“California lawmakers want the state to demand more information from private-equity and hedge-fund investors seeking to buy in-state medical providers.
Recently the state Assembly approved a bill, AB 1415, that would require buyout firms and other investors to notify California's Office of Health Care Affordability of planned mergers or acquisitions of healthcare entities in the state.
The measure "ensures that Californians have a watchdog when it comes to the billions of dollars of private-equity transactions in California's healthcare system," said Assembly member Mia Bonta, a Democrat representing Oakland and neighboring areas who introduced the bill.
For private-equity firms and other investors, the bill would create a new hurdle for healthcare transactions in a state that already has one of the nation's strictest regulatory regimes for such deals.
California's Senate approved the bill. The bill now goes to Gov. Gavin Newsom, a Democrat, who has 30 days to sign or veto it.
Newsom's press office didn't respond to a request for comment.
Last year, the governor vetoed a similar bill to rein in private-equity healthcare transactions, saying the recently formed Office of Health Care Affordability Act should retain authority over such deals. This year's bill appears to have been drafted to avoid those objections.
California's efforts come amid a nationwide backlash against private-equity ownership of medical practices. Massachusetts, Oregon, Indiana and Washington have also passed laws this year to restrict corporate healthcare deals. Other states have considered but failed to enact similar bills.” [1]
A nationwide backlash against private-equity ownership of medical practices stems from concerns that the industry's focus on short-term profits compromises patient care, increases costs, and destabilizes the healthcare system. While private equity (PE) firms claim their investments improve efficiency, a growing body of research and real-world consequences, such as hospital bankruptcies, suggest their financial tactics can create negative outcomes.
Decline in quality of care
Multiple studies have linked PE ownership to a decline in the quality of patient care. A profit-driven model often leads to aggressive cost-cutting measures that can endanger patient safety.
Reduced staffing: After a buyout, PE firms frequently cut staff, including nurses and experienced physicians. Research has shown that PE-owned hospitals have lower staff-to-patient ratios, which has been linked to higher rates of patient complications, falls, and infections.
Worse health outcomes: Multiple studies reveal worse health outcomes at PE-owned facilities. Examples include increased mortality rates at PE-owned nursing homes and higher rates of hospital-acquired infections at PE-owned hospitals.
Prioritizing profit over care: The American Medical Association (AMA) notes that PE firms have no ethical or legal duties to patients. Instead, their business model focuses on maximizing returns for investors, which can put them at odds with medical ethics.
Higher healthcare costs
Critics contend that PE involvement drives up healthcare costs for both patients and insurers.
Aggressive billing: After an acquisition, PE-backed practices often increase prices by 4–20% compared to non-PE-owned practices. Tactics include "upcoding"—billing for more expensive services than were provided—and steering patients toward more expensive tests and procedures.
Market consolidation: PE firms frequently use a "roll-up" strategy, acquiring multiple smaller practices to create large, dominant entities that face less competition. This increased market power allows them to demand higher reimbursement rates from insurers.
Higher out-of-network bills: PE-owned practices have been known to terminate existing insurance contracts and bill patients for expensive out-of-network fees.
Physician and provider burnout
The intense focus on profits and production can negatively impact medical professionals.
Sacrificed autonomy: Physicians in PE-owned practices have reported a loss of autonomy over clinical decisions, with pressure from non-medical management to increase billing and see more patients.
Increased workload: Cost-cutting through staff reductions often increases the workload for remaining doctors and nurses, contributing to high turnover and burnout.
Restrictions on practice: Non-compete clauses often restrict a physician's ability to practice in the same area if they leave a PE-owned practice.
Instability and bankruptcy
The financial strategies used by PE firms can leave healthcare facilities with high levels of debt and a greater risk of failure.
Leveraged buyouts: PE firms acquire practices using large amounts of borrowed money, and that debt is loaded onto the acquired company itself. This leaves the medical practice with a weaker balance sheet and high debt payments.
Forced bankruptcy: The financial burdens can push once-viable practices and hospitals into bankruptcy or closure. A 2024 Senate report found that some PE firms have extracted huge profits while allowing patient care to deteriorate, resulting in hospital closures.
Asset stripping: Some PE firms engage in "sale-leaseback" transactions, selling a hospital's real estate and then charging the hospital rent, stripping it of its assets to enrich investors.
Lack of transparency and oversight
The opaque nature of PE transactions makes it difficult for patients and regulators to track ownership and hold firms accountable.
Under-the-radar acquisitions: Many PE transactions fall below federal reporting thresholds and are not scrutinized by antitrust regulators, allowing for "stealth consolidation".
Obscured responsibility: Complex corporate structures can shield PE managers and investors from liability when things go wrong.
Regulatory gaps: Critics note that regulators have struggled to keep pace with the rapidly increasing PE activity in the healthcare sector.
1. U.S. News: California Bill Would Put Private-Equity Healthcare Deals Under Increased Scrutiny. Cumming, Chris. Wall Street Journal, Eastern edition; New York, N.Y.. 10 Sep 2025: A5.
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