Private Equity Investors in Healthcare at Risk: A New Defendant in False Claims Act Cases?

As a generally held principle, mere investment or ownership interest in a company does not expose the investor to liability for acts undertaken by the company. However, that principle is being called into question in the context of private equity firms investing in healthcare companies. In two recent cases, healthcare companies along with their sole or majority private equity firm owners settled False Claims Act (“FCA”) cases. These cases illustrate the risk that private equity investors in the healthcare space may face under the FCA, particularly to the extent that they actively manage their portfolio companies.