Compliance Risks in Healthcare Investments: Strategies for Private Equity Firms

The recent Request for Information by the Federal Trade Commission (FTC), Department of Justice (DOJ), and Department of Health and Human Services (HHS) regarding private equity (PE) investment in healthcare highlights the necessity of robust compliance programs. To mitigate compliance risks in healthcare investment, Bass, Berry & Sims suggests PE firms ensure their portfolio companies have effective compliance measures in place, aligned with regulatory guidelines.

The Bass, Berry and Sims article‘s key considerations include:

• Establishing a strong compliance culture with designated officers reporting directly to the board
• Implementing written policies and regular training
• Fostering open communication channels for reporting concerns
• Conducting audits based on identified risks

PE firms should also assess their involvement in portfolio companies, particularly in executive hiring and business programs targeting federal healthcare revenue growth. Antitrust issues arising from market share expansion should be analyzed, along with compliance with laws regarding equity incentive awards. It is crucial to protect attorney-client privilege by engaging legal counsel appropriately, ensuring confidentiality in communications, and considering their involvement in board meetings.

Engaging outside advisors for valuations, audits, and investigations through legal counsel helps maintain privilege and ensures thorough compliance oversight. By adhering to these steps, PE firms can effectively mitigate compliance risks in healthcare investments, avoid costly investigations, and navigate potential government scrutiny.