A flood of private equity investment is transforming the U.S. healthcare industry. Across the healthcare economy, private equity firms are rapidly acquiring medical practices and healthcare businesses and rolling them up into larger companies.
Private equity firms pool money from investors—typically institutional investors—and use debt to purchase businesses with the goal of generating short-term profits. These investments coincide with increasing concern that private equity’s single-minded pursuit of profit comes at the expense of fraudulent billing and diminishing quality of care. According to a 2021 report by the National Bureau of Economic Research, patients in a private equity-owned nursing home faced an increased short-term probability of death of about 10 percent, while claims submitted by PE-owned facilities were 11 percent higher than competitors.
We sat down with Dallas-based whistleblower attorney Caitlyn Silhan to discuss how private equity investment is impacting the healthcare industry and what it means for Texas patients. Silhan is a partner in the Dallas offices of Waters Kraus Paul & Siegel, where she devotes most of her practice to representing whistleblower clients in qui tam litigation exposing fraud under the False Claims Act.
Waters Kraus Paul & Siegel: Why should Texans be concerned when private equity groups invest in medical practices and healthcare businesses?
Caitlyn Silhan: Private equity firms are in existence to make money — which in and of itself isn’t a problem. But real concerns arise when the private equity playbook and its focus on squeezing out short-term profits is applied to our healthcare system.
We’ve seen this trend accelerating over the last 10 years, and in that time, there’s been an uptick in the number of acquisitions of medical practices and healthcare companies by private equity firms. Patients are left with far fewer choices for medical care, and too often we see diminished quality of care and higher prices. We know this is occurring because of the growing number of whistleblower lawsuits filed under the False Claims Act that are exposing a range of fraud, over-billing, and illegal kickbacks by private equity-owned companies abusing the system for profit.
Waters Kraus Paul & Siegel: What areas of the healthcare sector are impacted by private equity investment and ownership?
Caitlyn Silhan: Healthcare is a more than $4 trillion industry, and we’ve seen private equity investing in just about every area. That includes physician practices, urgent care, lab diagnostics, hospice care, mental health, applied behavior analysis (ABA), and nursing homes. Smaller practices and businesses are being acquired and absorbed into larger companies. In many regions, a single private equity-funded business owns the majority of certain specialty practices.
Waters Kraus Paul & Siegel: What is an example of the fraud and kickback cases you referenced?
Caitlyn Silhan: Some of the common schemes we see involve healthcare companies fraudulently billing Medicare and Medicaid for services that patients either aren’t eligible for, didn’t receive or received from unqualified providers. In terms of illegal kickbacks, we’ve seen allegations that private equity firms funded illegal commissions of their portfolio companies to third-party marketers. This is not only illegal, but these activities also drive higher prices and diminished quality of care for patients receiving care throughout the system.
Waters Kraus Paul & Siegel: What role do whistleblowers play in exposing fraud?
Caitlyn Silhan: In many ways, the government lacks both the resources and the ability to keep watch over the
entire healthcare sector, so whistleblowers play an indispensable role in protecting the government and taxpayers from fraud, waste and abuse. The False Claims Act empowers whistleblowers to come forward with information that the government can use to expose those abusing the system and recover financial damages and penalties.
Whistleblowers can be physicians, practitioners, staff or anyone else who may have knowledge of fraudulent activity. There is no requirement that whistleblowers be insiders; indeed, they can even be third parties who may discover, for example, that a competitor obtained an unfair competitive advantage using fraud. What’s critical is that whistleblowers bring original information to the government about illegal activities that are occurring. By law, whistleblowers are entitled to a percentage of any recovery in their case, usually between 15 to 30 percent.
For example, I recently represented a whistleblower who bravely raised concerns internally about unqualified and inadequately supervised clinicians treating Medicaid patients at the chain of mental health clinics where she worked. She was then fired.
She is a person of tremendous integrity, and her courage and persistence in taking on not only her former employer, but the private equity company that acquired it, resulted in the recovery of $29 million in taxpayer money. Her efforts in the trailblazing case brought a large mental health provider into compliance with regulations designed to ensure the quality of care for services provided to an extremely vulnerable population. Helping her achieve this result in her qui tam case was an absolute privilege.
Waters Kraus Paul & Siegel: What should you do if you are a whistleblower?
Caitlyn Silhan: Anyone who thinks they want to pursue a whistleblower case exposing healthcare fraud should contact an experienced False Claims Act attorney before taking any action. By law, whistleblowers cannot initiate a case without help from a lawyer— it’s actually a requirement to bring a whistleblower complaint.
An attorney with experience in this area can also help whistleblowers facing retaliation by their employer. A good whistleblower lawyer will strike a balance between protecting their client and providing sufficient evidence for the government to pursue and succeed in a case.
How Do We Fight Fraud Against the Government?
Seek justice on behalf of taxpayers with the help of our experienced attorneys. Our Dallas, Texas, whistleblower team has battled corporate giants for 20 years, aggressively fighting to hold corporations, individuals and other entities accountable for fraud committed against the government. If you believe you have a whistleblower case, we can help.