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Modern Healthcare: Why the Justice Department is targeting private equity

In another investigative piece on private equity’s “insatiable appetite for healthcare in recent years”, Modern Healthcare reported how the DOJ has won more than $43 million in settlement proceeds from private equity defendants across at least five such cases.

Modern Healthcare, November 16, 2021: Why the Justice Department is targeting private equity

The deputy chief of the civil division in the U.S. Attorney’s Office for the Eastern District of Pennsylvania told Modern Healthcare, “As long as private equity firms are incentivized to assume risk to create short-term, substantial profits in the healthcare sector, we’re going to continue to see cases like this.”

Private equity deals in the U.S. healthcare sector surpassed $100 billion in 2018, compared with less than $5 billion in 2000, according to Modern Healthcare: “Not only is it a nearly $4 trillion industry with significant federal government support, U.S. healthcare has proven to be a reliable profit driver.”

According to Modern Healthcare, in the cases where the DOJ won multimillion-dollar settlements against private equity firms, there was evidence the firms at least knew about the fraud. In some cases, there was evidence they were driving it.

The private equity investment model, which typically targets outsized returns over relatively short time horizons, may incentivize profit-seeking tactics that are harmful to patients. 

Earlier this year, the Private Equity Stakeholder Project (PESP) published a report detailing how private equity strategies to squeeze profits out of healthcare companies—such as understaffing, overcharging for services, overfilling capacity—may run afoul of the law.

Money for Nothing: How private equity has defrauded Medicare, Medicaid, and other government health programs, and how that might change.”

Another recent PESP report found alarming and harmful practices, including deceptive marketing and pressuring staff to increase sales of dental services and products; drilling into healthy teeth and setting quotas for expensive procedures; and performing medically unnecessary root canals on babies and fraudulently billing Medicaid.

Deceptive Marketing, Medicaid Fraud, and Unnecessary Root Canals on Babies: Private Equity Drills into the Dental Care Industry

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