California bill would tighten private equity oversight: What it means for ASCs

Lawmakers in California are considering a bill that would create additional oversight for private equity companies attempting to purchase healthcare facilities, including ASCs.  

The bill would require private equity firms and hedge funds to provide written notice to the state before purchasing a healthcare facility or provider group. 

California's attorney general would then have to approve the transaction, according to the bill text, which was amended in April. 

The attorney general could then stop the acquisition if it posed a "substantial likelihood of anticompetitive effects" or if it would affect access of healthcare services delivered to the community.

Buyers would also be required to submit written notice to any federal or state agency as required by law within 90 days of the transaction. 

The increased scrutiny comes as private equity has had an expanding role in medicine in the last decade. 

Currently, more than 60% of physicians have a negative opinion of private equity's role in healthcare and just 10.5% of physicians said they view private equity as positive, according to VMG Health's "M&A Report" for 2024.

Additionally, more than 20% of the healthcare bankruptcies in 2023 were by private equity-backed companies.

Private equity has also taken an increased interest in outpatient care and ASCs, with outpatient care seeing 195 private equity deals in 2023, the most of any healthcare subsector.

"The way it's heading, only certain specialties will be able to survive what's happening with hospitals, private equity and insurance companies buying everyone up. Unless the government steps in and starts pushing back against payers, our healthcare system will fail," Corey Hunter, MD, executive director of Ainsworth Institute of Pain Management in New York City, told Becker's. "The Medicare Administrative Contractors are supposed to manage Medicare on a regional level, but they aren't even obligated to follow Medicare guidelines when it comes to coverage. If that kind of change happens, then I would encourage medicine as a field. … If it doesn't I won't be telling my kids to follow in my footsteps."

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