California bill: Private equity firms must seek AG approval for healthcare buyouts
A bill in California aims to curb unfettered investment in healthcare from private equity firms and hedge funds. Reflecting a desire held by some legislators to limit consolidation, Assembly Bill 3129 would require such investors to have their buyouts approved by the Golden State’s attorney general before they finalize.
While it has a long way to go before becoming law, the bill has been gaining traction and was approved by the California house assembly. It now waits in a Senate committee to be voted on.
The bill has until August to be confirmed by the Senate, or it won’t have a chance to be made law by Gov. Gavin Newsom this year.
Under the current terms of AB-3219, private equity inventors would be required to file an application with the California attorney general’s office at least 90 days before they gain a controlling stake in any healthcare services facility, hospital or provider group in the state. The AG must then review and approve the purchase.
Growing backlash against private equity stakeholders
Private equity’s control of healthcare has been a source of scrutiny over the past several years. In April, the Private Equity Stakeholder Project released a scathing report that showed bankruptcies for healthcare organizations owned or partially-owned by private equity firms have exploded by 112% over the last five years. Further, the report revealed that private equity was responsible for 21% of healthcare bankruptcies in 2023 alone.
Market analysis group PitchBook found public backlash and fears of a regulatory response are deterring new investments. According to their report released in May, private equity money flowing into healthcare has dropped 20% since last year.
However, PitchBook noted in its analysis that there are many deals still pending that could result in a wave of new investments heading into 2025.
The full text of AB-3129 can be found here.
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.