California Takes Lead on Regulating Private Equity Health Deals
Healthcare & Life Sciences attorneys Kenneth Yood and Nili Yolin were interviewed by Bloomberg Law about legislation in California and New York increasing oversight of private equity deals in the healthcare industry. Assembly Bill (AB) 3129, recently approved by the California Senate's Judiciary Committee, would allow the state attorney general to approve or deny an acquisition or change of control between a private equity firm and a healthcare entity. Some industry groups, concerned that requiring approval for deals would make it difficult to raise capital, successfully lobbied for amendments exempting for-profit hospitals, while labor unions and patient groups have called for more rigorous action on the issue to prevent higher costs and staffing cuts post-transaction.
Mr. Yood, a Los Angeles-based attorney who represents a wide range of healthcare providers and healthcare companies, commented an issue he sees with AB 3129 is that it has "a predisposition to believe that a private equity deal is problematic or inappropriate, unless proven otherwise."
"If the goal of the state is to promote access to high-quality, cost-effective care, I don't think private equity investment or participation in healthcare should be automatically considered contradictory to this goal," he said.
Across the country, a New York law that took effect in August 2023 requires physician practices and other healthcare entities to provide a 30-day pre-closing notice to the New York Department of Health (DOH) for transactions that result in an increase of an entity's gross in-state revenue of at least $25 million. Unlike the California bill, however, the law does not grant the DOH authority to approve transactions. Ms. Yolin noted that because of the lack of enforcement teeth, "not much has changed" for entities working through mergers and acquisitions (M&A).
"This is like a fact-gathering exercise, at least that's what it appears to be, because there is no right to unwind transactions like these," she explained.
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