As private equity firms’ investment in the healthcare industry has grown exponentially over the last decade, government enforcement efforts targeting private equity investors have responded accordingly in recent years. Here’s what it means for private equity investors.
While that response is not unique to private equity—history indicates that enforcement efforts adapt to and follow private investment and government reimbursement dollars—it is nonetheless one that investors must consider carefully moving forward. Private equity investors must take steps to effectively manage their risk when entering and operating within the highly-regulated healthcare landscape.
Increased Enforcement Actions
Investors in the healthcare sector must be cognizant of the near-draconian penalties imposed by the False Claims Act (FCA) for submitting fraudulent claims for payment to the government. The FCA imposes civil liability for knowingly presenting a false claim to the government or knowingly making a false record or statement to the government in connection with a claim for payment. In the healthcare context, that liability arises within the context of the enormous number of claims submitted to government healthcare programs. Liability can be extreme: the FCA allows for damages up to triple the amount of the government’s actual loss, monetary penalties of approximately $12,000 to $24,000 for every false claim submitted, and the recovery of the relator’s attorneys’ fees.
Both the government...
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