CareCloud to pay $3.8M to settle charges it provided kickbacks to generate EHR sales

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The DOJ alleges that CareCloud’s payments to participants violated the federal Anti-Kickback Statute and also violated the False Claims Act because the kickback payments rendered false Meaningful Use and Merit-Based Incentive Payment System payments. (Getty/designer491)

A Miami-based developer of electronic health records software will pay $3.8 million to resolve a whistleblower’s allegations that it paid illegal kickbacks to generate sales.

The Justice Department alleges that CareCloud Health's "Champions" marketing referral program violated the False Claims Act and Anti-Kickback Statute by providing clients a variety of inducements to recommend its EHR program to prospective clients, including cash bonuses and percentage-success payments, according to a press release issued Friday.

Those clients also signed agreements to not say anything negative about the company’s EHR, according to the DOJ.

An employee filed a whistleblower lawsuit (PDF)  in federal court in Miami, Florida alleging the company paid kickbacks to its users. Former CareCloud manager Ada de la Vega will receive about $800,000 of the settlement (PDF) as the filer of the qui tam lawsuit.

I filed the qui tam lawsuit because I was hearing concerns from doctors, so I wanted the government to investigate. I was worried about patient safety and believe it is important that companies follow the rules," said de la Vega in a statement issued by law firm Phillips & Cohen LLP, which represented her in the whistleblower suit. 

The United States joined the suit, alleging that CareCloud’s payments to participants violated the federal Anti-Kickback Statute and also violated the False Claims Act because the kickback payments rendered false Meaningful Use and Merit-Based Incentive Payment System (MIPS) payments.

According to the DOJ's settlement agreement, the alleged kickbacks took place between January 1, 2012 and March 31, 2017.

RELATED: ResMed to pay more than $37.5M to settle kickback allegations made in 5 whistleblower lawsuits

On January 8, 2020, CareCloud, Inc. acquired the company now known as CareCloud Health, Inc. (formerly CareCloud Corporation). The acquired company was, at the time of the transaction, subject to a civil investigation, which began with the filing of a sealed complaint in 2017, according to a statement from the company emailed to Fierce Healthcare by a company spokeswoman.

The company has admitted no wrongdoing in this matter and has accepted settlement "in an effort to move forward, focusing its efforts fully on the vital support and services it provides to its clients, and avoid costly litigation," the company said in the statement.

Further, CareCloud executives said the settlement is in response to government allegations that certain elements of CareCloud Health’s client reference program violated the Federal Anti-Kickback Statute several years prior to acquisition.

"The U.S. government declined to intervene on and pursue any claims regarding CareCloud’s EHR product, Charts. The investigation was considered as an element of the acquisition, and adequate reservations were made," the company said.

CareCloud has discontinued the prior version of the marketing referral program that is the basis for this settlement, according to the DOJ press release.

“Product functionality, reliability and safety should drive a medical software company’s success, not illegal kickbacks paid to promote its products,” said Juan Antonio Gonzalez, Acting United States Attorney for the Southern District of Florida in a statement.

“There is simply no place for kickbacks in our country’s healthcare system. Companies who ignore this will be held accountable," Gonzalez said.

RELATED: Athenahealth to pay $18M to settle claims it provided kickbacks to generate EHR sales

“Medical software executives who unlawfully promote the capabilities of their electronic health record technology, and pay others to do the same, diminish their credibility and waste taxpayer money,” said Omar Pérez Aybar, Special Agent in Charge, U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG) in a statement.

HHS-OIG investigated the matter. Assistant United States Attorney Matthew J. Feeley handled the litigation.

Healthcare fraud is a frequent focus for the DOJ. The department said that it recovered $1.8 billion tied to fraud and false claims during fiscal year 2020 (ending Sept. 30, 2020), and has brought back more than $64 billion in total since 1986.

In January, health IT company Athenahealth agreed to pay $18.25 million to settle federal False Claims Act allegations that it paid sales kickbacks from 2014 to 2020, in another case brought by the DOJ.

A year ago, medical equipment maker ResMed was hit with a $37.5 million settlement to resolve DOJ allegations that it paid kickbacks to durable medical equipment suppliers, sleep labs and other healthcare providers.