The Weekly Articles

Last month, California’s Attorney General and Assembly Speaker Pro Tempore introduced AB 3129 (Click Here), which would obligate private equity (“PE”) groups and hedge funds to secure written consent from the California Attorney General before acquiring or effecting a change of control in “health care facilities” or provider groups.  “Health care facility” means a “facility, nonprofit or for-profit corporation, institution, clinic, place, or building where health-related physician, surgery, or laboratory services are provided, including, but not limited to, a hospital, clinic, long-term health care facility, ambulatory surgery center, treatment center, or laboratory or physician office located outside of a hospital.”  The Attorney General is granted considerable discretion to approve, deny, or impose conditions on transactions, based on potential anticompetitive effects and impacts on healthcare access. 

AB 3129 broadly defines “hedge fund” and “private equity group,” and would affect a wide range of investors in the healthcare sector.  Moreover, the bill seeks to prevent PE groups and hedge funds from influencing the operations of physician or psychiatric practices, including rate-setting, patient admission policies, and contractual agreements.

If AB 3129 is enacted, PE healthcare acquisitions in California would face additional regulatory hurdles, potentially slowing down or deterring investment in the sector.  This could have significant implications for the healthcare industry, particularly in terms of access to capital, consolidation trends, and the operational autonomy of healthcare facilities and provider groups under private equity ownership.  The bill was referred to the Assembly’s Health and Judiciary Committees on March 11, 2024.

AB 3129 is part of a broader trend of increasing regulatory oversight in California's healthcare sector and can be viewed as an expansion of SB 184.  SB 184, enacted in 2022, established the Office of Health Care Affordability (OHCA) and required certain notifications to the OHCA regarding sales or transfers of control with respect to healthcare entities.  The primary aim of SB 184 was to enhance transparency and oversight regarding healthcare affordability and market dynamics.  In contrast, AB 3129 specifically targets acquisitions and changes of control involving healthcare facilities and provider groups by private equity groups and hedge funds.

The California Privacy Protection Agency (“CPPA”), charged with promulgating regulations to implement the California Consumer Privacy Act (“CCPA”), released two preliminary new regulations in 2023 which would impose additional requirements on businesses in scope of the CCPA whose processing of “personal information” presents significant risk to “consumers’” privacy or security. These regulations are mandated by the CCPA and include: Cybersecurity Audit Regulations, which would require “businesses” to perform cybersecurity audits on an annual basis, and Risk Assessment and Automated Decisionmaking Technology (“ADMT”) Regulations, which would require businesses to complete and submit to the CPPA an independent risk assessment of their processing of “personal information” and “sensitive personal information” and provide opt-out rights to consumers with respect to the use of ADMT.

Auburn Daily was recently elevated to Region VP & General Counsel of the California Region with CommonSpirit Health.  In this position she manages a legal team who supports 31 acute care hospitals and more than 500 ambulatory clinics and care sites within the Region. When asked how she celebrated this achievement, Auburn said her and her husband went to Las Vegas to see U2 at the Sphere! 

Assembly Member Matt Haney, D-San Francisco, is sponsoring AB 3073 to combat the State's drug problem. California is in a state of crisis. In just three years (from 2019-2021), opioid related deaths spiked 121% according to the State's health department. In addition, new drugs are being mixed with opioids, like xylazine, commonly known as "tranq," which is a powerful sedative approved for veterinary use that causes significant infections. AB 3073 would mandate local sanitation agencies to collect wastewater samples to test for fentanyl, methamphetamine, cocaine and morphine. It would also mandate the state water board to report the results to the state public health department.  This will allow State officials to rapidly respond to spikes in the use of drugs to prevent or reduce overdoses. In 2022 alone, California experienced 7,400 overdose deaths. This is currently being implemented at the county level in some parts of the State like Marin and San Francisco. 

