Regulatory Oversight of Private Equity Health Care Acquisitions
SACRAMENTO–AB 3129, by Assemblymember Jim Wood (D-Healdsburg), and sponsored by Attorney General Rob Bonta, passed the Legislature on August 31 and moves to Governor Newsom’s desk.
“We can’t wait another day to begin reviewing private equity investments in health care,” said Wood. “When we look across the nation, we see private equity’s interest in health care growing by leaps and bounds, and I want California to be the leader to ensure that patients are getting the quality care they need at an affordable price. And just like any other circumstances, if acquisitions result in anticompetitive behavior, the consequences are often higher costs and lesser quality – caring for patients cannot suffer either of those outcomes.”
The bill authorizes the state Attorney General to consent to, give conditional consent to, or not consent to a change of control between a private equity group or hedge fund and a health care facility, provider group or both if those changes would have anticompetitive effects or negatively impact access or availability of health care services to the community. Included in the bill are reasonable review timelines and processes for private equity groups or hedge funds to appeal.
“Three years ago, private equity investment in health care reached $83 billion nationally and $20 billion of that was in California alone,” said Wood. “And who is reviewing these transactions to ensure they are in the public’s interest? No one is, because all of these transactions are flying totally under the radar.”
A letter to the California Legislature dated July 2, 2024, from Lina M. Khan, Chair of the Federal Trade Commission, praised AB 3129 and said “In light of the FTC’s experience with healthcare consolidation and private equity investment in healthcare markets, I write to support California’s efforts to more closely monitor mergers and acquisitions within healthcare and to halt deals that undermine the availability and affordability of quality healthcare.”
Private equity groups and hedge funds acquire an entity, restructure it, raise prices and resell it at a profit in three to seven years. Reports of asset stripping, cutting staff, closing or limiting services such as labor and delivery and clinical labs are widespread.
“When you don’t have another health care facility close by, that’s a real problem, especially in rural areas like the one I represent,” said Wood.
The bill also reinforces the bar on the corporate practice of medicine, providing a fundamental protection against the public danger that medical care could be subject to commercial exploitation through the influence of private equity groups or hedge funds. Such groups are not health care providers.
"All too often, we have seen private equity prioritizing profits over patients, compromising the quality, affordability, and accessibility of essential healthcare services,” said Attorney General Rob Bonta. “AB 3129 will implement regulatory oversight of private equity group transactions to protect patient care and promote fair competition while rooting out practices that hurt competition and patients. I am deeply grateful to Assembly Speaker pro Tempore Wood for working with us on this critical legislation.”
The final recommendation of a report published by the California Health Care Foundation in May 2024, Private Equity in Health Care: Prevalence, Impact and Policy Options for California and the U.S., stated in its conclusion that given the rapid pace of private equity investment in health care has historically exceeded the regulatory response, “additional policy innovation is urgently needed.”
“Although opponents have tried to argue that private equity is good because it can increase services in an area where it’s needed, I say fine, let’s make sure that’s the case and that it serves the entire population with quality and affordable care, especially lower income people who rely on government programs for their health care.”
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