AB 3129 (Wood) protect patients by giving the Attorney General oversight on certain private equity acquisitions in our health care system
SACRAMENTO, CA – As private equity in our health care system grows, the California Legislature voted on Saturday to pass AB 3129 by Assembly Speaker Pro Tem Jim Wood to put more oversight on certain transactions that may harm consumers. The bill gives the state’s Attorney General the power to review private equity acquisitions in certain health care settings to ensure it is in the best interest of consumers and protects access to affordable and quality health care. The bill now heads to Governor Newsom’s desk for his consideration.
Health advocates praised this effort as private equity and hedge fund firms buy up more and more health care entities in our state, including skilled nursing facilities, doctor practices, and health clinics, with worsening outcomes for patients. 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 oversight protects patients in California – our Attorney General has had some of this power for thirty years. But health care corporations have been fighting every step of this bill, because they don’t want to be open about what a private equity takeover may mean for Californians,” said Katie Van Deynze, policy advocate for Health Access California, the statewide health care consumer advocacy coalition, and a major supporter of the bill. “We’ve seen enough to know, when private equity takes over, bad things tend to happen: they treat it like a business asset, squeezing out what profit they can, which can leave a wake of debt, cuts to services and closures behind. We urge the Governor to sign AB 3129, ensuring that certain private equity deals are in the best interest of patients and the public.”
Because their priority is short-term profit for the investors, these 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.
As these potentially harmful private equity acquisitions accelerate, they are doing so with little regulation or oversight. AB 3129 will give the California Attorney General authority to act on behalf of consumers to protect their access to affordable and quality health care.
Governor Newsom has until September 30th to take action on legislation.
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Press inquires can be directed to:
Rachel Linn Gish, rlinngish@health-access.org, (916) 532-2128 (cell)