Assembly bill 3129 was passed by the California Legislature in August, and would give the attorney general authority to review and approve or deny transactions between independent physician practices and private equity firms.
However, as Ed Cohen, MD, and Aaron Spritz, MD, argue in a Sept. 18 opinion piece in The San Diego Union-Tribune, the bill could be "disastrous for physicians and patients alike."
This bill marks a fourth time that legislation has been proposed to give the attorney general the final say in whether healthcare groups can partner with PE-backed entities. Past proposals were all rejected. Instead, the Legislature created the Office of Health Care Affordability in 2022. This new office, which began work in April 2025, took on the role of reviewing transactions between physicians and other healthcare entities, including PE-backed management services and other organizations that provide business support for practices.
One of the tasks of the office is to analyze how a proposed transaction might impact competition among providers and affect the cost of care.
Drs. Cohen and Spritz contend that the bill assumes PE involvement with physician practices will inherently reduce competition and raise prices, despite not yet having data from the office.
"It's the opposite of evidence-based policymaking," they write.
Additionally, some groups receive exemptions under the new bill. PE firms seeking to partner with dermatology practices would not need to get permission from the attorney general. For-profit hospitals received a similar exemption from the approval process, as did University of California Health.
The writers argue that compared to hospital consolidation, PE-investment poses much less of a threat to a competitive market. Hospitals bought 7,600 physician practices between 2019 and 2024, including 2,800 in the last two years, according to the Physicians Advocacy Institute and Avalere Health.
The authors further claim the hospital exemption to the bill will inadvertently encourage hospitals to buy out more physicians and harm independent practices, which already suffer from declining reimbursement rates and soaring costs of operations with inflation.
Drs. Cohen and Spitz argue that PE-backed management service organizations are one of the few options that physicians have to keep their businesses alive in a challenging economic climate without giving up total control over their practice or opting for hospital employment. The writers called upon California Gov. Gavin Newsom to veto the bill.