Public Scrutiny is Now Part of the Risk Profile
Two California laws that became effective January 1, 2026 are especially relevant to MSO and investor-backed structures.
SB 351: Tighter Boundaries Around Clinical Control
SB 351 is aimed at limiting the influence of private equity groups and hedge funds in physician and dental practices, particularly where business-side pressure can distort clinical judgment. In practical terms, it targets interference in areas regulators already care about, including staffing decisions, coding and billing decisions, patient volume and scheduling pressure, and the selection of medical equipment and supplies.
For med spas, the takeaway is straightforward: if your model relies on a physician title on paper while business leadership effectively directs clinical operations, you are standing in the wrong place in 2026. The closer your structure gets to “the business decides, the physician signs,” the higher the risk.
AB 1415: Transactions and Ownership Changes Now Have a Clock on Them
AB 1415 expands California’s health care transaction oversight through the Office of Health Care Affordability (OHCA). It is now effective January 1, 2026, and it is designed to pull more transactions, including certain MSO-related transactions, into a notice-and-review framework.
The key operational implication is timing and preparedness. If a deal, recap, or control change triggers notice requirements, you do not want to discover during that window that your separation is mostly vibes. Even solid operators can lose momentum when diligence turns up inconsistent intercompany flows, unclear management fees, shared payroll, or undocumented reimbursements.
In June 2025, Last Week Tonight with John Oliver ran a segment focused on the med spa boom and the lack of consistent oversight, highlighting patient harm scenarios and weak supervision models. Regardless of how you felt about the segment, it did what media does best: it simplified the story for the public and made oversight failures feel mainstream.
That matters because consumer-facing healthcare businesses do not get to separate brand risk from regulatory risk anymore. Public attention tends to shorten the enforcement timeline.
The California Catalyst: SB 351 and AB 1415
Chief Bookkeeping Officer's Med Spa Financial "Firewall"
Business Function
The 2025 "Wild West" Model
The 2026 "Compliance" Reality
Revenue Control
MSO collects 100% of cash directly.
Revenue hits PC account first; MSO fees "swept" later.
Clinical Hiring
Business owner hires for sales skill.
Medical Director must sign off on clinical competency.
Director Oversight
"Ghost" MD with no chart review.
Verified digital audit trail of MD chart reviews.
Management Fees
Percentage of Gross (Fee-Splitting).
Fair Market Value (FMV) flat or tiered fees.
Deal Closing
Quick 30-day "handshake" sales.
90-day mandatory notice & state audit period.
The 2026 National Compliance Heat Map
While California is the epicenter, the "California Standard" is rapidly becoming the national benchmark for Private Equity buyers.
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Red States (High Scrutiny): These states have active Medical Boards and new legislation targeting MSO overreach. Operating here requires "Institutional Grade" bookkeeping.
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Yellow States (Rising Scrutiny): These states are moving toward stricter "Good Faith Exam" enforcement and MD proximity rules.
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Green States (Permissive): Still relatively open, but institutional buyers in these states are already demanding "Red State" compliance standards before closing deals.
The Regulatory Pivot (2025 vs. 2026)
To survive in 2026, your operations must shift from "Administrative Support" to "Total Compliance."
Most med spa owners understand the legal concept of separating the Professional Corporation (PC) from the Management Services Organization (MSO). The miss is usually not intent. The miss is proof.
If a regulator, lender, buyer, or opposing counsel wants to pressure-test your structure, they are not starting with your Instagram, your before-and-afters, or your booking software. They are starting with your financial records:
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Do the PC and MSO have truly separate bank accounts and expense footprints?
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Are intercompany transactions documented, consistent, and supported by an agreement?
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Do management fees look like fair-market compensation for real services, or like profit extraction?
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Can you explain each transfer in one sentence, with a paper trail behind it?
This is where most risk hides: not in a single catastrophic decision, but in months of casual intercompany behavior that adds up to a story you cannot defend.
Why Bookkeeping Becomes Compliance Infrastructure in 2026
Frequently Asked Questions
Med Spas Under the Regulatory Microscope: Attorney General-Led Scrutiny in 2026
For most of the last decade, med spas grew fast because demand was high and enforcement was inconsistent. That created opportunity, but it also created a lot of structures that were never designed to hold up under scrutiny.
California Has Shifted From “Gray Area” to Enforceable Standards
Published on January 10th, 2026 | Written by Marc Pamatian
At Chief Bookkeeping Officer, our work is not generic bookkeeping with a med spa label. It is building and maintaining a set of books that can survive scrutiny.
A real financial firewall looks like:
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Clean separation of revenue, payroll, vendor spend, and taxes between entities
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A disciplined intercompany ledger that ties out every month
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Management fee and reimbursement workflows that are documented and repeatable
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Reporting that makes the structure easy to understand for attorneys, buyers, and regulators
When the structure is real in the books, everything else gets easier: diligence, banking, tax filings, compliance conversations, and exits.
If your med spa was built in the easy era, treat 2026 as the year you professionalize the back office. California’s direction is clear: less tolerance for fuzzy separation, more scrutiny on who controls clinical decisions, and more oversight around health care transactions.
If you want an institutional-grade business, you need institutional-grade records to match.
Disclaimer: This article is informational and not legal advice. For CPOM, SB 351, AB 1415, and transaction-specific questions, consult qualified healthcare counsel.
As of January 1, 2026, California has made the direction of travel much clearer. If you own, invest in, or operate a med spa, the key question is not whether your model can scale. It is whether it is defensible. In 2026, “we’ve always done it this way” is not a strategy. The structure needs to be real on paper, real in operations, and real in the books.
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