Recently, the California Legislature made a series of major revisions to Assembly Bill 3129 (“AB 3129” or “the Bill”), a highly anticipated piece of legislation expected to have a substantial impact on transactions in California’s healthcare space.  Although Epstein Becker Green has previously discussed the Bill (see original post here, as well as a first update here), this blog post will discuss the legislature’s most recent revisions on June 19 and June 27.

Why Assembly Bill 3129 Was Introduced

The Bill was introduced by Assembly Member Wood and is supported by Attorney General Bonta in response to growing concerns about the increasing involvement of private equity and hedge funds in California’s healthcare sector. As private equity firms have increasingly acquired healthcare facilities and provider groups, California’s legislature wants to strengthen oversight to ensure that these transactions are conducted in a transparent manner that protects patients, ensures access, and preserves affordability.

What the Bill Will Do

AB 3129 seeks to address these concerns by requiring private equity groups and hedge funds to provide written notice to, and obtain the written consent of, the Attorney General before engaging in any change of control or acquisition involving healthcare facilities, provider groups, or nonphysician providers. This includes changes of control, acquisitions, or agreements that may impact healthcare services or access.

This notice must be submitted at least 90 days before the transaction, allowing sufficient time for review and evaluation. The bill also grants the Attorney General the authority to grant waivers or impose conditions on these transactions based on public interest considerations.

The bill also prohibits private equity groups and hedge funds from controlling or directing physician, psychiatric, or dental practices and restricts these practices from entering into certain management services agreements with such entities.

What is a “Hedge Fund” or a “Private Equity Group” under the Bill?

Hedge Fund: a pool of funds managed by investors for the purpose of earning a return on those funds, regardless of the strategies used to manage the funds. Hedge funds include, but are not limited to, a pool of funds managed or controlled by private limited partnerships.

Private Equity Group:  an investor or group of investors who primarily engage in the raising or returning of capital and who invests, develops, or disposes of specified assets. 

These definitions do not include natural persons or other entities that contribute to or promise to contribute funds to the hedge fund or private equity group, but otherwise do not participate in the management of the hedge fund/private equity group or the fund’s/group’s assets, or in any change in control of the hedge fund or private equity group’s assets.  They also do not include entities such as banks, credit unions, or bond underwriters that solely provide or manage debt financing.

Powers Given to the Attorney General

Under AB 3129, the California Attorney General would review transactions involving private equity groups or hedge funds and healthcare entities to ensure they do not have substantial anticompetitive effects or negatively impact healthcare access and availability. Once this review is complete, the Attorney General will then consent to, give conditional consent to, or not consent to, the transaction in order to protect the public’s interest.

Recent Revisions to AB 3129

The Legislature heavily revised AB 3129 on June 19 and June 27, materially changing the legislation in several ways, including:

  • Re-defining “Provider group” as a group of 10 or more licensed health professionals acting within the scope of their practice, or a group of two to nine licensed health professionals acting within the scope of their practice that generated gross annual revenue of twenty-five million dollars $25,000,000 or more (modifying “annual revenue” to “gross annual revenue” and increasing the threshold from $10,000,000 to $25,000,000).
  • Adding that a transaction involves a “material amount of the assets or operations” if either: (1) the transaction affects more than 15 percent of the market value or ownership shares of the healthcare facility, provider group, or provider, or (2) the transaction involves a hospital.

And further stating that a transaction that vests rights significant enough to constitute a change in control, including, but not limited to, supermajority rights, veto rights, exclusivity provisions, and similar provisions, involves a “material amount of the assets or operations” even if less than 15 percent of the market value of the healthcare facility, provider group, or provider is affected.

  • Expanding the written notice and written consent requirements to include transactions between a private equity group or hedge fund and a provider, if the private equity group or hedge fund has been involved, directly or indirectly, in a transaction involving a healthcare facility, provider group, provider, or related healthcare services within the past seven years.
  • Under limited circumstances, permitting a transaction to close if the Attorney General fails to issue a written determination within the allotted time.
  • Expanding the factors the Attorney General may rely upon when determining whether to grant consent.[1]
  • Granting the affected private equity group or hedge fund the right to a public evidentiary hearing before an administrative law judge to challenge the Attorney General’s written determination.

Potential Effects

The introduction of AB 3129 reflects a growing legislative interest in guarding against the potential risks associated with private equity investment in healthcare. By expanding the oversight of the Attorney General to cover transactions involving private equity and hedge funds, the bill aims to mitigate these risks and ensure that healthcare transactions prioritize patient care and community needs over short-term profit motives.  Ultimately, the author of, and supporters of, AB 3129 argue that it seeks to promote healthcare affordability, quality, equity, and access for all Californians.


[1] Protecting competitive and accessible healthcare markets includes considering the substantial risk of lessening competition in horizontal, vertical, or related markets, the substantial risk of anticompetitive effects from increased leverage or the ability to tie, the substantial risk of foreclosing competitors in the same or related markets, the substantial risk of decreased access or services in local markets, any other negative effects from the transaction, any benefits from the transaction that are specific to the transaction, any views from local communities on the transaction, and any other factors the Attorney General determines to be a public benefit. Negative effects may involve the substantial risk of increases in prices or costs, decreases in quality, or the lessening of access to or availability of services. Benefits from the transaction may include price or cost decreases directly passed to patients, improvements in access or availability of services in the community, or capital improvements that will benefit local community care if that financing cannot be reasonably obtained elsewhere. The Attorney General may, in the public interest, take account of any other negative or positive effects of the transaction.

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