Newsom vetoes bill to regulate private equity transactions in healthcare
A law in California that would give the state Attorney General (AG) oversight of private equity transactions in healthcare has been vetoed by Gov. Gavin Newsom.
Assembly Bill 3129 gives the AG’s office the authority to review and veto investments from private equity firms in any hospital, health system, physician group, long-term care facility or other healthcare entities operating in the state.
In order to comply with the law, private equity firms and hedge funds would need to submit details on any healthcare transaction to the AG’s office for approval at least 90 days before any major investment or acquisition. The decision from the AG, under the terms of the proposed law, would be to ensure the interests of investors align with the public need for accessible, affordable care.
Despite passing in the California legislature and making its way to Newsom’s desk, AB 3129 was ultimately vetoed and returned unsigned to the senate. In a statement, Newsom thanked the California legislature for its desire to “ensure consumers receive affordable and quality health care,” but ultimately felt the bill was unnecessary, since a similar regulatory framework is already in place.
“The Office of Health Care Affordability (OHCA) was established in 2022 to review and evaluate health care consolidation transactions. … OHCA analyzes transactions that may significantly impact market competition, meeting state spending targets, or affordability and will compile data about market consolidation,” the statement reads.
Newsom felt AB 32129 would infringe on OHCA’s ability to do its job while adding little protection for patients. He argued the agency can already coordinate with the AG to take action against a private equity transaction, if it so desires.
“While OHCA itself cannot block a proposed transaction, it can coordinate with other state entities, including referring transactions for further review to the AG. This bill would exempt transactions involving PEGs or hedge funds that would be subject to review by the AG from OHCA's existing review,” Newsom said in the statement.
Redundancy in the law?
John Saran, a healthcare attorney with Holland & Knight, agreed with Newsom’s reasoning: “Redundancy was the reason that AB 3129 failed—Gov. Newsom thought it more appropriate for the OHCA to oversee consolidation in California,” he said, adding that this year OHCA has already “reviewed several healthcare transactions in California and just updated its regulations in August to expand the reach of the transaction review requirements.”
With the veto from Newsom, the fate of AB 3129 remains unclear. A two-thirds majority in both the California assembly and the senate could override the veto—or the bill could now be effectively dead, at least for this legislative session.
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.