California wants greater review power over private equity investment in health care

California State Assemblymember Mia Bonta, chair of the Assembly Health Committee, authored a bill granting the state Office of Health Care Affordability more power to review private equity acquisitions of health care providers.

California health care regulators will have greater oversight of private equity deals involving physicians, hospitals and health systems starting next year.

The California State Assembly has passed and Gov. Gavin Newsom signed into law new powers for the state Office of Health Care Affordability (OHCA) to review “major transactions” involving private equity deal in health care.

“Specifically, the new law requires private equity groups, hedge funds, and Management Services Organizations (MSOs) to notify OHCA when they undertake major transactions, including mergers or acquisitions, involving hospitals, physician organizations, skilled nursing facilities, or other MSOs,” said a news release published this week. Assemblymember Mia Bonta (D-District 18), chair of the Assembly Health Committee, authored the bill as a possible way to help lower costs for working-class Californians.

“Californians deserve a full picture of the billions spent annually in our health care system by large private equity firms,” Bonta said in the news release.

The legislation, formally titled Assembly Bill 1415, “ensures that our Office of Health Care Affordability has the authority to monitor these transactions and protect patients from rising costs and reduced access to care,” she said.“Access to affordable, high-quality care is essential for Californians across the state, and I’m proud to see this bill signed into law to deliver on that promise.”

Bonta’s announcement noted increasing consolidation among physician groups and other health care providers.

• From 2019 to 2023, private equity acquisitions totaled $4.31 billion, accounting for one-third of California’s health care deals.
• The share of community hospitals owned by a larger health entity increased from 53% in 2004 to 68% in 2022.
• In 2012, 29% of doctors worked in a hospital or practice partially owned by another hospital or health care system. By 2022, that figure reached 41%.

In 2022, the state created OHCA to address an affordability crisis, as health care costs surpassed inflation rate. OHCA reviews data on health care spending; promotes improvement of affordability, quality and equity; enforces cost-growth benchmarks; and examines health care transactions to assess effects on competition, prices, access, quality and equity, according to an office description from Bonta.

The advocacy group Health Access California supported the legislation and praised the work of Bonta and Newsom, along with additional authority for OHCA.

“Private equity groups often treat our hospitals and doctors' offices like any other asset, maximizing profits for their investors at the expense of patients' access and ability to afford care,” Health Access California Senior Policy and Legislative Advocate Katie Van Deynze said in the news release. “This new law will ensure that communities have the full picture of these transactions before they happen, what it means for their health care, and hold the new owners accountable to promises made about benefits for the community."