8. Healthcare Fraud – Increased Risk for PE Investors BY TAYLOR CHENERY
As PE investment in the healthcare industry has increased dramatically in recent years, investors have faced increased scrutiny and potential exposure for liability under the False Claims Act (FCA). The government and private whistleblowers increasingly have targeted PE firms’ portfolio companies and the firms themselves in fraud and abuse enforcement efforts. PE firms and owners have been named as defendants in and agreed to pay funds to settle numerous recent FCA enforcement actions. Moving forward, PE investors and their portfolio companies must consider ways to protect themselves and limit potential exposure when investing in healthcare, including: • Conduct comprehensive diligence about the target company and the sector in which it operates. • Maintain effective compliance functions that, where practicable, are separate from business and financial personnel and have a direct line of communication to the board and/or the company’s chief decision makers. • Make deliberate and informed decisions about how much direct involvement the PE investors will have in the portfolio company’s operations. 9. Healthcare Regulatory – No Surprises/Surprise Medical Billing BY JEFF DAVIS Healthcare providers will continue to face challenges in 2023 related to the implementation of the No Surprises Act (NSA). The NSA banned surprise medical billing (also called “balance billing”) in certain cases where insured patients are treated out-of-network and placed limits on how much providers can charge insured patients. The NSA created a federal independent dispute resolution (IDR) process to address out-of-network payment disputes between providers and payers, and the government’s implementation of the IDR process continues to face legal challenges, with providers arguing that the regulations favor payers over providers. Depending on the outcome of the litigation, the government could further revise the IDR regulations in 2023. The NSA also required providers to share a good faith estimate (GFE) of expected charges with uninsured and self-pay patients. Although HHS has delayed enforcement of certain provisions of the GFE requirements related to co-providers, the overall GFE requirements continue to be in effect. 10. Unique Approaches to Incentivize Employees BY BRITTANY MCCANTS Many clients continue to face unique challenges in structuring compensation packages to compete for talent in tight markets. As executives and board members evaluate incentive compensation vehicles in 2023, below are a few conceptual items to frame the conversations: • Adopting a long-term incentive compensation plan is a key step for a company to reward its employee base. Identifying the demographics of your employee base and their values is imperative. For example, younger employees tend to prefer access to cash versus equity that does not provide immediate value and will require an investment of their own limited capital (considering student loans and consumer debt). The type of equity to be offered is also a critical decision point. Stock options and restricted stock units are not taxable on grants. However, the appreciative value of these awards and the delay in their taxation can create barriers to accessing the benefit of these awards because of the significant tax impact on the employee upon vesting or settlement, as applicable. Companies will need to carefully evaluate the use of net settlement features and the recycling terms of their incentive plans to ensure alignment with meeting employee needs and equity plan operational compliance. Granting restricted stock
6 | BASS, BERRY & SIMS
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