Allscripts reports $145M settlement agreement with DOJ

Allscripts reported strong second-quarter bookings of $276 million up 31% from the prior-year period during the earnings call on Thursday. (Rostislav_Sedlacek/Getty)

Allscripts has reached a tentative deal with the Department of Justice to pay $145 million to settle an investigation into Practice Fusion's compliance with the Anti-Kickback Statute and HIPAA, company officials said during a second-quarter earnings call on Thursday.

Practice Fusion, an electronic health records company owned by Allscripts, received a grand jury subpoena in March as part of an ongoing government criminal investigation, as disclosed in a public filing with the U.S. Securities and Exchange Commission in May.

The subpoena requested information and documents about the certification Practice Fusion obtained for its health IT software in connection with the Electronic Health Record (EHR) Incentive Program overseen by the Office of the National Coordinator for Health IT.

Allscripts acquired Practice Fusion for $100 million in January 2018, a year after the company received an inquiry from the U.S. Attorney’s Office for the District of Vermont examining the company’s compliance with the EHR certification program as part of a criminal investigative demand. 

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Practice Fusion has since been rebranded as Veradigm with a focus on the payer and life sciences markets.

Allscripts officials said Practice Fusion has reached an agreement in principle with the DOJ, and if finalized, is intended to resolve all potential civil and criminal liability in connection with the investigations, Allscripts officials said.

"The DOJ began investigations into certain practices of Practice Fusion before we acquired the business early last year. These investigations have many similarities to investigations that have either been settled or remain active with many of our industry competitors," Allscripts President Rick Poulton said during the earnings call on Thursday.

After Allscripts acquired Practice Fusion, the DOJ investigations continued to expand and required expanding levels of resources from the company to support, Poulton said.

"The main focus has been on actions that occurred prior to our ownership and thus we were highly motivated to reach an accord with the DOJ as soon as possible so that we could put this chapter behind us and focus our team on serving our clients and realizing the significant opportunity that Veradigm has to bring value to the payer and life sciences markets," he said.

Poulton said the $145 million settlement, while "not insignificant," is in line with other settlements between the DOJ and electronic health record vendors to resolve claims related to falsified certification. 

In May 2017, Massachusetts-based eClinicalWorks agreed to pay $155 million to settle allegations that it violated the False Claims Act by falsely claiming its software met Meaningful Use requirements.

RELATED: Allscripts' Practice Fusion receives grand jury subpoena related to EHR certification, anti-kickback concerns

Poulton said the company expects to receive recoveries from third parties to help offset a portion of the $145 million that the company has agreed to pay the government but he didn't specify the names of the third-party organizations.

Responding to a question from a Wall Street analyst regarding additional compliance requirements from the DOJ settlement, Allscripts CFO Dennis Olis said there would be "other parameters that go beyond just writing a check" but did not provide details as the agreement is not finalized.

Olis said he did not expect any compliance measures related to the DOJ agreement to impede Allscripts' business.  

Q2 results

Allscripts reported strong second-quarter bookings of $276 million up 31% from the prior-year period during the earnings call on Thursday, and earnings during the quarter beat Wall Street estimates.

Allscripts reported adjusted earnings per share in the second quarter of $0.17 vs. $0.19 in the second quarter of 2018.

But the company fell short of revenue expectations with second-quarter revenue of $445 million, up 1% year over year.

Allscripts' strong bookings performance continued in the second quarter in both its provider and Veradigm businesses, Allscripts CEO Paul Black said.

The company saw strong second-quarter bookings across both its Sunrise and Paragon EHR customer bases, Poulton said. Allscripts is in an advanced stage of negotiations with Northwell Health to extend and expand its business relationship and that deal should be concluded by the end of the year, he said.

In the ambulatory market, Allscripts continues to see strong demand for its recycle cycle management services. To date, Allscripts' RCM services cover 6,000 providers representing $2 billion in annual billings, Poulton said.

The company raised its full-year 2019 bookings outlook to between $1.05 million and $1.1 million, up from the prior outlook of between $900 million and $1 million as the company anticipates strong performance in the second half of this year, Allscripts officials said.

"This is the result of our deliberate investments, along with the value we deliver to clients through our comprehensive and industry-leading solutions. We are well-positioned to drive long-term revenue and earnings growth, as we leverage our strategic platforms and maintain a disciplined capital deployment strategy," Black said.