"Right now, we’re focused on ending these outrageous surprise billing practices that these firms are profiteering off of, but I am certainly open to looking into their practices in other parts of our health care system in the future," Pallone said.

Stoking lawmakers' concerns has been an effort by laid-off workers to demand action from Congress and the private equity firms themselves. Hill aides give credit to the labor advocacy group United for Respect that has organized former employees of Toys "R" Us and other struggling retailers controlled by private equity firms. Americans for Financial Reform, a coalition that includes the AFL-CIO, has made private equity legislation a top priority.

Among the lawmakers moved by the stories of laid-off retail workers is Sen. Tammy Baldwin (D-Wis.). She signed on to Warren's plan to crack down on the industry after Shopko, a Wisconsin-based retailer, filed for bankruptcy in January following a private equity takeover in 2005.

Baldwin said private equity firms have made sustainable, job-creating investments in companies in Wisconsin but she called the Shopko buyout and ensuing layoffs "predatory."

"We need to rip up the predatory playbook that private equity firms are using to leave workers with nothing but pink slips," she said.

Such criticism incenses the industry.

"Our private equity portfolio companies added over 100,000 net jobs during our ownership in the past 15 years, underlying their good performance," said Stephen Schwarzman, CEO and co-founder of Blackstone, in October.

The American Investment Council said it’s “important to consider the industry’s full record instead of focusing on single anecdotes."

“You’re cherry picking over a 30-year period a handful of things they say they don’t like,” added one senior official at a major private equity firm who declined to be identified. “You need to step back and think about the airlines dumping their pensions plans in the 2000s. The auto bailouts. The S&L crisis. Private equity has not cost the taxpayers a dime.”

In addition to ads and op-eds, the American Investment Council released research that it produced with Ernst & Young touting private equity’s economic benefits. And the U.S. Chamber of Commerce is trying to bolster the case with its own study that warns of grave consequences from Warren’s legislation.

“Millions of jobs would be lost,” Chamber Executive Vice President Tom Quaadman told reporters on a call with the professor who drafted the business group's report.

A recent academic study by researchers from the University of Chicago, Harvard Business School and other institutions found mixed results of private equity takeovers — significant job losses following buyouts of companies traded on public stock markets but an uptick in employment after buyouts of privately held companies.

"This conclusion cast doubts on the efficacy of 'one-size-fits-all' policy prescriptions for private equity," they said.

Warren’s bill is such an affront to the private equity industry because it would fundamentally change how it does business. When the bill was being developed, Warren’s staff at her insistence spent last fall and winter trying to peel back the layers of the industry, an aide said. The focus of the legislation became the idea that PE firms have authority over their target companies but lack responsibility for the effects of their actions, creating the potential for moral hazard and abuses.

Under Warren’s bill, private equity firms would be liable for debt that’s imposed on companies they control, the pension obligations of the companies as well as government litigation the companies face. The legislation is unlikely to become law but the fact that it's gaining steam at all is rattling private equity.

“The elimination of the concept of limited liability for one particular method of investing and shredding the corporate veil is wildly dangerous,” said the senior private equity representative. “The idea you would familiarize that and desensitize it is a frightening thing.”

It has also caused concern among major investors that have benefited from returns provided by private equity funds.

The Institutional Limited Partners Association, which represents pension funds, endowments and insurance companies, is pushing for greater investor protections in the private equity industry. But the group is concerned that Warren's proposal would deter the firms from continuing to take the risk of running their funds or would cause them to hike fees to pay for insurance policies to protect themselves from greater liability.

"The things we're concerned about are things that would make it potentially difficult for a private equity firm to operate," said Christopher Hayes, the group's senior policy counsel.

It's a worry that's already being heard by lawmakers who are otherwise supportive of Warren's plan.

Sen. Sherrod Brown (D-Ohio), who is co-sponsoring Warren’s bill and wants to probe private equity's role in the housing industry, said in an interview that he was “not sure” about some of the liability issues raised by her legislation and that he wanted to think more about it.

If Democrats win back the Senate, Brown would be in line to chair the Banking Committee, which oversees financial markets as well as the regulators tasked with policing private equity.

“People see abuses, they see the pluses of it,” he said of private equity. “And I’ve talked to people who can give you chapter and verse of how it’s benefited companies and communities and made them more efficient and helped them grow when they couldn't find traditional financing. But you also hear when they come in and they put people out of work in the name of efficiency, but not really for that reason. I just want to know more."