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Private equity firms have been investing in healthcare practices, with at least one report indicating that 2022. The second-best year In recent history.
That level of activity is drawing attention from federal regulators who oversee medical care, billing and the business arrangements of doctors and investors, said Jolie Apicella JD, a partner in the health care group at the law firm Wiggin & Dana in New York.
Previously, Apicella served as an Assistant United States Attorney in the Eastern District of New York, where she served as the United States Attorney. Health care fraud. She now also represents entities and their executive leaders before the US Office of Inspector General for Health and Human Services, the US Department of Justice (DOJ), and other federal and state government regulatory and compliance authorities.
Jolie Apicella, JD
Wiggin and Dana
Apicella spoke with Medical Economics to share her insights on what physicians and investors need to know about federal and state laws regarding pharmaceuticals and private equity investment. The interview has been edited for length and clarity.
Medical Economics (ME): When private equity firms get involved in healthcare, do their leaders fully understand the regulations in the healthcare industry? Do you understand the rules that affect the action?
Jolie Apicella: It definitely depends. When we talk about private equity, we can talk about very large and complex companies that actually focus on the healthcare industry and have their own healthcare industry segment with experts and advanced players. Or we’re talking about a private equity firm, perhaps family run, with just two brothers working outside the ground floor investing and moving money. So I think it really depends on the type of company we’re talking about and whether or not they’re guided to understand the regulatory requirements in the industry they’re investing in.
Me: Legally, can private equity firms invest in large health systems or are they looking for small to mid-sized practices?
Apicella: Legally, it can be either. What you want to be aware of are the government regulations out there. A corporate medical practice cannot exist in certain states. So New York and New Jersey do not allow corporate treatment, as I’m sure many of your audience knows. So in those kind of states, you have to respect the restrictions. And what usually happens is that there is a management services organization or MSO and a management services agreement and that’s how they control or profit from the practice and the individual physicians own and license the practice, not accountable to some corporation.
Me: Can you talk about the level of federal regulation involving private equity and investing in health care?
Apicella: One trend we’re seeing with private equity in health care is that there are private equity firms named in the False Claims Act because the False Claims Act only allows regular people, regular citizens with some inside knowledge. To bring cases on behalf of the government. So, typically, as per Delaware law, you need to pierce the veil of your organization, which is probably a legal concept and again your audience will be familiar with it. Piercing that corporate veil and holding the corporation owner accountable as a whole is a tough, tough challenge, but the Fed. False Claims Act Section 3729A contains broad language and provides that any person who knowingly makes a false claim to the government may be held liable. So it’s not just the accountant who actually makes the claim, although the government wants to know how it was done, and that will be part of the investigation. And not just the person who provided the care, because that person caused the claim to be made. But it’s also possible – and we’ve seen this in a few cases in the last three years – that there could be a liability on the part of people who give advice in theory about business decisions, that if they knew something, they could have stopped some mistakes. Conduct and this can be a broad application of reasoning because the government sees organizations as complicit in the crime, ignores it, legalizes it, funds it, and does nothing to correct it. is it.
Me: Do the doctors themselves usually control their own actions in this way, or do they work with a manager or someone in the organization or the investment company that controls that?
Apicella: Perhaps it works best when physicians work with their managers. But the idea, the best practice, is to spell that out right at the beginning, so that everyone understands who does what, who controls what, what kind of controls. Compliance works, this is the level of control. Will we have board members who are private equity firm owners? Because this increases liability for the private equity firm. But to have an understanding of that at the time of purchase investment, it is probably the best practice.
Me: Our primary audience is primary care physicians. What do you want to tell them, or what do you want them to know?
Apicella: Patient care is (really) paramount. When I was an Assistant United States Attorney, that was a top priority. If there were two cases on my desk, one where there was potential for harm to patients and the other was coded but the patients seemed to be receiving perfect care, it was to get mine. Attention. These are difficult issues, but I think private equity is probably here to stay in this sector. I think that the active participation in this sector is because it is a very attractive growth area and it is constant. For this reason, it should be given great attention. There will be more to know about private equity firms, I think, with the upcoming legislation, we’ll see that.
But I think it will be more attention. You know, hackers can keep naming these private equity firms because that’s where the deep pockets are. I think there are many benefits to this relationship, and I don’t think all private equity is just about the bottom line. In my personal experience, I’ve certainly seen private equity come in and I think it’s important that providers understand the guidelines, go into compliance, capitalize on the best legal advice. But there will also be increased focus, increased risk, increased government control in this area. But I think that’s nothing new in the healthcare industry, there’s always been a lot of focus, there’s always been a lot of focus on the healthcare industry by regulators. So if you just focus on providing the highest level of care and think about navigating those tricky waters with compliance and hiring lawyers, I think you’ll be fine.