By Oakland Post Staff

California is one step closer to tightening oversight of private equity and hedge fund spending in the healthcare sector as lawmakers sent Assembly Bill (AB)1415, authored by Assemblymember Mia Bonta (D-Oakland), to Gov, Gavin Newsom’s desk this week.

The measure, if signed into law, would expand the authority of the state’s Office of Health Care Affordability (OHCA), requiring private equity groups, hedge funds, and Management Services Organizations (MSOs) to notify the office of major transactions, including mergers or acquisitions involving hospitals, physician organizations, skilled nursing facilities, or other MSOs.

“AB 1415 ensures that Californians have a watchdog when it comes to the billions of dollars of private equity transactions in California’s healthcare system,” said Bonta, who chairs the Assembly Health Committee. “This bill is a crucial step to close the gaps in the Office of Health Care Affordability’s oversight abilities at a time when our constituents are demanding that we take action to protect access to affordable and high-quality care.”

Created in 2022, OHCA was tasked with tackling rising health costs that continue to outpace inflation and strain working families. The office monitors healthcare spending enforces statewide cost-growth benchmarks, reviews transactions for their effect on access and equity, and promotes strategies to improve affordability and quality.

Bonta’s bill follows last year’s veto of AB 3129, a similar measure blocked by Gov. Newsom. In that veto, Newsom directed that OHCA — not other agencies –should be the lead state entity reviewing healthcare mergers and acquisitions, a role AB 1415 would now cement.

Supporters say the legislation is urgently needed as California faces rapid healthcare consolidation. Between 2019 and 2023, private equity acquisitions of healthcare providers in the state totaled $4.31 billion, representing nearly one-third of all healthcare deals. The share of community hospitals owned by larger health entities climbed from 53% in 2004 to 68% in 2022. And the percentage of physicians working in hospitals or practices owned by bigger systems grew from 29% in 2012 to 41% in 2022.

Research shows that when consolidation increases, so do prices. Critics of unchecked mergers warn that corporate takeovers often lead to service reductions, closures, and diminished community access to care.

“We all are feeling the rise in our health care prices, and one big reason is that powerful investment and private equity firms are quietly buying up hospitals, clinics, and doctors’ offices, often cutting corners to boost profits. Yet the state doesn’t have all the information needed to determine the impact of these mergers for California health care consumers,” said Katie Van Deynze, Senior Policy Advocate with Health Access California, a statewide healthcare consumer coalition.

Deynze continued, “We hope Governor Newsom signs this bill so we can have the full picture when health care mergers have the potential to harm patients or workers and drive up costs.”

If signed, AB 1415 would mark a first-of-its-kind law in California and could set a precedent nationally. Other states, including Illinois and Texas, along with Congress, are exploring similar efforts to scrutinize private equity’s growing footprint in the healthcare industry.

Bonta represents California’s 18th Assembly District, which covers Oakland, Alameda, and Emeryville. She is also the first woman of color to chair the Assembly Health Committee.

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