The False Claims Act (FCA) has long protected consumers in healthcare. Now, in an effort to increase these protections, regulators are expanding FCA liability to PE firms, placing them under increased scrutiny.
The Corporate Crimes Against Health Care Act, proposed by Senators Elizabeth Warren and Ed Markey, imposes more FCA responsibility on PE firms. Effective later this year, it imposes criminal violations on PE firms that fail to report discovered false claims within 60 days.
The new law allows regulators to recoup executive compensation from PE-owned providers. More significantly, it allows them to hold private equity firms legally and financially responsible if operational measures harm patients.
PE firms will now face more regulatory oversight, and future FCA violations could lead to lawsuits and civil penalties. To protect themselves, private equity firms must carefully vet healthcare investments and monitor for adverse media and sanctions and enforcement actions.
The FCA’s Shifting Approach to Consumer Protection Targets Private Equity Operations
Recovering over $70 billion since 1986, the FCA has traditionally targeted only entities directly submitting false claims, meaning PE firms were shielded from FCA liability for fraud by healthcare providers they owned.
However, greater PE healthcare investment in recent years is attracting greater regulatory scrutiny. Agencies now focus on PE firms’ substantial operational control over healthcare providers. The DOJ identified PE firms as a growing FCA priority and HHS is tightening ownership requirements.
Other recent legislative action includes a New York law requiring healthcare entities to disclose covered transactions to the State and a pending California bill allowing the Attorney General to authorize or place conditions on healthcare investment control.
The growing regulatory focus on PE’s role in healthcare emphasizes the need for PE firms to adopt thorough due diligence and monitoring to reduce the risk of FCA and litigation issues.
Future-Proofing PE Healthcare Investments
As FCA enforcement ramps up, private equity firms investing in healthcare must adopt strong due diligence and monitoring to navigate potential FCA liabilities.
Vcheck’s due diligence provides best-in-class regulatory and reputational insights, including FCA enforcement screening, to assess healthcare investments, portfolio companies, and key executives for potential regulatory exposure.
After red flags are uncovered, firms can use Vcheck’s Continuous Monitoring Platform to continuously screen for emerging risks, including real-time updates on FCA, OIG, and DOJ enforcement actions.
In an era of heightened FCA enforcement, only firms committed to robust due diligence will thrive. Contact us to learn how Vcheck’s due diligence and monitoring can help PE firms navigate regulatory and reputational risk.