There is still time to lobby for changes to a proposed new California law that would require an additional layer of approval for healthcare acquisitions by private equity groups or hedge funds. Jon Zucker, David R. Carpenter, and Gabrielle Feliciani explain.
On May 22, the California Assembly passed a bill (AB 3129), which would have a substantial impact on changes of control and acquisitions of healthcare facilities and provider groups by private equity groups or hedge funds. The bill would require at least 90 days notice and California Attorney General approval for such changes of control and acquisitions. The bill is currently being considered by the California Senate, so there is still time for stakeholders to participate in the legislative process.
AB 3129 reflects the increasing efforts by the state of California to oversee and regulate healthcare transactions involving private equity groups or hedge funds. California also recently enacted a broad healthcare transaction review law and a notice-and-consent law for nonprofit healthcare entities. This new bill would allow the California Attorney General to give consent, conditional consent, or to refuse to consent to a transaction involving private equity groups or hedge funds if it “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.”
The bill requires that the Attorney General apply a “public interest” standard in deciding whether or not to grant consent. This standard is defined in terms of “the interests of the public in protecting competitive and accessible health care markets for prices, quality, choice, accessibility, and availability of all health care services for local communities, regions, or the state as a whole.”
The bill also would prohibit private equity groups or hedge funds from controlling or directing certain aspects of physician or psychiatric practices. Additionally, it would prohibit entities directly or indirectly controlled by a private equity group or hedge fund from managing physician or psychiatric practices for certain fees. These prohibitions could potentially be effective as soon as the proposed law comes into force.
Please contact your Sidley lawyer for additional information or if you would like to participate in the legislative process.
