California lawmakers have introduced SB 351, a bill aimed at restricting private equity’s involvement in healthcare management. This bill echoes many provisions of last year’s AB 3129 while omitting certain requirements for Attorney General oversight.
SB 351 was introduced in the California legislature to target private equity influence in physician and dental practices. The bill prohibits private equity groups from interfering in medical decisions, hiring practices, patient volume, and billing procedures. While it includes many of the same restrictions as AB 3129, it does not require private equity firms to notify or obtain consent from the Attorney General before making certain healthcare-related transactions. Additionally, the California Attorney General would have enforcement authority to seek injunctive relief to uphold these new regulations.
California has long had laws restricting the corporate practice of medicine and dentistry. These laws aim to ensure that medical decisions are made by licensed professionals rather than by corporations motivated by financial interests. AB 3129, introduced in 2023, sought to enforce stricter regulations on private equity-backed healthcare management but failed to pass. SB 351 follows a national trend of heightened scrutiny on private equity investments in the healthcare sector, as several other states consider similar measures.
Supporters of the bill argue that it protects patient care by preventing profit-driven entities from making medical decisions. They claim that private equity-backed management can prioritize financial returns over patients' best interests, leading to reduced quality of care. On the other hand, critics believe that the bill could discourage investment in medical practices, potentially limiting resources and accessibility for patients. Some also worry that it might drive up operational costs for independent physicians, making it harder for smaller practices to thrive.
Despite its restrictions, SB 351 does not prohibit all management services organization (MSO) arrangements. MSOs provide administrative and operational support to medical practices, and as long as these arrangements comply with existing laws, they will not be affected by the bill. Healthcare providers currently in management agreements with private equity affiliates should review their contracts to ensure compliance with both existing corporate practice laws and the potential new regulations under SB 351.
This legislation displays California’s ongoing effort to keep medical decision-making in the hands of licensed professionals rather than business executives. If passed, SB 351 could set a precedent for other states looking to regulate private equity in health care. However, it also raises concerns about whether reduced investment in the industry could impact the availability of medical services and the financial sustainability of smaller practices.
SB 351 reaffirms California’s stance against corporate influence in medical practices while maintaining flexibility for investment structures that comply with state laws. Health care stakeholders should monitor the bill’s progress closely and prepare for potential regulatory changes that may impact their business and professional operations.
No, it specifically targets physician and dental practices.
No, but it restricts their ability to influence medical decisions and operations.
Yes, private equity groups must ensure compliance with SB 351 if it becomes law.
SB 351 removes the requirement for Attorney General approval in certain transactions.