California Could Curb Private Equity Health Deals

Lawmakers in California are hoping that keeping private firms out of their health care market will help down the cost of health care there and maintain the quality.

California Assembly Bill 3129 would let the state attorney general review many efforts by private equity groups and hedge funds to acquire health care facilities and health care provider groups.

The attorney general would get the ability to block some deals involving nonphysician providers with annual revenue over $4 million or other health care providers with annual revenue from $4 million to $10 million.

The bill would exclude deals between an investor group and a nonphysician and some other types of deals.

The backdrop

California has long put tight limits on corporate ownership of health care organizations.

It allows for partnerships, nonprofit groups and health maintenance organizations to practice medicine, but it generally forbids for-profit organizations to practice medicine or other health care professions. California strongly prefers for the licensed professional to be responsible for how the professional practices medicine.

In other states, investors have bought up many related types of health care practices, such as physician group practices and dental group practices.

The Federal Trade Commission and the Justice Department last month suffered a district court-level defeat in Texas over an effort to fight a private equity firm that has been buying anesthesiology practices, but the agencies have vowed to continue to fight efforts by private equity firms to “roll up” competing health care providers.

The FTC and Justice Department started an antitrust investigation of private equity firm involvement in health care delivery May 23.

AB 3129 details

Rob Bonta, the current California attorney general, sponsored AB 3129.

Assemblymember Jim Wood, D-Medocino, introduced the bill in February.

Assemblymember Mia Bonta, D-Oakland, Calif. — who is Rob Bonta’s wife and the Assembly Health Committee chair — presided over a hearing on the bill in April.

The Assembly passed the bill by a 50-16 vote May 21.

The Senate Health Committee and the Senate Judiciary Committee now have jurisdiction.

The Senate Health Committee has scheduled a June 26 hearing.

Interest groups

The list of groups that opposed the bill as of April 9 includes the California Chamber of Commerce and the California Hospital Association.

The hospital association says California needs to encourage more investors to come in and help alleviate the state’s hospital capacity shortage, not scare investors away.

The list of groups supporting the bill includes the Purchasers Business Group on Health and the Small Business Majority.

“Studies have shown that private equity acquisitions have negative impacts on costs, quality, and access to care,” William Kramer, a PBGH senior advisor, wrote in a comment letter in April.

“Comparing communities where private equity dominates physician specialties, a study found that price increases are up to 3 times higher; and a recent study found that private equity ownership in U.S. hospitals was associated with a 25 percent increase in hospital-acquired conditions, which was driven by falls and central line-associated infections,” Kramer said.


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