Attorney General Bonta Announces First-of-Its-Kind Settlement with Carbon Health and its Co-Founder for Violating California’s Ban on Corporate Practice of Medicine and Other Healthcare and Consumer Protection Laws

Subject to court approval, the settlement requires restructuring of unlawful corporate ownership and protects patients 

OAKLAND — California Attorney General Rob Bonta today announced a settlement with Carbon Health Technologies, Inc., its affiliated medical groups, and its co-founder and former CEO, Eren Bali, (Carbon Health), resolving allegations that the company violated California's prohibition on the corporate practice of medicine, engaged in false advertising, used unlawful consumer contracts, and improperly billed patients and insurance providers. Founded in the Bay Area in 2015, Carbon Health operates over 80 clinics across eight states, including 54 in California. As alleged in the complaint filed alongside the settlement, an investigation by the California Department of Justice (DOJ) found that Carbon Health used a structure in which a corporate entity not licensed to provide medical care effectively owned and controlled all aspects of the medical practice, in violation of California’s prohibition on the corporate practice of medicine. The settlement requires Carbon Health to end this structure and ensure that physicians control medical decisions. It also permanently enjoins Carbon Health from having policies that, as uncovered by the DOJ investigation, subjected patients to billing errors, overcharges, and other improper billing practices. As added accountability for the conduct at issue, the settlement imposes $4.4 million in penalties on Carbon Health and $100,000 on Mr. Bali. 

“In California, medical decisions must be made by licensed healthcare professionals whose duty is to prioritize patient care, not by companies focused on profits,” said Attorney General Bonta. “This settlement holds Carbon Health accountable for violating California's longstanding protections against the corporate practice of medicine and for engaging in unlawful business practices. It also sets a significant precedent by showing that healthcare businesses can be restructured to protect patients, preserve physicians’ independent medical judgment, and comply with California’s laws.” 

Carbon Health used a “friendly professional corporation” model in which Carbon Health Technologies, a management services organization (MSO), controlled the clinics’ business operations through contracts. Those contracts unlawfully gave Carbon Health Technologies the power to replace the physician-owner of the clinics with a physician of its choosing, while preventing the physician-owner from replacing the MSO without risking losing ownership of the medical practice. As a result, the MSO effectively ran these captive clinics, divided physician loyalties, subordinated patient wellbeing to its financial interests, and allowed Mr. Bali and the MSO’s unlicensed officers to direct staffing, advertising, and insurance negotiations. 

DOJ’s investigation also found that Carbon Health misled patients about insurance coverage, including misrepresenting which plans it accepted and sometimes telling patients they were in-network when they were not, leading to unexpected out-of-network bills. Further, the investigation identified billing problems, such as a hidden automatic charging term for credit cards, overcharges, charging patients twice for the same service, and delaying refunds when errors were discovered. 

Under the settlement, Carbon Health has agreed to comprehensive injunctive relief requiring significant changes to its corporate structure and business practices. Among other things, the settlement requires Carbon Health to:

• Revise its corporate structure: Carbon Health must change its organizational structure so that a non-medical management company can no longer control or have ownership interests in physician-owned medical practices. Physicians must have independent control over medical decisions and how the practices operate.
• Stop misleading advertising: Carbon Health must end advertising and communications that falsely or misleadingly represent insurance coverage or whether services are in-network.
• Update patient contracts: The company must revise its consent forms and contracts to remove unclear or unlawful terms that affected how and when patients were billed.
• Fix billing practices: Carbon Health must correct how it bills patients and insurers to reduce errors, prevent overcharges, and ensure patients are not improperly charged.

Carbon Health filed for Chapter 11 bankruptcy restructuring in the U.S. Bankruptcy Court for the Southern District of Texas while the Attorney General’s investigation was ongoing. Carbon Health and the California Attorney General’s Office are now filing the settlement, which is subject to court approval, in the Los Angeles County Superior Court.

The settlement is part of Attorney General Bonta's broader efforts to protect patients from unlawful corporate influence over medical decision-making. In April 2026, Attorney General Bonta filed an amicus brief defending California's prohibition on the corporate practice of medicine, and in May 2026, Attorney General Bonta secured a settlement with Aspen Dental for violations of the corporate practice of dentistry.