A bill under consideration by the California State Legislature would “add scrutiny on private equity companies when considering healthcare investments, amplifying the pressure already imposed by enforcement agencies in California and throughout the country,” attorneys from Polsinelli told the McKnight’s Business Daily on Monday.
The legislation, AB 3129, introduced in February 2024, would require private equity firms and hedge fund organizations to give prior notice of acquisitions or changes in control to the state’s attorney general. The bill would also require the attorney general to grant or deny the waiver within 60 days of notice. The attorney general would have the authority then to grant, deny or impose conditions to a proposed transaction.
In addition, the bill would limit the ability for those investors to exercise managerial authority over the healthcare facilities or provider groups they acquire.
The proposed legislation comes as the Justice Department, Federal Trade Commission and Health and Human Services Department also announced plans to jointly investigate private equity’s influence on healthcare.
“This bill follows a trend of scrutiny by state and federal enforcement agencies of private equity investments in the healthcare industry and would add to the existing healthcare transaction review process by California’s Office of Health Care Affordability,” the Polsinelli attorneys said.
According to attorneys at Sidley Austin law firm, the legislation would affect “direct and indirect purchases of a material amount of assets and operations of a healthcare facility or provider; changes in voting control of a healthcare facility or provider; or direct and indirect changes in control over the healthcare services or operations of a healthcare facility or provider.”
The state legislature will hold a formal hearing today regarding the proposal. If passed, the law would become effective on Jan. 1, 2025.
