The healthcare industry is highly regulated, and as such, private equity firms and dealmakers in the industry must pay immense attention to regulatory compliance, particularly with regard to their portfolio companies. The government’s reach may not stop at a firm’s portfolio company or even its executives, as we have seen in situations like this one where a private equity firm was fined $25 million for oversight failures related to false claims made by its portfolio company.

In this environment, private equity firms and the boards of their portfolio companies need to get out in front of potential regulatory compliance issues. Below are five questions private equity firms should be asking their healthcare portfolio companies right now.

(1) Do you have a written compliance program?

The portfolio company should have a written compliance program that includes all elements recommended by the Office of the Inspector General (OIG):

• Implementing written policies, procedures and standards of conduct.
• Designating a compliance officer and compliance committee.
• Conducting effective training and education.
• Developing effective lines of communication.
• Conducting internal monitoring and auditing.
• Enforcing standards through well-publicized disciplinary guidelines.
• Responding promptly to detected offenses and undertaking corrective action.

For a compliance program to be effective, it must be implemented and incorporated into daily operations and corporate culture, rather than...

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