To avoid being the target of False Claims Act lawsuits, attorneys say private equity firms ought to make sure their companies are on the up and up prior to investing in them. That means extensive due diligence, often by third-party companies that specialize in the specific sector of healthcare the target company operates in.
Due diligence is important because it’s when a buyer ideally would learn about any potential wrongdoing. Attorneys say it’s important to preserve any documentation showing that issues raised during due diligence were resolved.
“Diligence, diligence, diligence,” said Mike Cole, managing director and healthcare industry leader of Alvarez & Marsal’s transaction advisory group. “You can’t know too much about this area, which is why our clients have a number of advisers, from the legal, accounting and operational perspectives, that are tacking all these issues at the same time.”
If it’s a healthcare provider, for example, the potential buyer might want to bring in third-party billers and coders.
Ultimately, liability in False Claims Act cases comes down to knowledge of noncompliance and failing to fix it despite having the power to do so.
Due diligence is an important part of that because it’s when a buyer ideally would learn about any potential wrongdoing. Attorneys say it’s important to preserve any documentation showing that issues raised during due diligence were resolved.
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