Governor Vetoes AB 3129 (Wood)

Regulatory Oversight of Private Equity/Hedge Fund Health Care Transactions

For immediate release:

Monday, September 30, 2024

SACRAMENTO-AB 3129, by Assemblymember Jim Wood (D-Healdsburg) and sponsored by Attorney General Rob Bonta was vetoed by Governor Gavin Newsom on Saturday.

"Today is a sad day for health care consumers," said Wood. "When we look across the nation, we see private equity's encroachment into health care growing by leaps and bounds and I had hoped California would be the first state to provide a preventive and reasonable initial review to protect health care consumers from being the victims of profit-driven investors who are not interested in ensuring that Californians get quality care where they need it and at an affordable price."

The bill would have authorized the state Attorney General to consent to, give conditional consent to, or not consent to a change of control between a private equity group or hedge fund and a health care facility, provider group or both if those changes would have anticompetitive effects or negatively impact access or availability of health care services to the community. Working with all stakeholders, amendments were taken to ensure a fair review process and the ability for private equity groups or hedge funds to appeal.

"Although the Office of Health Care Affordability has a significant role to play in the cost of health care, it cannot block a transaction - too late to prevent the damage the transaction could have on the cost of health care," said Wood.

A letter to the California Legislature dated July 2, 2024, from Lina M. Khan, Chair of the Federal Trade Commission, praised AB 3129 and said "In light of the FTC's experience with healthcare consolidation and private equity investment in healthcare markets, I write to support California's efforts to more closely monitor mergers and acquisitions within healthcare and to halt deals that undermine the availability and affordability of quality healthcare."

Three years ago, private equity investment in health care reached $83 billion nationally and $20 billion of that was in California. These groups acquire an entity, often restructure it and raise prices with the goal to resell it at a profit in three to seven years. Reports of asset stripping, cutting staff, closing or limiting services such as women's reproductive health care, labor and delivery services and clinical laboratories.

"We can see the results of unregulated private equity transactions happening throughout the country as they gobble up hospitals, physician groups, nursing homes and other health care entities for only one purpose - to reap profits for their investors regardless of the consequences," said Wood. "No one is reviewing these transactions before they happen, and as a result, they are flying totally under the radar."

The final recommendation of a report published by the California Health Care Foundation in May 2024, Private Equity in Health Care: Prevalence, Impact and Policy Options for California and the U.S., stated in its conclusion that given the rapid pace of private equity investment in health care has historically exceeded the regulatory response, "additional policy innovation is urgently needed."

"Of course, I am disappointed with the veto," said Wood. "My goal with AB 3129 was to prevent California from having to - after the fact -- bail out health care entities in order to keep them open and stop private equity firms and hedge funds from lining their pockets at our expense. My time in the Legislature is ending this year but I hope we find a way to stop this predatory invasion into health care without any initial review."

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