State advances bill that would prevent private equity firms from interfering with medical decision-making
Lawmakers in California have advanced proposed legislation that would prevent private equity firms and hedge funds from interfering with medical decision-making at acquired physician practices.
The state assembly voted to advance AB 3129 on May 22, moving the measure to the California Senate for further consideration. Assembly Member Jim Wood, D-Healdsburg, and Attorney General Rob Bonta together proposed the measure in February.
If passed, the bill would authorize the AG to grant, deny or impose conditions related to changes in control or the acquisition of a radiology group or other healthcare entity. The review would apply in cases where authorities believe a PE or hedge fund investment would have “anticompetitive effects or negatively impact access or availability of healthcare services to the community.” Assembly Bill 3129 also would reinforce 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 others.”
“As a dentist who practiced for nearly 30 years, I understand why it is essential and critical that this bill contain a component that protects physicians from others interfering with their practice of medicine,” Wood said in a statement issued earlier this year. “It prohibits a private equity group or hedge fund involved with a physician or psychiatric practice in the state from controlling or directing that practice or from entering into an agreement with the practice to manage any of its affairs in exchange for a fee.”
Law firm Sidley posted a May 23 summary of the bill, anticipating it will have a “substantial impact” on healthcare ownership changes. AB 3129 also would require at least 90 days of notice before a practice sale. It reflects “increasing efforts” by state regulators to better police hedge fund and PE acquisitions. California also recently enacted a “broad” healthcare transaction review law for nonprofit entities, Sidley noted.
Advocacy group Health Access California praised the bill on May 21 ahead of its initial passage. HAC highlighted a recent study by the California Health Care Foundation, which found that PE provider acquisitions have totaled $4.31 billion since 2019. Such transactions represented nearly one-third of all healthcare deals in the state, and other previous analyses have connected PE to higher prices and poor clinical outcomes, the group noted.
“For over 30 years, California attorneys general have used their authority to protect consumers from negative impacts of nonprofit hospital mergers, and this bill would extend this critical oversight to private equity and hedge fund acquisitions in healthcare. AB 3129 will ensure that these deals have that same public scrutiny and they are in the best interest of patients and the public,” Katie Van Deynze, policy advocate for Health Access California, said May 21.
Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic.