The California Legislature passed AB 3129 late Saturday night on the final day of the legislative session. The final bill includes several amendments made on the final day of the legislative session, exempting certain types of transactions and health care providers from the bill’s scope. If signed by Governor Newsom, AB 3129 will be made available to the California Attorney General (“AGBeginning January 1, 2025, investment restrictions (the “Investment Restrictions”) will apply to certain investments by private equity groups and hedge funds in California’s healthcare industry.
AB 3129 requires notice and potential approval by the Attorney General before any acquisition or change of control occurs between a private equity group or hedge fund and certain types of California medical practices and facilities. The notice and consent requirements vary depending on the size and type of provider entity. The bill also prohibits private equity groups or hedge funds from exercising certain authority over physician, psychiatric, and dental practices. However, these restrictions primarily reiterate existing law for medical practice entities. 1
The Legislature amended AB 3129 several times in the days before it was passed. The final language in the bill exempted transactions with certain types of California health care entities from the notice and consent requirements, including:
- Dealing with hospitals
- Transactions with dermatology clinics
- Transactions with health service plans that are subject to review by the Office of Managed Health Care for cost impacts or market integration.
- A transaction in which a county acquires a health care facility, provider group, or provider from a private equity group or hedge fund to ensure continued access to health care services in that county.
- Dealing with health districts.
The bill also included a late addition that notice and consent would be required “only for transactions or agreements with the University of California in which a private equity group or hedge fund purchases, acquires, or assumes control, responsibility, or governance of a health facility, provider group, or provider.” The language in this amendment could be improved with further clarification through implementing regulations or guidance.
For the bill to become law, Governor Newsom must sign AB 3129 by the end of September. If signed, stakeholders and investors in California’s healthcare industry should consider how AB 3129’s notice and consent requirements will affect future transactions with the help of qualified healthcare advisors early in the process.
[1] Our previous analysis of AB 3129 can be found here.
https://natlawreview.com/article/californias-ab-3129-continus-national-trend-scrutinizing-private-equity
https://natlawreview.com/article/california-considers-revisions-legislation-health-care-investments-and-regulations
