These Two Bills Would Increase Accountability in California’s Health Care System

This month, Nia Johnson submitted letters of support for California Senate bill (SB) 351: Health Facilities and Assembly bill (AB) 1415: California Health Care Quality and Affordability Act, two bills that build on prior state efforts to rein in unchecked corporate influence while expanding oversight of health care transactions involving private equity and other for-profit entities.

Last year, the landmark bill AB 3129: Health Care Consolidation, which would have closed loopholes that allow private equity and other corporate interests to interfere with medical care, passed the California Legislature but was vetoed by Governor Newsom. As Nia explains in her letters, which you can read below, the growing momentum of these two bills represents California’s unwavering commitment to protecting patients and health workers.

California State Senate
Judiciary Committee
1021 O Street, Room 3240
Sacramento, CA 95814

Dear Members of the Senate Judiciary Committee,

RE: Support for SB 351—Strengthening the Ban on the Corporate Practice of Medicine

Thank you for the opportunity to submit comments in support of SB 351, which pertains to the corporate practice of medicine ban in physician and dental practices. This legislation will strengthen California’s worker and patient protections by reinforcing the state’s prohibition against non-medical professionals, such as financial institutions or wealthy investors, from interfering with medical decisionmaking and the delivery of care. This bill also empowers the attorney general, an enforcement authority, to take action against violators of the ban.

Private equity firms—which uniquely operate by borrowing funds from pensions, wealthy individuals, and financial institutions to invest in health care assets, facilities and services—are reshaping the health care industry. Notably, the percentage of dentists affiliated with private-equity firms has more than doubled since 2015, while the percentage of private equity-backed physician groups has increased more than 600 percent since 2012. Given private equity’s increased presence in health care, California is right to strengthen safeguards regarding corporate and private equity interests influencing health care delivery and decisionmaking.

Currently, private equity firms can sidestep the state’s corporate practice of medicine ban by acquiring management service organizations (MSOs) or similar entities that oversee billing, staffing, scheduling, and other core functions of clinical operations. While these services may appear non-clinical on paper, in practice they have a direct impact on the delivery and quality of care—and they can erode the independence of physicians and medical staff.

We have already seen the consequences of this loophole. In California and beyond, health professionals have raised alarms about pressure from private equity-owned companies to prioritize profits over patient well-being. For instance, legal action against private equity-backed Envision Healthcare highlighted how firms can bypass California’s ban on corporate practice of medicine by using a “friendly physician model” which masquerades as a physician-owned business model, but actually allows MSOs to influence a significant amount of the facility operations. Separately, TeamHealth, a private equity-owned physician staffing group which currently operates in the state, paid $60 million in settlement fees for allegedly pressuring doctors to inappropriately code medical treatment for Medicaid and Medicare beneficiaries, which inflates the cost of care. These examples represent an unregulated threat to the patient–provider relationship and public trust in our health care system.

Californians deserve to know that their doctors’ decisions are based on clinical expertise and patient needs, not corporate mandates or profit margins. I urge this committee to support this bill so that medical practitioners can treat patients without the constraints of corporate or profit-driven interests.

Best,

Nia Johnson
Policy Researcher
Next 100
[email protected]

California State Assembly
Committee on Health
1020 N Street, Room 390
Sacramento, CA 95814

Dear Assemblymembers of the Committee on Health,

RE: Support for AB 1415—Oversight of Health Care Transactions Involving For-Profit Entities

Thank you for the opportunity to submit comments in support of AB 1415. This critical legislation will fill a longstanding gap in California’s health care oversight by expanding the state’s ability to review and regulate transactions involving profit-driven entities, particularly those that have operated for too long outside the reach of public accountability.

AB 1415 takes an essential step forward by codifying the authority to review transactions involving management service organizations (MSOs), entities that provide administrative, financial, and clinical support services in our medical system. Historically, these transactions have flown under the regulatory radar, creating a dangerous loophole that private equity firms and corporate interests exploit to consolidate power in our health care system.

One of the fundamental characteristics of the private equity business model is the way it borrows money from the wealthy, pensions, and financial institutions that invest in the firm in exchange for shares. As a result, investment returns are a primary priority for the shareholders and, by association, the private equity firm, which periodically provides reports on the state of investments to its shareholders. Under current law, these firms can acquire physician MSOs or management companies and exert control over core areas of care delivery, including billing, staffing, and even clinical decision-making. This influence, though technically “nonclinical,” can have real and lasting effects on patient outcomes and access to care, especially for historically underserved communities.

AB 1415 rightly places these transactions under the purview of the Office of Health Care Affordability (OHCA), aligning them with the state’s mission to protect affordability, access, and quality for all Californians. I strongly support the bill’s provision to expand notice requirements to capture private equity and hedge fund activity, including transactions involving their sub-affiliates. By redefining “provider” to include health systems—such as hospital systems and combinations of hospitals, physician organizations, and health insurers—AB 1415 captures the influence of large, for-profit hospital systems such as the Hospital Corporation of America (HCA) and Tenet Health, as well as private equity-owned staffing firms like TeamHealth, all of which currently operate in California.

AB 1415 should be understood not only as a transparency measure, but also as a foundation for meaningful accountability. As we expand the OHCA’s oversight role, we must also ensure that it or the attorney general’s office has the enforcement tools necessary to act in the public interest. States like Oregon have already demonstrated the value of giving oversight bodies the authority to approve, conditionally approve, or reject health care mergers and acquisitions. In Oregon, the health authority not only reviews the financial and operational details of proposed transactions, but also considers their potential impact on access, cost, and quality of care, especially for underserved patients. California has the opportunity to do the same, all while advancing OHCA’s mission. AB 1415 is a vital step toward ensuring that California’s health care system serves people, not profits. I urge this committee to support this bill and give OHCA the tools it needs to protect the health and well-being of all Californians.

Best,

Nia Johnson
Policy Researcher
Next 100
[email protected]