Legislation to Stop Harmful Private Equity Health Care Takeovers Passes CA Assembly

AB 3129 (Wood) would protect patients by giving the Attorney General oversight on private equity acquisitions in our health care system

SACRAMENTO, CA – To oversee the increasing concern of private equity firms taking over health care providers, the California State Assembly voted to pass AB 3129 by Assembly Speaker Pro Tem Jim Wood. The bill gives the state’s Attorney General the power to review private equity acquisitions to ensure it is in the best interest of consumers and protects access to affordable and quality health care.

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 hospitals, 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.”

“The growth of private equity takeovers in our health care should alarm patients. These Wall Street-backed investment firms know little about health care and are mainly out to maximize profits, not improve patient health,” said Katie Van Deynze, policy advocate for Health Access California, the statewide health care consumer advocacy coalition, and a major supporter of the bill. “When private equity takes over a health care provider, 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 need public oversight to prevent private equity takeovers from reducing access and leading to higher costs of health care for many Californians.”

Because their priority is short-term profit for the investors, these hedge funds 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.

“For over 30 years, California Attorneys General have used their authority to protect consumers from negative impacts of nonprofit hospital mergers, and this bill would extend this critical oversight to private equity and hedge fund acquisitions in health care. AB 3129 will ensure that these deals have that same public scrutiny and they are in the best interest of patients and the public,” said Van Deynze.

The bill now heads to the State Senate for consideration.


Press inquires can be directed to:
Rachel Linn Gish, rlinngish@health-access.org, (916) 532-2128 (cell)