California lawmakers are debating whether to go where Congress won’t and pass legislation that would give the state the ability to block private equity acquisitions of health care facilities or providers.
Why it matters: It’s the latest example of states trying to regulate deals valued at $1 trillion over the past decade that critics have linked to staffing shortages and poorer patient outcomes.
State of play: The legislation builds on an existing state requirement that firms buying health care businesses notify the California attorney general before the transaction goes through.
- It would require the state to give explicit approval before a private equity firm or hedge fund officially acquires most types of health care organizations with gross annual revenue of $25 million or more.
- Investors would also be banned from interfering in medical decision-making under the legislation, which is championed by California Attorney General Rob Bonta.
Yes, but: Deals involving for-profit hospitals would be exempt from the law in the most recent version of the bill. The change followed pressure from both health provider and investor groups, CalMatters reported.
- A similar law that took effect in Oregon in 2022 hasn’t resulted in any blocked transactions to date, raising questions of how much of an effect such policies really have, according to an analysis from policy advisory firm Capstone.
- Still, six out of 22 transactions submitted to Oregon regulators for review were approved with conditions, such as a requirement that the business remain in-network for Medicaid payers, per Capstone.
California’s bill has support from labor unions, nurses and consumer advocacy groups. Gov. Gavin Newsom (D) has not yet taken a position on the bill.
Zoom out: California and Oregon are part of a growing number of states trying to curb private equity’s influence over health care. Eleven states have passed laws requiring some level of state review over private equity and health care deals, according to law firm Ropes & Gray.
- The Biden administration’s Federal Trade Commission has started looking into private equity’s control over health care.
- In Congress, Sen. Ed Markey (D-Mass.) introduced legislation earlier this year that would give federal regulators more authority to block these deals nationwide. But the bill hasn’t advanced, with many lawmakers reluctant to give the government that kind of power.
What’s next: The state legislature has to vote on the amended version of the bill before the current session ends on Aug. 31. Newsom has until Sept. 30 to sign or veto the bill.