Private equity firms paid nearly $22M to settle medical group fraud claims last year

Private equity companies with physician groups in their portfolios are being held accountable for False Claims Act violations and will continue to face scrutiny from the Justice Department this year.

"With the government now having secured multiple settlements involving private equity firms, it is likely that the perceived deep pockets of private equity investors will remain a continued [False Claims Act] target," according to an article published in JDSupra, a legal analysis company.

Last July, Anchor Holdings-backed national electroencephalography company Alliance Family of Cos., paid $15.3 million to resolve claims that it paid kickbacks to referring physicians. The company allegedly paid physicians to refer patients for EEG tests. It was accused of interpreting the results for free but allowing primary care physicians to bill for services as if the physicians had interpreted the tests.

Alliance also allegedly billed inaccurate codes for higher reimbursement. Anchor, a private equity company, allegedly knew of the kickbacks before investing in Alliance and allowed the practice to continue after investing. Anchor paid about $1.8 million of the settlement to the federal government to resolve the claims.

H.I.G. Capital and its growth equity affiliate H.I.G. Growth Partners were also dinged last year after one of its portfolio companies, South Bay Mental Health Center in Boston, was accused of submitting false claims to MassHealth, Massachusetts' Medicaid program. South Bay Mental Health Center and H.I.G. agreed to pay $25 million to settle allegations that unlicensed, unqualified and improperly supervised staff treated patients at its clinics.

The settlement resolved allegations that H.I.G. knew about the violations and false claims and didn't rectify them. H.I.G. paid $19.95 million of the settlement.

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