Governor Newsom Vetoed Bill AB 3129

Governor Newsom has vetoed AB 3129, citing concerns regarding the redundancy of the bill with the Office of Health Care Affordability’s (OHCA’s) existing authority to review and evaluate health care transactions in the state. AB 3129 would have required PE and hedge fund investors to obtain consent from the state Attorney General for certain health care investments, and would have imposed restrictions on management relationships between PE and hedge fund-backed MSOs/DSOs and physician, psychiatric and dental practices. See Prior RG Alert. The Governor’s veto message explains that OHCA was created to review state health care transactions, and it would be more appropriate for OHCA to oversee PE and hedge fund investments in health care. While OHCA, in contrast to the Attorney General under AB 3129, does not have the authority to block transactions, Governor Newsom notes that OHCA does have the ability to coordinate with other state entities and refer transactions for further review to the Attorney General.

The failure of AB 3129 represents a large victory for many PE, hedge fund and health care industry stakeholders, who expressed concerns that the bill would discourage private funding of health care investments in the state. The bill’s author, Assemblymember Jim Wood, who has attempted to pass legislation similar to AB 3129 multiple times over the past several years, is not seeking re-election and will finish out his term in December 2024. In light of the growing nationwide movement targeted at private equity investments in health care, it remains to be seen whether similar legislation will be introduced in California in the future. For now, however, Governor Newsom has signaled that the spotlight with respect to oversight of health care transactions in California will be on OHCA.