Cal. HSC § 1191 — California Code / Code hsc / Division 1.7 / Section 1191
Section 1191
Status: in_force

(a) A private equity group or hedge fund involved in any manner with a physician or dental practice doing business in this state, including as an investor in that physician or dental practice or as an investor or owner of the assets of that practice, shall not do either of the following with respect to that practice:

(1) Interfere with the professional judgment of physicians or dentists in making health care decisions, including any of the following:

(A) Determining what diagnostic tests are appropriate for a particular condition.

(B) Determining the need for referrals to, or consultation with, another physician, dentist, or licensed health professional.

(C) Being responsible for the ultimate overall care of the patient, including treatment options available to the patient.

(D) Determining how many patients a physician or dentist shall see in a given period of time or how many hours a physician or dentist shall work.

(2) Exercise control over, or be delegated the power to do, any of the following:

(A) Owning or otherwise determining the content of patient medical records.

(B) Selecting, hiring, or firing physicians, dentists, allied health staff, and medical assistants based, in whole or in part, on clinical competency or proficiency.

(C) Setting the parameters under which a physician, dentist, or physician or dental practice shall enter into contractual relationships with third-party payers.

(D) Setting the clinical competency or proficiency parameters under which a physician or dentist shall enter into contractual relationships with other physicians or dentists for the delivery of care.

(E) Making decisions regarding the coding and billing of procedures for patient care services.

(F) Approving the selection of medical equipment and medical supplies for the physician or dental practice.

(b) The corporate form of that physician or dental practice as a sole proprietorship, a partnership, a foundation, or a corporate entity of any kind shall not affect the applicability of this section.

(c) (1) A private equity group or hedge fund, or an entity controlled directly, in whole or in part, by a private equity group or hedge fund, shall not enter into a contract or other agreement or arrangement with a physician or dental practice doing business in this state if the contract or other agreement or arrangement would enable the person or entity to interfere with the professional judgment of physicians or dentists in making health care decisions, as set forth in paragraph (1) of subdivision (a), or exercise control over or be delegated the powers set forth in paragraph (2) of subdivision (a).

(2) Any provision within a contract or other agreement that violates subdivision (a) is void, unenforceable, and against public policy.

(d) (1) Any contract involving the management of a physician or dental practice doing business in this state by, or the sale of real estate or other assets owned by a physician or dental practice doing business in this state to, a private equity group or hedge fund, or any entity controlled directly or indirectly, in whole or in part, by a private equity group or hedge fund, shall not include any clause barring any provider in that practice from doing either of the following:

(A) Competing with that practice in the event of a termination or resignation of that provider from that practice.

(B) Disparaging, opining, or commenting on that practice in any manner as to any issues involving quality of care, utilization of care, ethical or professional challenges in the practice of medicine or dentistry, or revenue-increasing strategies employed by the private equity group or hedge fund.

(2) Any provision of a contract that violates paragraph (1) is void, unenforceable, and against public policy.

(3) This subdivision shall not affect the validity of either of the following:

(A) An otherwise enforceable sale of business noncompete agreement. However, a contract described in this subdivision shall not operate as an employee noncompete agreement.

(B) An otherwise valid provision within a contract that prohibits the disclosure of material nonpublic information about the private equity group or hedge fund that is not generally available to the public, except to the extent that the provision seeks to either prohibit a disclosure of confidential information that is required by law, or to prohibit a disclosure described in subparagraph (B) of paragraph (1).

(e) The Attorney General shall be entitled to injunctive relief and other equitable remedies a court deems appropriate for enforcement of this section and shall be entitled to recover attorney’s fees and costs incurred in remedying any violation of this section.

(f) This section is intended to ensure that clinical decisionmaking and treatment decisions are exclusively in the hands of licensed health care providers and to safeguard against nonlicensed individuals or entities, such as private equity groups and hedge funds, exerting influence or control over care delivery.

(g) This section does not narrow, abrogate, or otherwise lower the bar on the corporate practice of medicine or dentistry as set forth in the Business and Professions Code or the Corporations Code, or any other applicable state or federal law.

(h) This section does not prohibit an unlicensed person or entity from assisting, or consulting with, a physician or dental practice doing business in this state with respect to the decisions and activities described in paragraph (2) of subdivision (a), provided that the physician or dentist retains the ultimate responsibility for, or approval of, those decisions and activities.