California Governor Vetoes Bill Restricting Private Healthcare Acquisitions

On September 28, 2024, California Governor Gavin Newsom vetoed AB 3129. As discussed in our prior alert, AB 3129 would have required California Attorney General approval of healthcare transactions involving private equity groups and hedge funds and would have had a significant impact on changes of control and acquisitions of healthcare facilities and provider groups by such entities.

In his decision to veto the bill, Governor Newsom stated that he supported efforts to increase oversight over California’s health care system to ensure consumers receive affordable and quality health care, but that “it would be more appropriate for the [Office of Health Care Affordability (OHCA)] to oversee these consolidation issues as it is already doing much of this work.” Currently, the OHCA is tasked with conducting cost and market impact reviews of transactions that are likely to significantly impact competition in the healthcare marketplace as well as the affordability of healthcare services for consumers in the state.

A two-thirds vote in both the California State Assembly and Senate within 60 days would be required to override the Governor’s veto. While AB 3129 passed by wide margins in both chambers (50–16 and 49–14, respectively), the California State Legislature could decide not to override the veto. The bill could also be reintroduced in a future legislative session, and a future version could include provisions aimed at expanding the role of OHCA in reviewing healthcare transactions in the state.

Given the increased scrutiny of private equity participation in the healthcare industry, California and other states may continue to consider similar bills. Sidley will continue to closely monitor these state-level developments.

If you would like additional information about this or other state healthcare transaction review laws, please contact the Sidley lawyer with whom you usually work or one of our team members listed below.