New California Legislation Targets Private Equity’s Role in Health Care

California lawmakers are considering two bills aimed at increasing regulatory oversight of private equity and hedge funds' involvement in health care transactions and medical practice operations.

• Assembly Bill 1415 () would expand the jurisdiction of the Office of Health Care Affordability over health care transactions.
• Senate Bill 351 () would reinforce existing prohibitions on corporate influence in medical and dental practices.

These two bills reflect continuing concerns by some legislators and health care advocates that private equity investment interests exercise disproportionate control over health care decision making in the state at the expense of higher costs and reduced access to quality health care.

State Landscape on Private Equity in Health Care

The introduction of AB 1415 and SB 351 follows last year’s legislative effort to monitor, restrict or otherwise regulate private equity and hedge fund investors’ involvement in California's health care sector.

Assembly Bill 3129 () (2024) would have required private equity and hedge fund investors to provide prior notice and obtain consent from California’s Attorney General before completing certain health care transactions. Additionally, the bill would have imposed prohibitions on management relationships between medical and dental practices and private equity and hedge fund-backed entities.​

Governor Gavin Newsom vetoed AB 3129, writing that the Office of Health Care Affordability (OHCA), established in 2022, is already responsible for reviewing many proposed health care transactions and that it would be more appropriate for OHCA to oversee these consolidation and overconcentration issues.

AB 1415: Expanded Oversight of Health Care Transactions

In response to the Governor's AB 3129 veto message, AB 1415 would broaden OHCA’s authority to review and monitor health care transactions involving private equity and hedge fund entities, in addition to management services organizations and health systems. Key provisions of the bill include:

• Expanded Jurisdiction: Would extend OHCA’s oversight to include transactions involving entities that own, operate or control health care providers, even if they are not currently licensed or operational.
• Mandatory Pre-Transaction Notification: Would add private equity and hedge funds, and other newly formed business entities, to the list of those engaging with health care entities to provide written notice to OHCA before executing mergers, acquisitions, changes in governance, control of assets or corporate affiliations.
• Increased Regulatory Scrutiny: Would subject private equity and hedge fund-backed entities to mandatory reporting and potential OHCA review, enhancing oversight of consolidation and financial structuring.
• Review Process: Would impose a 90-day advance notice requirement for a material change transaction, with the possibility of additional review, including antitrust review by the Attorney General, if OHCA determines that the transaction could impact market competition, affordability or cost trends.

Under AB 1415, as currently drafted, OHCA would not have the authority to block transactions outright, but it could conduct a cost and market impact review to assess potential effects on health care pricing and competition. If OHCA determines that a transaction poses significant risks, it may delay implementation for up to 60 days following the issuance of a final report.

SB 351: Reinforcing Restrictions on Corporate Practice of Medicine

Like AB 3129 last year, SB 351 would reinforce California’s long-standing prohibition on the corporate practice of medicine and dentistry by explicitly prohibiting private equity and hedge funds’ influence over clinical decision-making. The bill enumerates practices specifically prohibited for private equity groups and hedge funds, preventing non-physician entities from interfering in professional judgment or controlling key operational aspects of medical and dental practices, including:

• Determining appropriate diagnostic tests and treatment plans.
• Influencing patient referral decisions.
• Controlling patient medical records or their content.
• Making decisions regarding coding, billing, and reimbursement practices.

In addition, SB 351 would invalidate contractual clauses that restrict health care providers from competing with their former employers post-termination or from discussing quality-of-care concerns. Under the bill, the Attorney General is granted enforcement authority to pursue injunctive relief against entities violating these restrictions.

AB 1415 and SB 351 will face their first legislative hearings in late March or April.

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