In spring 2026, the California Attorney General’s Office took two significant actions signaling an increasingly aggressive posture toward nonprofessional entities that manage health care practices. These developments—a stipulated judgment against Aspen Dental Management Inc. and an amicus curiae brief in Art Center Holdings Inc., et al. v. WCE CA Art, et al. addressing the corporate practice of medicine (CPOM) doctrine—carry important implications for management services organizations (MSOs), private equity investors, and licensed practitioners operating in California.
The Aspen Dental Settlement
In May 2026, Aspen Dental Management Inc. (Aspen) entered into a Stipulation for Entry of Final Judgment and Permanent Injunction with the state of California, resolving claims that Aspen violated California's Unfair Competition Law (which prohibits illegal business practices and false, deceptive, or misleading advertising) and False Advertising Law (which prohibits businesses from making false or misleading statements in advertising) in its management of dental practices. Notably, the claims were largely related to deceptive advertising rather than compliance with state corporate practice of dentistry or medicine restrictions.
As part of the settlement, Aspen agreed to pay $2 million in civil penalties and $300,000 in consumer restitution. Aspen also agreed to comply with certain injunctive restrictions on the services it provides to licensed dental practices in California, including:
- Property and Leases. Aspen must not own practice property or hold lease rights; all leases must be held by the licensed practitioner.
- Noncompetes and Nonsolicitations. Aspen must discontinue the use of any contract provisions restricting where clinicians may practice or prohibiting managed practices or clinicians from communicating with patients they have treated.
- Offices & Equipment. Aspen cannot require practitioners to surrender offices or equipment to Aspen upon termination and must allow practitioners the option to assume the office lease and purchase any equipment in the office at fair market value.
- Fee Structures. Aspen cannot charge service fees based on practice revenue, sales, or profits.
- Clinical Staffing. Aspen may not hire, fire, set salaries for, or conduct performance reviews of licensed clinical staff.
- Compensation. Aspen’s own employees may not be compensated based on sales, revenue, or profit of managed practices, and Aspen likewise may not reimburse a practice for any similar incentives paid to practice employees.
- Annual Renegotiations. Aspen must renegotiate services and fees with each practice owner annually, in writing.
- Advertising. All advertisements must clearly disclose independent practice ownership, identify practice owners by name, and avoid any false or misleading representations. Aspen also must obtain practice owners’ quarterly written preapproval for marketing initiatives, including any recommended promotions or discounts.
The settlement also installs a compliance monitor to oversee Aspen’s compliance with certain injunctive provisions for 36 months, including through access to all records and corporate records of the practices contracted with Aspen.
The Amicus Brief on the Corporate Practice of Medicine
On March 30, 2026, the California Attorney General’s Office filed an amicus curiae brief in Art Center Holdings Inc., et al. v. WCE CA ART LLC, et al., a case in California’s Second Appellate District involving a dispute between a physician who owned a medical practice and a private equity-backed MSO. The brief supports the trial court’s ruling that contractual arrangements giving nonprofessional corporations the authority to replace the physician owners of medical practices violate California’s prohibition on CPOM.
The Attorney General’s Office asserts that when an agreement gives an unlicensed MSO the right to replace the physician-owner of a professional corporation with a different physician of its choice, that MSO effectively owns and controls all aspects of the practice. Likewise, when a physician-owner cannot replace the MSO without fear of losing ownership of the practice, the MSO has “undue control” over it.
The brief emphasizes that these “captive PC” arrangements—where physician ownership is nominal and the MSO retains unilateral termination rights—violate CPOM restrictions regardless of whether the corporation actually exercises that control. The mere reservation of the right to replace physician-owners, the Attorney General’s Office argues, creates an impermissible division of loyalties that undermines patient care.
The brief also highlights Senate Bill 351, signed into law on October 6, 2025, which explicitly extends California’s CPOM prohibition to private equity and hedge fund involvement in health care. S.B. 351 prohibits these entities from interfering with physicians’ clinical judgment and exercising control over functions reserved to licensed professionals—including the hiring and firing of physicians—and declares that any contract terms violating these prohibitions are “void, unenforceable, and against public policy.”
Key Takeaways for Stakeholders
Taken together, the settlement and amicus brief appear to represent a coordinated enforcement posture by the California Attorney General’s Office aimed squarely at corporate structures that blur the line between legitimate management and business support and impermissible control over licensed health care practitioners. These actions suggest that the California CPOM doctrine may be moving toward clearer, and perhaps more restrictive, limits on contractual and operational arrangements between nonprofessional entities and licensed health care practices.
In that environment, stakeholders should focus now on whether their existing structures preserve a clear separation between administrative support functions and decisions that impact ownership, governance, staffing, clinical judgment, or day-to-day professional autonomy. Proactive steps may include revisiting management or administrative services agreements for provisions that could indicate excessive nonprofessional influence over professional practices, reviewing stock transfer and succession provisions, potentially narrowing unilateral rights that could affect replacement of professional corporation owners, evaluating fee structures tied to revenue or profits, and confirming that reserved clinical functions remain with licensed professionals.
Taking proactive steps now may help corporate entities reduce risk as California’s enforcement expectations evolve. Alston & Bird’s Health Care Group is ready to assist stakeholders in assessing these developments.
AlstonHealth State Law Hub
Alston & Bird’s Health Care team highlights state legislation and regulatory actions with direct implications for operations, reimbursement, privacy, and enforcement risk. Designed for in-house counsel, the tracker supports legal teams in proactively managing risk and aligning business strategy with a rapidly evolving state regulatory environment.
Learn more on the AlstonHealth State Law Hub.
If you have any questions, or would like additional information, please contact one of the attorneys on our Health Care team.
You can subscribe to future advisories and other Alston & Bird publications by completing our publications subscription form.