New Scrutiny on Private Equity Healthcare Investments Expands Liability, Calling for Heightened Due Diligence

With private equity investment in healthcare exploding over the last 20 years with no signs of stopping, the U.S. government has implemented new measures and increased surveillance to combat false claims, investor driven revenue agendas, and monopolizing tactics. The federal focus has set off a domino effect, with several states following suit, implementing bills and laws that empower government bodies to gain more control over processes between private equity firms and the healthcare providers they invest in. 

The Department of Justice is sending a message loud and clear, false claims violations will not be tolerated moving forward. While the False Claims Act has been around since 1863 (amended most recently in 2009), increased scrutiny in private equity healthcare investments by the DOJ is the first move of many the U.S. government has up its sleeve, with state investigations, congressional action, and a redefinition of who and what is considered liable bolstering their mission. In 2023, the DOJ recovered $2.7 billion under the FCA, setting a new record. Although healthcare has always been the main focus of FCA regulations and accounted for the largest recovery, the DOJ issued a statement announcing private equity firms’ involvement in the healthcare space will be a priority in the coming years. 

A bill proposed to the Senate in Massachusetts echoes the DOJ’s amplified focus. Set forth by Senators Elizabeth Warren and Ed Markey, the Corporate Crimes Against Health Care Act is intended to leverage more control and protection for healthcare providers. Federal funding would enable providers the means to report ownership and financial data to the public. This move enables the Senate to curtail executive compensation when providers are struggling financially and prevents firms from swiping funds that result in patients’ death. Proposed legislation in New York and California would also tighten protocols on healthcare investments. 

The FCA also clarifies who exactly is considered liable when it comes to false claims. Previously centered around the language of “knowingly submitting” claims, the DOJ has broadened its definition to include any actions that “cause the submission” of such claims. So even if firms or third parties are not responsible for the submission of claims to the government first hand, if their actions influence or cause false claims to be submitted they are now liable under the new guidelines. 

According to a press release issued by the DOJ, “The Criminal Division is committed to rooting out health care fraud, wherever it may be found, no matter who commits it, said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. And we are using more tools than ever before to uncover misconduct and hold wrongdoers to account, whether they are executives in corner offices or doctors who violate their oaths.”  Don’t miss violations to the FCA hiding in plain sight. Making sure that entities you are partnering with, investing in, or employees you are considering hiring are clear of FCA violations in the past is the first step in preventing future possible violations. Take precautions to ensure your firm is not at risk for becoming unintentionally liable when conducting healthcare investments. Keep blindspots in check with Intelligo’s pre-investment due diligence and ongoing monitoring performed with the most current FCA standards in mind. Schedule your free demo today and safeguard your firm.