QUESTION:
I heard that a private equity firm is interested in acquiring a local physician practice.  Could that be accurate?  Has the OIG or any other government enforcement agency said anything one way or the other about the entry of private equity into the health care market?

OUR ANSWER FROM HORTYSPRINGER ATTORNEY HENRY CASALE:
Subject to a state’s corporate practice law, there may not be anything unlawful about a private equity firm acquiring an ownership interest in a physician practice or other health care provider.  However, in order to give you an idea of what the OIG thinks of private equity, in its November 6, 2023, General Compliance Program Guidance, the OIG included a section V entitled “Other Compliance Considerations” in which the OIG recognized that the health care sector is seeing an increasing number of new entrants, including technology companies, new investors, and organizations providing non-traditional services in health care settings.  OIG then warned these new entrants that they need to become familiar with the unique regulations and business constraints that apply in the health care industry, as well as the range of Federal and State government agencies that regulate health care and enforce fraud and abuse laws.  OIG also repeated its oft‑stated concern that these new entrants into the health care market need to be aware that “business practices that are common in other sectors create compliance risk in health care, including potential criminal, civil, and administrative liability.”

With regard to private equity, the OIG stated:

The growing prominence of private equity and other forms of private investment in health care raises concerns about the impact of ownership incentives (e.g., return on investment) on the delivery of high quality, efficient health care.  Health care entities, including their investors and governing bodies, should carefully scrutinize their operations and incentive structures to ensure compliance with the Federal fraud and abuse laws and that they are delivering high quality, safe care for patients.  An understanding of the laws applicable to the health care industry and the role of an effective compliance program is particularly important for investors that provide management services or a significant amount of operational oversight for and control in a health care entity.

So, the OIG is not saying that private equity investment in health care providers is prohibited.  The OIG is, however, saying that if private equity wants to invest in health care, they need to know the rules, and that the OIG intends to make sure that they follow them.

If you have a quick question about this, e-mail Henry Casale at hcasale@hortyspringer.com.

If you want to learn more about the OIG, the Anti-Kickback Statute, the Stark Law, the False Claims Act, and much more, check out our latest episode of the “Kickback Chronicles” podcast and also join us at the Hospital-Physician Contracts and Compliance Clinic Seminar in Las Vegas from November 14-16, 2024!