Under a new 2025 law, Massachusetts is one of the first in the nation to broaden its state False Claims Act (FCA) to require disclosures by investors and owners of health care entities. On January 8, 2025, Governor Maura Healey signed into law H.5159, An Act enhancing the market review process (the Act), significantly changing Massachusetts’s regulatory and enforcement landscape. As discussed in further detail here, the law imposes FCA liability against investors and focuses on private equity and corporate ownership in health care. While this Act appears to be the first direct codification of FCA liability, it is consistent with the Department of Justice (DOJ) and Office of the Inspector General, U.S. Department of Health and Human Services’ (HHS-OIG) recent focus on private equity and the impact on health care.[1] While the DOJ has focused on private equity firms that allegedly knew of misconduct at portfolio companies and failed to stop it through their involvement in the operations of those companies, the MA FCA goes further by imposing liability on health care investors for merely being aware of misconduct and failing to report it to the state. H. 5159 expands the scope of the MA FCA enforced by the Commonwealth’s Attorney General[2] to apply to any person who has an “ownership or investment interest” and any person who violates the false claim statute that “knowingly” or “knows” about the violation[3] and fails to disclose the violation to the government within 60 days of identifying the violation. This is a significant expansion of the traditional protections afforded by the corporate veil and appears to be designed to hold private equity and other owners liable if they become aware of any MA FCA violations and fail to take action. 

As part of the expansion, the Act defines “ownership or investment interest” as any: (1) direct or indirect possession of equity in the capital, stock, or profits totaling more than ten percent of an entity; (2) 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 (3) interest held by a pool of funds by investors, including a pool of funds managed or controlled by private limited partnerships, if those investors or the management of that pool or private limited partnership employ investment strategies of any kind to earn a return on that pool of funds. This amendment clearly expands MA FCA liability to private equity investors and appears to codify the Massachusetts Attorney General’s approach in an October 2021 settlement with a private equity firm and former executives of South Bay Mental Health Center, Inc. for allegedly causing the submission of false claims submitted to MA’s Medicaid program.[1] 

Additional enforcement mechanisms codified in the Act include expanding the Attorney General’s authority to obtain information as part of a civil investigative demand from significant equity investors, health care real estate investment trusts, or management services organizations.[2]

We will continue to monitor this activity and any resulting litigation and its possible impact on organizations transacting business in Massachusetts.

[1] https://www.mass.gov/news/private-equity-firm-and-former-mental-health-center-executives-pay-25-million-over-alleged-false-claims-submitted-for-unlicensed-and-unsupervised-patient-care.

[2] To be codified at MGL 12, s. 11N.

[1] For example, see Justice Department, Federal Trade Commission and Department of Health and Human Services Issue Request for Public Input as Part of Inquiry into Impacts of Corporate Ownership Trend in Health Care, available at https://www.justice.gov/opa/pr/justice-department-federal-trade-commission-and-department-health-and-human-services-issue; see also, https://www.hhs.gov/about/news/2025/01/15/hhs-releases-report-consolidation-private-equity-health-care-markets.html

[2] To be codified at MGL 12, §§ 5A and 5B. 

[3] The Act clarifies that “knowing,” “knowingly,” or “knows” all mean “possessing actual knowledge of relevant information, 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; provided, however, that no proof of specific intent to defraud shall be required.”