Governor Newsom vetoed AB 3129 (Wood) that would have given Attorney General oversight on certain private equity acquisitions that may be harmful to patients
SACRAMENTO, CA – Health care corporations have used their undue influence to yet again put patients in harm’s way by allowing bad actors to continue to interfere in our health care system unabated. With the veto of AB 3129 by Governor Newsom, private equity and hedge funds continue to have free rein to buy up skilled nursing facilities, medical practices, health clinics and more with zero ability by the state to act ensure that these acquisitions are in the best interests of patients.
Private equity and hedge fund firms are buying up more and more health care entities in our state and across the U.S. A recent study by the California Health Care Foundation found that since 2019, private equity acquisitions of health care providers totaled $4.31 billion dollars and represented nearly a third of all health care deals in California. In reviewing the academic literature, the study also concluded that “these acquisitions have been associated with higher prices, increased consolidation, and mixed to worse clinical outcomes in patient populations.”
“We know the negative impacts private equity has on our health care, yet corporate powers that are out to squeeze every last dollar of profit out of our health care system fought AB 3129 at every step of the process. This veto ultimately leaves Californians unprotected from these bad actors, allowing for-profit entities to continue to run rampant unchecked throughout our health care system,” said Katie Van Deynze, policy advocate for Health Access California, the statewide health care consumer advocacy coalition, and a major supporter of AB 3129.
Because their priority is short-term profit for the investors, these private equity and 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. Restructuring often involves “asset stripping,” such as reductions in staff, replacing staff with lower cost staff, selling assets and limiting services provided. As they increase their market power by acquiring multiple providers in the same specialty within a local or regional market, they then use their market power to raise prices. Less competitive pressure can also result in lower quality and negative health outcomes.
The Governor’s veto message suggests that review powers by the state’s new Office of Health Care Affordability are sufficient to protect consumers, however OHCA can only review health care mergers and acquisitions, not act on them. It does not have the power to approve, deny, or approve with conditions any of these purchases, as the state’s Attorney General has for 30 years for nonprofit hospital mergers. Therefore, these private equity mergers can still go through, even if a review shows there will be negative impacts for Californians and their access to affordable care. While OHCA can refer transactions to the AG, the AG only has a short period to act before the transaction closes. Antitrust lawsuits take time, and without AB 3129, the state cannot act quickly to prevent the negative impacts of private equity transactions with conditions to protect consumers or stop transactions that are not in the public interest.
“We are very disappointed that the Governor vetoed this critical health care consumer legislation. But health care advocates will not stop our work to protect patients from profit-driven takeovers that put our care at risk and create monopolies that drive up our costs. We thank everyone who supported this bill, with special recognition to bill author Assembly Pro Tem Jim Wood who has been a champion for health care consumers and against corporate health care greed during his time in the legislature. We appreciate his and Attorney General Rob Bonta’s leadership on this bill,” said Van Deynze. “Despite this outcome, we will continue to this fight against private equity’s harmful intrusion into our health care system.”
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Press inquires can be directed to:
Rachel Linn Gish, rlinngish@health-access.org