocols, and the evaluation and prescribing workflow — with the boundary drawn where California now requires it. Clinical governance sits with the PC because that is where it belongs, not because a document says so.
See what is included, or read the California corporate practice fundamentals.
Frequently asked questions
When did SB 351 take effect?
It was signed October 6, 2025 and took effect January 1, 2026.
Does SB 351 ban MSOs in California?
No. The MSO-PC structure remains the compliant architecture. What the law restricts is management-side control over clinical decisions.
Does it only apply to private equity?
The private equity and hedge fund provisions get the attention, but the restrictions on management entities interfering with clinical decision-making reach ordinary MSO arrangements too. Do not assume you are outside it because no fund is involved.
Who enforces it?
The Attorney General, who may seek injunctive relief, attorneys’ fees, and penalties.
Do I need to redo my whole structure?
Usually not the structure — usually the agreement and the operating practice underneath it. The MSO-PC model itself is still the answer.
General information about California SB 351 and related law, not legal advice. This is new legislation and interpretation is developing. Confirm your specific arrangement with healthcare counsel licensed in California.