Governor Vetoes Bill Stifling Free Market Transactions for Health Care Entities

Governor Gavin Newsom recently vetoed an Assembly bill opposed by the California Chamber of Commerce that would have harmed access to health care by cutting off needed private funding for health care providers.

The bill, AB 3129 (Wood; D-Santa Rosa), would have required private investors to obtain the consent of the California Attorney General before acquiring or effecting a change of control with respect to certain health care entities.

In his September 28 veto letter, Governor Newsom pointed out the state already has an agency, the Office of Health Care Affordability (OHCA), that reviews and evaluates health care consolidation transactions through cost and market impact reviews (CMIR) of mergers, acquisitions, or corporate affiliations involving health plans, hospitals, physician organizations, pharmacy benefit managers, and other health care entities.

"…OHCA was created as the responsible state entity to review proposed health care transactions, and it would be more appropriate for the OHCA to oversee these consolidation issues as it is already doing much of this work," he stated.

CalChamber Opposition

The CalChamber and a coalition of allied groups opposed AB 3129 and urged its veto because it would have:

• Cut off critical source of funding for health care providers. Many health care providers in California are under-resourced and struggling-particularly in underserved communities, where residents already suffer from a lack of access to care. AB 3129 would have given the Attorney General new power to unilaterally and arbitrarily reject private funding and investment that serves as a lifeline for struggling health care providers to preserve access to care and as the resources needed to expand access to care.
• Added millions in annual costs to the General Fund. The potential annual cost of the appeal process recently added to AB 3129 was at least in the millions of dollars given the average annual number of transactions, the annual average value of these transactions, and the likelihood parties that need to exit their investments will be highly incentivized to appeal the decision of the AG.
• Threatened successful health care innovation and partnerships. AB 3129 threatened the private investment and partnerships that are helping drive innovation and expand access to care. In an opposition letter, the coalition pointed out that private investment has helped dental practices expand access to care to more underserved children; helped thousands of physicians by providing administrative and back-office support; enabled access to reproductive treatment with greater convenience and support; and funded outpatient clinics, oncology clinics, long-term care, urgent care, dental care, behavioral health, and other medical care that has strengthened our health system and improved patients' lives.

In its letter, the coalition also stressed that California is already spending millions of dollars on the OHCA to assess health care spending.

"Instead of waiting for OHCA's data to help develop data-driven policies, AB 3129 assumes what the nature of the problem is and how best to address it," the coalition said.