California Attorney General Rob Bonta has announced a first-of-its-kind settlement with Carbon Health, its affiliated medical groups, and co-founder Eren Bali over allegations that the company violated the state's ban on the corporate practice of medicine and engaged in unlawful billing and consumer practices.

Under the proposed settlement, which is subject to court approval, Carbon Health must restructure its corporate governance so that physicians—not corporate managers—control medical decisions. The agreement also requires the company to revise its advertising, patient contracts, and billing practices to address allegations of misleading insurance information, improper charges, duplicate billing, and delayed refunds.

The California Department of Justice alleged that Carbon Health's management services organization exercised unlawful control over physician-owned medical practices through a "friendly professional corporation" model, giving corporate executives influence over staffing, advertising, and insurance negotiations.

The settlement imposes $4.4 million in penalties on Carbon Health and $100,000 on Bali. Carbon Health, which operates more than 80 clinics across eight states, including 54 in California, filed for Chapter 11 bankruptcy while the state's investigation was underway.

Attorney General Bonta said the agreement reinforces California's longstanding prohibition on the corporate practice of medicine and establishes a precedent for restructuring healthcare organizations to preserve physicians' independent medical judgment while protecting patients. The settlement follows other recent enforcement actions by the attorney general's office aimed at limiting corporate influence over clinical decision-making.