Bill to regulate private equity passes California legislature, heads to Newsom’s desk
A proposed law in California meant to curb wanton private equity buyouts in healthcare has passed the state Senate and now heads to the desk of Governor Gavin Newsom.
Assembly Bill 3129 empowers the state’s Attorney General to review and veto investments from private equity firms that are deemed to be disadvantageous to consumers and patients. The bill would cover hospitals, health systems, physician groups, long-term care facilities and other healthcare entities operating in the state.
The passage of the bill received immediate praise from Health Access California, a group that advocates for affordable and accessible care in the state. The group cited a 2019 study from the California Health Care Foundation that found that nearly a third of major healthcare investments and transactions in the state involved private equity groups or hedge funds.
“We know oversight protects patients in California—our Attorney General has had some of this power for thirty years. But health care corporations have been fighting every step of this bill, because they don’t want to be open about what a private equity takeover may mean for Californians,” Katie Van Deynze, policy advocate for Health Access California, said in a statement. “We’ve seen enough to know, when private equity takes over, bad things tend to happen: They treat it like a business asset, squeezing out what profit they can, which can leave a wake of debt, cuts to services and closures behind.”
“We urge the Governor to sign AB 3129, ensuring that certain private equity deals are in the best interest of patients and the public,” Van Deynze added.
Health Access California has been one of the major sponsors of the bill to rein in private equity spending, citing the damage caused by short-term profit seeking. “These hedge funds follow a well-established playbook: take control of an entity, restructure it and resell it at a profit within 3 to 7 years,” the group argued in the statement.
Author of the bill calls for swift implementation
AB 3129 was initially proposed by Democratic assemblyperson Jim Wood, whose office put out its own statement celebrating its advancement to the governor’s desk.
“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,” the statement read.
Wood also commented personally, detailing the reasoning behind bringing the bill to the floor of the California legislature.
“Three years ago, private equity investment in health care reached $83 billion nationally and $20 billion of that was in California alone,” Wood said. “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.”
The bill has received the endorsement of California Attorney General Rob Bonta, who urged the governor to sign it. However, the fate of the bill is still unknown, as Newsom has yet to comment on AB 3129.
The governor has until Sept. 30 to either approve or veto the bill.
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.