Newsom vetoes bill to let California ban private equity deals for health care
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California Gov. Gavin Newsom on Saturday vetoed a bill that would have given his state the ability to block private equity acquisitions of most health care facilities and service providers.
Why it matters: This likely kills the idea on a national level, where it was proposed by Sen. Ed Markey (D-Mass.) in response to the Steward debacle.
- Newsom is a top surrogate for Kamala Harris, and there's no way that a Trump administration would take up this mantle.
Zoom in: Private equity firms and hedge funds already are required to notify California's AG when buying certain health care businesses, but the vetoed legislation would have required the AG to give written consent at least 90 days before transactions valued at $25 million or more.
- The only exemption would have been for deals involving for-profit hospitals.
- The bill also said that investors could not "interfere with the professional judgment of physicians, psychiatrists, or dentists in making health care decisions," including in areas like determining the need for diagnostic tests or referrals.
What they're saying: In his veto message, Newsom explained that while he appreciated the bill authors' intent, he believes that health care acquisitions are best reviewed by the state's Office of Health Care Affordability.
- "While OHCA itself cannot block a proposed transaction, it can coordinate with other state entities, including referring transactions for further review to the AG," Newsom writes. "This bill would exempt transactions involving [private equity groups] or hedge funds that would be subject to review by the AG from OHCA's existing review."
- Drew Maloney, CEO of private equity trade group AIC, said in a statement: "Our coalition worked hard to ensure California leaders recognize and support private equity's essential role in improving health care in California. The Governor's well-reasoned decision will help patients and communities continue to have access to quality care."
Behind the scenes: California AG Rob Banta had supported the bill. So did FTC chair Lina Khan.
Elsewhere: Newsom's veto came on the same day that controversial Steward Health CEO Ralph de la Torre announced his resignation, and one day before he vetoed a controversial bill to regulate artificial intelligence.
The bottom line: Private equity remains open for health care business in California. And everywhere else.
