Corporate Practice of Medicine Update: California Attorney General Announces Carbon Health Settlement

On June 26, 2026, the California Attorney General (AG), Rob Bonta, announced a second proposed settlement related to California’s corporate practice of medicine (CPOM) doctrine in the past two months. See our June Update for a description of the first settlement as well as an amicus brief submitted by AG Bonta in a case before the California Second District Court of Appeal.

The most recent proposed settlement involves Carbon Health Technologies, Inc., its affiliated medical groups, and the company’s co-founder (collectively, Carbon Health). Carbon Health is a technology-enabled healthcare company that provides primary care, urgent care, and virtual care services through a network of affiliated physician practices.

While the causes of action in the underlying complaint relate to consumer protection, the proposed settlement would permanently enjoin Carbon Health from engaging in certain arrangements that the AG alleges constitute “engaging in the corporate practice of medicine as prohibited by Business and Professions Code sections 2052(a) and 2400.”¹

Among other things, the injunction would prohibit

• management services agreements that grant a management services organization (MSO) “complete authority over advertising, payor negotiations, selection of medical equipment, and the hiring, firing, or compensation of licensed medical professionals”²
• MSO ownership rights in professional corporations, including assignable option agreements granting the MSO the right to acquire ownership interests in a professional corporation for its own account³
• exclusive financing arrangements requiring affiliated professional corporations to obtain financing solely from the MSO at above-market rates⁴

In addition to these injunctive provisions, Carbon Health agreed to pay $4.4 million in civil penalties, and the company’s co-founder agreed to pay an additional $100,000.⁵

Key Takeaways

The Carbon Health settlement provides the clearest indication to date of AG Bonta’s views regarding contractual provisions that may cross the line under California’s CPOM doctrine. In addition to equity transfer restriction agreements, the Carbon Health settlement focuses on additional provisions in management services agreements that relate to clinical control of managed practices.

The settlement is also noteworthy in that it cites to statutory provisions under California law that generally prohibit the corporate practice of medicine, Business and Professions Code Sections 2052(a) and 2400, rather than SB 351, which is focused on private equity and hedge funds. This indicates that even platforms that do not involve private equity or hedges funds need to consider the impact of this settlement on their operations.

Furthermore, the settlement illustrates that the AG may pursue alleged CPOM violations through California’s consumer protection laws rather than through a standalone CPOM claim.

While currently these are only proposed settlements, and therefore not binding on other parties or courts, it is clear that AG Bonta is making CPOM enforcement a priority. Healthcare organizations using MSO-PC structures in California should continue reviewing governance documents, management services agreements, equity transfer provisions, financing arrangements, and operational controls in light of the AG’s evolving enforcement position.