Newport Beach doctor’s fight against hedge fund highlights new California healthcare law

A Newport Beach physician who had been forced out of his practice by hedge fund executives joined fellow advocates who say corporations exercise too much control over medical decisions in celebrating recent legislative and legal victories.

Steve Abelowitz, M.D., spent decades building Coastal Kids into a successful practice. But he was financially pressured by the economic downturn caused by the COVID-19 pandemic to partner with Pediatric Associates Holdings LLC to stay afloat in the winter of 2020. In the years that followed, the hedge fund allegedly cut corners to save costs at the expense of patient safety, according to a lawsuit filed by Abelowitz shortly after he was fired in 2024 from the practice he established.

Critical support services were outsourced to a call center in Mexico, according to the lawsuit. Patients seeking mental healthcare — which typically generates less profit than other forms of medicine — were given less priority when scheduling appointments.

Abelowitz claimed less qualified staffers were hired, and that resulted in some children getting injected with the wrong vaccines.

The physician claims he was wrongfully terminated for pushing back against corporate executives prioritizing profits over patients. In addition to damages associated with lost wages, legal fees and emotional distress, Abelowitz is seeking an injunction halting the alleged corporate practice of medicine by Pediatric Associates.

Dr. Steve Abelowitz of Newport Beach, a pediatrician, started Coastal Kids in 2001, and since then it has expanded to multiple locations. He has filed a lawsuit against the hedge fund he says forced him out. “ I think we need more of a voice,” he said of doctors who have found themselves in the same position.

(Aryadne Woodbridge)

Pediatric Associates issued the following statement in response to the doctor’s claims: “The health and safety of patients and team members always come first. The allegations raised by Dr. Abelowitz are false and entirely unsubstantiated. He was terminated in 2024 following an ethics hotline complaint regarding his hostile behavior toward clinic staff. After a thorough investigation, Dr. Abelowitz was removed from his role to protect the Coastal Kids team members and to ensure their continued delivery of high-quality care to patients and families.”

Attorneys for Pediatric Associates attempted to invoke an arbitration clause that would have forced the case out of the public court system. But earlier this month, the California Court of Appeals denied that motion, allowing the case to formally come to light.

“So much still needs to be told,” Abelowitz said. “I still believe there is nowhere close to enough public awareness in the general public. Because only when people go through it themselves and experience it, do they really realize how broken our healthcare system is because it is in the hands of these corporate executives.”

Since 2013, medical practices have increasingly become a target for acquisition by private equity firms, according to studies published by the American Medical Assn.’s open access medical journal, JAMA Network. Past studies have shown some correlation between rising involvement of private equity in the medical field with rising costs for care.

More than 30 states have laws on the books prohibiting the corporate practice of medicine, but patient advocates say many lack teeth. In California, the state’s medical board defines what constitutes the corporate practice of medicine. But until recently, it did not have any mechanism in place, nor the resources to enforce the law or investigate potential violations.

“There was no accountability and it was kind of a free-for-all,” Abelowitz told the Daily Pilot during an interview Tuesday. “And patients were affected.”

A law signed by Gov. Gavin Newsom that went into effect this year aims to bolsters existing law by empowering California’s attorney general to investigate corporate entities accused of interfering with the decisions of medical professionals. Patient advocates say it’s a critical step in reigning in private equity’s influence on healthcare.

However, Abelowitz said there’s still more progress to be made. He still hears from medical professionals who say corporate interests are being prioritized over their patients’ health about four or five times every month. He has also been contacted by physicians in Texas, Florida and other states.

“We’re talking about very deep pockets,” Abelowitz said. “And the lobbying often goes in the other direction. So seeing the American Medial Assn., the passion from the California attorney general, seeing the passion from some of the senators in the state … I’m hearing things are starting to be spoken about, and I think we need more of a voice.”