A bill making its way to California Governor Gavin Newsom's desk would provide Attorney General Becerra with an effective veto over health systems seeking to affiliate with or acquire health care facilities or providers. In addition, with respect to certain market providers, the proposed law would set limits on price increases and costs, and allow the attorney general to use enforcement tools to give teeth to several provisions.

With the coronavirus pandemic hitting the bottom line of hospitals across the country, California has been no exception and the state could see substantial market consolidation as a result. SB-977 is designed, in part, to slow down or halt this type of market activity.

Left undiscussed, however, in the course of debate around SB-977 has been the impact of private equity in the health care system generally and how the proposed California law could alter how and where private equity funds deploy capital going forward. To give some sense of the scope of these funds and their activity in the health care sector, according to Bain & Company, in 2018 there were 316 deals related to health care representing $63.1 billion in total value, and 313 health care deals in 2019 totaling $78.9 billion.

Indeed, California is not alone in examining consolidation in this economic sector. Colorado has gone so far as to repeal a portion of its antitrust law that prevented its attorney general from intervening to stop certain transactions and numerous bills have been introduced in Congress to stop certain merger activity as well.

Whatever the fallout from SB-977 is in California, the larger lesson here is that state attorneys general are going to be another regulator that private equity funds must take into account when lining up their next deals in 2020 and 2021 as the coronavirus pandemic subsides. State Attorneys General are now among the country's most active regulators, and the health care sector in particular is a regular target for scrutiny.