Healthcare Private Equity and Compliance: Did Someone Say Fractional Compliance Officer?

The scenario: You’re a private equity-backed healthcare company with a rapid growth strategy, ramping up fast in all areas, and you need to either build from scratch, or build upon, your compliance program foundation. Ideally, with a simple, cost-effective solution. What to do?

Enter the Fractional Compliance Officer: A “fractional” compliance officer is a contract consultant with excellent professional credentials, who can map out and implement strategy, effectively work with stakeholders at all levels, and whose services can be purchased as needed, on an hourly or project basis. An FCO provides entities that need lots of expertise, especially early in their lifecycles, but only in a limited amount or for a limited time, with services delivered in a form that is efficient, flexible, and scalable. FCO arrangements are suitable for every type of healthcare company, whether they are a provider-focused/management service organization, drug or medical device manufacturer, senior/longterm care, or pharmacy.

How does it work? A typical engagement involves determining the scope of work, sometimes through a gap analysis, then focusing efforts on whatever areas were identified, whether board or leadership relations, or development of various compliance infrastructures, like policies and procedures, training and education programs, or audit programs. The overall goal is to lay in a sound foundation as quickly as reasonably possible, then leverage internal resources to efficiently manage the program from day to day. Depending on the size, type and circumstances of the entity, anywhere from just a few hours to several days per week may be needed perform this foundational work.

Do we really need it? Compliance programs, especially in these times of active Fraud Waste & Abuse enforcement, add value to healthcare companies, because: 1) they protect the company, its leadership and providers from direct liability; 2) compliance programs differentiate companies, whose market competitors often have either thin or no programs; 3) the Fraud Waste & Abuse enforcement environment continues to get even worse, with no slowdown in the number or amount of DOJ or OIG False Claims Act recoveries in sight; and, perhaps most importantly, 4) nearly all FCA enforcement actions today (90%+), are brought by whistleblowers, who are present in far too many companies, where the alleged misconduct is often an open secret that everyone knows about.

Don’t get a FCO if: 1) your company has a very high risk tolerance; 2) you view a possible enforcement action as just another cost of doing business, which you’ll deal with if and when it happens; or 3) you do not believe in the adage “an ounce of prevention is worth a pound of cure.” Many enforcement actions, including some recently, have clearly shown us that most issues, especially the big ones, are preventable with an effective compliance program in place. That being the case, why would any company choose to risk so much – potentially huge litigation costs, massive penalties, reputational harm, business disruption, and unrealized bona fide business opportunities – when a sensible alternative exists? Put another way, why lose sleep at night?

Reid Pearlman, JD, CCEP, of True Compliance Consulting, LLC dba MyComplianceOfficer.net, welcomes inquiries and engagement opportunities from healthcare private equity-backed companies, and other healthcare entities, who may need a Fractional Compliance Officer or other compliance consulting services. He can be reached at Reid@MyComplianceOfficer.net.