Electronic health records provider Modernizing Medicine has agreed to pay $45 million to the federal government to settle a whistleblower lawsuit alleging that it violated the False Claims Act.
The U.S. Department of Justice (DOJ) joined the case against ModMed’s two founders and executives, Dan Cane and Michael Sherling, M.D., in March 2022 following an investigation. The complaint alleged that ModMed engaged in multiple kickback schemes and rewarded sources for recommending its EHR, among other charges, according to a DOJ press release.
The settlement resolves allegations filed in Vermont by a former ModMed vice president under the whistleblower provisions of the False Claims Act.
In a statement, ModMed denied the allegations of misconduct but has made the decision to settle for $45 million in order to fully resolve the matter. The settlement agreement does not include any admissions of wrongdoing, the company said.
"The settlement fully resolves this matter and does not require any changes to ModMed’s products, EHR certifications, existing programs, or compliance policies, and will not require any government monitoring. We have historically made substantial investments in our compliance programs and training and will continue to do so," company executives said in a statement.
The U.S. government alleged in the civil case that between January 2010 and July 2017, the Boca Raton, Florida-based EHR provider engaged in marketing programs that improperly generated sales for itself and for a clinical lab partner, Miraca Life Science, now known as Inform Diagnostics. The lawsuit alleges that Miraca compensated ModMed when its users sent laboratory orders to Miraca.
ModMed’s EHR allegedly gave Miraca exclusive “enhanced” laboratory interfaces in order to direct diagnostic testing business to Miraca, the government claims in the civil case.
Prosecutors said ModMed allegedly also rewarded influential customers and sources in healthcare to recommend its EHR and was aware that providers were receiving Medicare subsidies for those purchases. Financial rewards in the form of gift cards were offered if a new user adopted ModMed’s system after a demonstration of the EHR, according to the lawsuit.
“Electronic health records serve a critical role in informing physician decision making, and it is therefore essential that healthcare providers select such technology free from the influence of improper financial inducements,” said Principal Deputy Assistant Attorney General Brian Boynton, head of the DOJ’s Civil Division, in a press release. “Vendors of electronic health records will be held to the same standards of compliance that we expect of everyone who impacts the delivery of health care services.”
Under the False Claims Act and the Anti-Kickback Statute, the federal government alleges that healthcare providers submitted false claims for reimbursement to the federal government for pathology services provided by Miraca and generated by ModMed. Prosecutors also allege that ModMed incorrectly generated incentive payments through the Department of Health and Human Services for the implementation and “meaningful use” of ModMed’s systems.
Under the Anti-Kickback Statue, any remunerations used to induce referrals of items or services covered by federally funded programs including Medicare and Medicaid are prohibited.
“Resolution of this lawsuit is significant for a number of reasons, including that it reminds EHR vendors of the need to comply with the federal laws prohibiting kickbacks when entering into arrangements with third-party providers including laboratory and other diagnostic services providers within the EHR ecosystem,” Colette Matzzie, partner with the law firm Phillips & Cohen LLP and an attorney for the whistleblower in the case, said in a press release. “Steering clinicians to send orders to a preferred laboratory has the potential to inappropriately influence clinical decisions. Transparency of these financial relationships is essential for quality of care and beneficiary choice.”
The whistleblower, or “relator,” in question was Amanda Long, who held the role of vice president of product management at ModMed until her resignation in 2017. Long is currently CEO of BigBear.ai and former vice president of IT automation at IBM.
Whistleblowers can receive awards in the range of 10% to 25% of any recovery. Long will receive 20% of the settlement, or $9 million.
In January 2019, Miraca consented to pay $63.5 million to settle similar allegations that it violated the Anti-Kickback Statute and the Stark Law by providing subsidies to physicians who referred EHR systems and free or discounted technology consulting services.