According to a recent study, private equity acquisitions of physician-owned practices in the U.S. rose from 75 deals in 2012 to 484 in 2021―a sixfold increase in a decade.¹
In 2021, private equity investors spent more than $200 billion on healthcare acquisitions, and $1 trillion in the past decade.² These firms have long been active in hospital, nursing home, and home care settings. Over the past decade, however, a significant number of physicians have transitioned from working in small practices that they own to working in larger corporate-owned entities, mostly concentrated among high-margin specialties like dermatology, urology, gastroenterology, and cardiology. In 13 percent of metropolitan areas, a single private equity firm owns more than half of the physician market for certain specialties.¹
Driven by profits, these corporate-owned practices are increasingly concerning given their rapid growth and potentially harmful impact on access to care―and lawmakers are taking notice.
During the 2024 legislative session, Assemblymember James Wood (D-Sonoma) introduced Assembly Bill 3129 (AB 3129), The Healthcare System Consolidation bill. This bill would:
■ Require a private equity group or a hedge fund, as defined, to provide written notice to, and obtain the written consent of, the Attorney General prior to a change of control or an acquisition between the private equity group or hedge fund and a healthcare facility or provider group. The provider group as defined by the bill means a group of 10 or more licensed health professionals acting within the scope of their practice, or a group of 2 to 9 licensed health professionals acting within the scope of their practice that generated annual revenue of ten million dollars ($10,000,000) or more. A provider group may include any combination of licensed health professionals. The bill would additionally require a private equity group or hedge fund to provide advance written notice to the Attorney General prior to a change of control or acquisition between a private equity group or hedge fund and a nonphysician provider, or a provider with specified annual revenue.
■ Authorize the Attorney General to give the private equity group or hedge fund a written waiver or the notice and consent requirements if specified conditions apply, including, but not limited to, that the party makes a written waiver request, the party’s operating costs have exceeded its operating revenue in the relevant market for three or more years and the party cannot meet its debts, and the acquisition or change of control will ensure continued health care access in the relevant markets. The bill would require the Attorney General to grant or deny the waiver within 60 days, as prescribed.
■ Authorize the Attorney General to grant, deny, or impose conditions to a change of control or an acquisition between a private equity group or hedge fund and a healthcare facility, provider group, or both, if the change of control or acquisition may have a substantial likelihood of anticompetitive effects or may create a significant effect on the access or availability of health care services to the affected community, applying a public interest standard, as defined. The bill would authorize any party to the acquisition or change of control to apply to the Attorney General to reconsider the decision and to modify, amend, or revoke the prior decision, and to seek subsequent judicial review of the Attorney General’s final determination on that reconsideration application if the Attorney General denies consent or gives conditional consent.
■ Prohibit a private equity group or hedge fund involved in any manner with a physician or psychiatric practice doing business in this state, from controlling or directing that practice, as specified. The bill would also prohibit a physician or psychiatric practice from entering into an agreement or arrangement with an entity controlled in part or in whole directly or indirectly by a private equity group or hedge fund in which that private equity group or hedge fund manages any of the affairs of the physician or psychiatric practice in exchange for a fee. The bill would authorize the Attorney General to adopt regulations to implement its requirements, as specified.
The bill is double-referred and will receive hearings by the Health and Judiciary Policy Committees. Its trajectory through the legislative process is a prime opportunity to address growing concerns and explore opportunities for a better balance.
For more information on AB 3129, visit: https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=2…
Gabriela Villanueva is CAP’s Government and External Affairs Analyst. Questions or comments related to this article should be directed to GVillanueva@CAPphysicians.com.
¹Richard Schefler et al. 2023.”Monetizing Medicine: Private Equity and Competition in Physician Practice Markets.” July 10, 2023.
https://www.antitrustinstitute.org/wp-content/uploads/2023/07/AAI-UCB-E…
²Blumenthal, David. 2023. "Private Equity’s Role in Health Care." The Commonwealth Fund. November 17, 2023.
https://www.commonwealthfund.org/publications/explainer/2023/nov/privat….