California lawmakers cut hospitals from private equity health deal bill
The list of supporters has included an employer group, the Purchaser Business Group on Health.
California lawmakers seem to be narrowing their effort to limit private equity investors’ ability to buy health care providers.
Members of the California Assembly Appropriations Committee voted 4-2 Aug. 15 to approve an amended version of a health care acquisition bill. The bill would give the California attorney general the ability to slow or block efforts by private equity groups and hedge funds to acquire health care facilities, health care providers or provider groups.
Related: California Could Curb Private Equity Health Deals
The version of the bill approved last week excludes deals involving hospitals and dermatology medical groups from the scope of the bill.
Mark Aprea, a lobbyist with the American Investment Council, a group representing private equity firms, testified in opposition to the bill Aug. 5, before it was amended.
Aprea noted that the California Office of Health Care Affordability already reviews health care deals, and he predicted implementation of the bill would increase California regulators’ litigation costs.
California legislative analysts compile lists of groups officially supporting and opposing bills.
Insurance and many benefits groups have not weighed in on the private equity health deal bill.
Two employer groups, the Purchaser Business Group on Health and the Small Business Majority, are supporting the bill. The U.S. Chamber of Commerce has joined the American Investment Council and provider groups in opposing the bill.
The backdrop
A private equity group is a firm that uses cash from institutions and wealthy individuals to make investments. A private equity fund does not have to face the same kinds of reporting obligations and supervision requirements that a “public company” faces, because, under U.S. federal law, the U.S. Securities and Exchange Commission assumes that the private equity investors are sophisticated investors who do not need handholding.
Some health policymakers, including Sen. Elizabeth Warren, D-Mass., and Sen. Charles Grassley, R-Iowa, have suggested that private equity investors may have too little oversight and may hurt the finances and care quality at health care providers that they acquire.
Defenders, including analysts at Vanguard, have argued that private equity firms are relatively small players in the U.S. health care market and have been especially small players in the U.S. hospital market in recent years. They have accused the private equity firms’ critics of exaggerating the firms’ impact.
The Federal Trade Commission and the Justice Department have been fighting efforts by private equity firms to “roll up” health care providers.
Sen. Edward Markey, D-Mass., and Rep. Pramila Jayapal, D-Wash., have introduced Senate and House versions of the Health Over Wealth Act bill, a bill that would require a private equity fund to put five years of hospital operating expenses in escrow before buying a hospital.
The bill would also let federal regulators revoke the investment licenses of private equity firms that increase prices at health care facilities to what the bill authors believe to be unreasonable levels.