September 30, 2024 – Governor Gavin Newsom has vetoed AB 3129, expressing concerns that the bill overlaps with the existing authority of the Office of Health Care Affordability (OHCA) to review and assess health care transactions in California. AB 3129 would have required private equity (PE) and hedge fund investors to seek approval from the state Attorney General for certain health care investments and would have imposed limitations on management relationships between PE and hedge fund-backed management service organizations (MSOs/DSOs) and physician, psychiatric, and dental practices.

The Governor’s veto message explains that OHCA was established to oversee state health care transactions, and it would be more suitable for OHCA to manage PE and hedge fund investments in the sector. While OHCA does not have the authority to block transactions like the Attorney General would have under AB 3129, Governor Newsom notes that OHCA can collaborate with other state agencies and refer transactions for further review by the Attorney General, when it deems appropriate.

The veto of AB 3129 is seen as a significant win for many stakeholders in the PE, hedge fund, and health care sectors, who argued that the bill could deter private investment in California’s health care industry, one that has seen the value of private equity investment grow from less than $1 billion in 2005 to $20 billion as of 2021¹. The bill’s author, Assembly member Jim Wood, who has repeatedly tried to pass similar legislation in recent years, is not seeking re-election and will complete his term in December 2024. Given the growing national focus on private equity involvement in health care, it is uncertain whether similar legislation will be proposed in California in the future. For now, Governor Newsom has indicated that OHCA will play the central role in overseeing health care transactions in the state.

Overall, the Physician Growth Partners leadership team sees this as a positive for California physician practice and healthcare services business owners as they look for strategic options in order to stronger compete in their market.

If you’re an owner of a medical practice or healthcare services business owner and you’re looking to explore what private equity could mean for your practice, please get in touch with our team.

Since 2018, we have represented 60+ independent medical practices as their exclusive M&A Advisor, in transactions with private equity and strategic acquirers; more transactions advised on in the physician practice management (ppm) space than any other healthcare investment banking firm in the United States.²

¹Private Equity in Health Care: Prevalence, Impact, and Policy Options for California and the US: California Health Care Foundation (May 2024)

² LevinPro HC (Healthcare Mergers & Acquisitions Data Platform, Irving Levin Associates, LLC)