Newsom can protect patients and doctors by vetoing AB 1415

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OPINION – The California legislature just passed a bill that could make operating an independent physician practice much more difficult.

Known as AB 1415, the measure would force entities that provide financial and operational backing to independent physician practices to go through an onerous state review process for nearly every material financial transaction they enter into. That process will no doubt scare off many of these entities, called management services organizations or MSOs, from the Golden State.

If AB 1415 becomes law, it will thus deprive the state’s healthcare infrastructure of precious investment — and put high-quality care out of reach for countless Californians. For the sake of patients throughout the state, Gov. Gavin Newsom must veto this bill.

The recently formed Office of Health Care Affordability will be the body leading that new review process. Created in 2022, OHCA is tasked with scrutinizing transactions between healthcare organizations — things like mergers and acquisitions. OHCA also has jurisdiction over transactions between physician practices and MSOs, among other companies.

Under AB 1415, OHCA would be charged with reviewing a far wider range of transactions involving MSOs, private equity firms, and hedge funds. The upshot is that these companies would need to provide written notice to OHCA of any material corporate transaction they enter into — even those that have nothing to do with a healthcare entity in the state

That’s nonsensical on its face. Why should an office focused on trying to make health care more affordable in California be looking at something like an investment an out-of-state hedge fund makes in an out-of-state MSO? It will distract OHCA from its mission — and discourage firms from making investments in California.

Expanding OHCA’s mandate would also create enormous administrative headaches for independent physicians looking for help running the business side of their practices — or for capital to help them improve and expand the care they provide.

California’s healthcare infrastructure is in desperate need of capital — to build new clinics in underserved areas; to install the latest technology in outpatient clinics that are more convenient for patients; to attract and retain top physician talent, particularly in rural areas facing shortages.

A monthslong review by OHCA of a potential deal may prove too time-consuming — and too expensive — for many investors to go through.

Patients will ultimately pay the price for investments that never happen. Consider what partnerships with MSOs have enabled some independent practices in California to do.

One dermatologist in Merced used the capital he received from an MSO partner to construct 10 new exam rooms, recruit an additional provider, and introduce new surgical capabilities in his community.

A urologist in San Diego has leveraged investment from his MSO partner to deploy new technology that allows him to monitor patients more effectively — and reduce complications from prostate biopsies.

And in my own practice in Sacramento, our MSO partner has enabled us to more than double the size of our clinical trials division. Through these clinical trials, patients — including people without insurance — have access to cutting-edge retinal treatments at no cost.

Investment from MSOs doesn’t just enable independent practices to provide better care. It reduces overall healthcare costs. A 2024 study conducted by Avalere found that per-beneficiary Medicare expenditures at independent physician practices were $963 lower, on average, in the 12 months after those practices took on an MSO partner.

AB 1415’s onerous and expansive reporting requirements will jeopardize future investment by MSOs. That’s something the state can ill afford. About 38% of state residents — roughly 15 million people — live in areas with federally designated shortages of primary care providers. Two-thirds of Southern Californians report logistical barriers to securing care.

OHCA has been up and running for just 18 months. It only issued its first full “Cost and Market Impact Review” in June. It makes little sense to expand the office’s mandate and workload so early in the body’s existence.

Independent physicians are fast becoming an endangered species, with the share of doctors operating out of private practices falling precipitously in recent years. By vetoing AB 1415, Gov. Gavin Newsom can help arrest this trend — while also preserving the incentive for firms nationwide to make much-needed investments in California’s healthcare infrastructure.

Dr. Tony Tsai is a board-certified ophthalmologist with Retinal Consultants Medical Group based in Sacramento.