Assembly Member Matt Haney, D-San Francisco, is sponsoring AB 3073 to combat the State's drug problem. California is in a state of crisis, in just three years (from 2019-2021) opioid related deaths spiked 121% according to the State's health department. In addition, new drugs are being mixed with opioids, like xylazine, commonly known as "tranq", which is a powerful sedative approved for veterinary use that causes significant infections. AB 3073 mandates local sanitation agencies to collect wastewater samples to test for fentanyl, methamphetamine, cocaine and morphine. It would also mandate the state water board to report the results to the state public health department.  This will allow State officials to rapidly respond to spikes in the use of drugs to prevent or reduce overdoses. In 2022 alone, California experienced 7,400 overdose deaths. This is currently being implemented at the county level in some parts of the State like Marin and San Francisco. 

The Office of Health Care Affordability (OHCA) is charged with slowing health care spending growth while promoting high value system performance. In furtherance of these goals, on February 12, 2024, OHCA released revised draft regulations as well as its Total Health Care Expenditures Data Submission Guide, Proposed Version 1.0 supplemental guidance (“the Guide”) further detailing the data collection process.  Mostly substantively unchanged from the prior draft, the payers remain responsible for the reporting requirements. It is anticipated that these proposed regulations are close to their final version, which will be formally filed by OHCA with the Office of Administrative Law (OAL) not earlier than February 19, 2024. Once filed, the public will have five days to submit comments on the proposed regulations. Five days after that, OAL may finalize the regulations. Once finalized, the regulations become effective for five years.

This follows OHCA January activity where it released a proposed 3% annual spending growth target for 2025-2029, justified using median household income as the basis for the value. Hospitals that fail to meet the target, that is hospitals with spending which exceeds the 3% growth rate, risk facing performance improvement plans and financial penalties. This target has not yet been adopted by the Board, but is expected to be discussed at the February 28, 2024 Health Care Affordability Board Meeting and may be adopted as early as the Board Meeting on March 25, 2024. 

If finalized, the proposed regulations set a registration deadline for all required submitters and approved voluntary submitters of April 30, 2024 for registration in the Data Portal. Registered submitters would then be required to submit data as required in the Guide for the 2022 and 2023 reporting years by September 1, 2024.

Bridget Gordon was recently named equity partner with Hooper, Lundy and Bookman. Bridget learned the good news the day of the firm’s holiday party so was able to celebrate with her colleagues, then with her family in Pennsylvania over the holidays and finally with her fiancé in Curacao for New Years. Congratulations Bridget!

Beginning January 1, 2024, licensees of the Medical, Osteopathic, Podiatric and similar Boards may notify their Board of a name and/or gender change and, when meeting certain requirements, request confidentiality of their prior information. Licensees must submit appropriate documentation confirming a legal name change (such as court order) and gender change (driver’s license, passport, etc.).  The Boards will update publicly viewable information consistent with the name and/or gender change.

In order to be eligible for confidentiality as to a name change, a licensee must:

• Be participating in the Secretary of State’s Safe at home program and have changed their name pursuant to Code of Civil Procedure section 1277(b) due to concerns of domestic violence, stalking, sexual assault, or human trafficking
• Have changed their name pursuant to Code of Civil Procedure section 1277.5 to conform to their gender identity
• Have changed their name in connection with changing their gender or sex identifier pursuant to the Health and Safety Code

If a search is performed using the licensee’s former name, the public will be directed to contact the licensing board for more information. Documents submitted to request a change in name or gender are not subject to public disclosure.

This change is codified at Business and Professions Code section 27.5.

Jordan Kearney was recently elevated to equity partner with Hooper Lundy.  When asked how she celebrated this achievement, Jordan said that due to her pregnancy, she fell asleep at 8:00 p.m.  Double congratulations to Jordan!

On March 5, 2024, California voters will decide on an overhaul of the state’s community mental health system via Proposition 1 (Behavioral Health Services and Bond Measure).  The two-pronged proposition, which would rename the Mental Health Services Act (2004) to the Behavioral Health Services Act, includes a nearly $6.4 billion bond to build 10,000 treatment units and supportive housing.  It also seeks to redefine how counties spend funding from a “millionaire’s tax” (1% tax on income above $1 million) to allocate a share of it to supportive housing for individuals with behavioral health issues while at the same time redistributing a portion of the tax monies so that the state receives a larger percentage.  Proponents believe it is a necessary measure to reprioritize and tackle many of the behavioral health issues the state is facing, while opponents believe it will create more harm than good by diverting funding from current mental health services to housing and increased involuntary treatment.