An amendment to the Massachusetts False Claims Act (Massachusetts FCA) targeting private equity investors is scheduled to go into effect on April 8, 2025. This development is noteworthy, as it signals increasing state scrutiny of the role of private equity in healthcare.
Massachusetts House Bill 5159 (H.5159), “An Act Enhancing the Market Review Process” (the Amendment), was signed into law on January 8, 2025. Along with broadening reporting requirements for private equity transactions, the Amendment expands liability under the Massachusetts FCA to explicitly include private equity firms and other investors.
Increased Federal and State Scrutiny of Private Equity in Healthcare
Over the last year, there has been increasing federal and state focus on private equity’s influence in healthcare. For example:
- In March 2024, DOJ, HHS, and the FTC jointly issued a Request for Information to assess the impacts of corporate ownership, including private equity, on healthcare delivery. In January 2025, HHS issued a report synthesizing findings and key points from comments submitted in response to the RFI. According to the report, many commenters believed that private investment in health care services had resulted in “higher prices, reduced access, and lower quality care” and, as such, the agency concluded, “HHS, DOJ, and FTC must continue to monitor and address these issues, welcome partnerships with states and Congress to prevent harm from further consolidation, and collaborate with public and private partners in identifying effective remedies.”
- Similarly, an August 2024 Congressional Research Service (CRS) report raised concerns about private equity firms prioritizing short-term profits at the expense of patient care, potentially increasing legal risks under fraud and abuse laws.
- Finally, the FTC has taken an active role in challenging private equity acquisitions that may harm competition and drive up healthcare costs. In January 2025, the FTC secured a settlement with private equity firm Welsh, Carson, Anderson & Stowe (WCAS) regarding allegations that WCAS, through its portfolio company U.S. Anesthesia Partners (USAP), engaged in anticompetitive acquisitions to suppress competition and drive up prices for anesthesiology services in Texas. On March 6, 2025, the FTC filed a lawsuit to block private equity firm GTCR’s proposed $627 million acquisition of Surmodics, a medical device coatings manufacturer, arguing that the merger would lead to a highly concentrated market for outsourced hydrophilic coatings and eliminate significant head-to-head competition, potentially increasing healthcare costs.
The Amendment to the Massachusetts FCA represents the latest state action targeting the role of private equity in health care.
Amended Massachusetts FCA
The Massachusetts FCA imposes civil liability for conduct that generally tracks the federal FCA, including, for example, knowingly presenting, or causing to be presented, a false or fraudulent claims for payment or approval to the Commonwealth of Massachusetts or one or its political subdivisions.
Unlike its federal counterpart, the amended Massachusetts FCA imposes liability on any person or entity that (i) “has an ownership or investment interest” in an entity that violates the Massachusetts FCA (ii) “knows about the violation,” and (iii) “fails to disclose the violation” to the Commonwealth of Massachusetts or a political subdivision thereof “within 60 days of identifying the violation.” Under the amended statute, “ownership or investment interest” is defined to include any:
- “direct or indirect possession of equity in the capital, stock, or profits totaling more than 10 percent of an entity”;
- “interest held by an investor or group of investors who engages in the raising or returning of capital and who invests, develops or disposes of specified assets”; or
- “interest held by a pool of funds managed or controlled by private limited partnerships, if those investors or the management of that pool or private limited partnerships employ investment strategies of any kind to earn a return on that pool of funds.”
As noted above, the private equity investors would be liable under the Massachusetts FCA only if, among other things, they “know” of the violation committed by the entity in which they hold an ownership or investment interest. The knowledge standard under the Massachusetts FCA mirrors that under its federal counterpart. Specifically, under the Massachusetts FCA, knowledge includes not just “actual knowledge,” but also “acting with deliberate ignorance of the truth or falsity of the information or acting in reckless disregard of the truth or falsity of the information.”1
Implications for Private Equity Firms and Investors
The amended Massachusetts FCA is further evidence that the scrutiny of private investments in health care is continuing to grow. Given that scrutiny, private equity firms would be well advised to consider whether their health care investments have sufficient compliance monitoring and controls. Additionally, given the greater potential for direct liability, private equity firms may wish to devote more resources to health care diligence when considering future investments.
- The Massachusetts FCA amendment also extends liability to a “beneficiary of an inadvertent submission of a false claim” or “beneficiary of an overpayment” in the event the beneficiary “subsequently discovers the falsity of the claim or the receipt of overpayment and fails to disclose the false claim or receipt of overpayment” within the timeframe allotted under the statute. On the federal side, the “report and return” statute added by the Affordable Care Act provides that the improper retention of a federal health care program overpayment (i.e., beyond the timeframe specified by statute to report and return the overpayment) constitutes an “obligation” under the federal FCA. The federal FCA provides for civil liability in the event that a person “knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property” to the federal government.” ↩︎
