Proposed California Bill AB 3129’s Impact on Digital Health Companies and Corporate Practice of Medicine

“This legislation could actually pass and, signed into law, would likely eliminate the friendly PC model in California as we know it.”

Foley & Lardner LLP partner Nathaniel Lacktman, chair of firm’s national, Chambers ranked Telemedicine & Digital Health Industry Team, was quoted in Christina Farr’s Second Opinion Media article, “This proposed bill in California could have a big impact on digital health,” offering insight on whether the California AB 3129 legislation has a chance to pass and its potential consequences for the digital health care industry.

The bill, passed by the California General Assembly and under consideration by the Senate, has two major components. First, it would institute a new review process with the California Attorney General for transactions involving private equity, hedge funds, and health care facilities. Second, it proposes new provisions around what an investor relationship with a medical practice resembles, which threatens the “friendly PC” model in the state.

The friendly PC model, developed in response to century-old laws in some states that bar non-doctors from owning medical practices or directing medical care, is a vehicle for investors in technology and management companies to contract with physician-owned practices.  The management company provides non-clinical administrative support and technology to the practice, and the physicians focus on supervising and delivering quality medical care.

Lacktman stated, “Yes, this legislation could actually pass and, signed into law, would likely eliminate the friendly PC model in California as we know it.”  

If that occurs, other states could follow suit.