Navigating California’s Proposed Health Care Transaction Legislation: Assembly Bill 3129

California’s health care industry is facing potential new challenges as Assembly Bill 3129 aims to curb consolidation allegedly driven by private equity firms and hedge funds. The proposed legislation, introduced in February 2024, would require these parties to obtain prior written consent from California’s Attorney General before acquiring or changing control of various health care businesses and assets.

If passed, the law would impact transactions starting on January 1, 2025. While previous bills attempting to regulate health care consolidation have not succeeded, AB 3129’s narrower scope may garner more support from California legislators. The fate of the bill will be clearer by early July, before the legislative session closes for the summer recess.

The bill targets private equity groups and hedge funds that acquire a significant amount of health care assets or change governance over them. Covered transactions include acquisitions of health care facilities and provider groups operating in California. Parties engaging in these transactions must file an application for AG approval at least 90 days prior to the change of control.

AB 3129 also includes a failing firm exemption for financially unviable health care assets and could impact the Friendly PC-MSO Model used by investors to navigate California’s CPOM prohibition. While the bill’s passage is uncertain, parties considering affected transactions should prepare for potential enactment.

With the scrutiny on health care consolidation increasing at both state and federal levels, California’s focus on regulating these transactions could have significant implications for the industry. Stay tuned for updates on the progress of AB 3129 and its potential impact on health care transactions in the state.