Modernizing Medicine Settles False Claims Act Violations for $45 Million

The Justice Department continues to pile up healthcare enforcement actions — false claims, anti-kickback, and fraud.  DOJ is on its way to a record year.

In a recent enforcement action, Modernizing Medicine (“ModMed”), an electronic health record (“EHR”) vendor, agreed to pay $45 million for AKS and False Claims Act violations for receiving bribes in exchange for referrals and causing users to falsely report information about federal incentive payments.  (The AKS statute prohibits any person from offering or paying, directly or indirectly, any remuneration, money or any other thing of value, to secure referrals of items or services covered by Medicare, Medicaid and other federally funded programs).

ModMed violated the False Claims Act through three marketing programs:

First, ModMed solicited and received kickbacks from Miraca Life Sciences (“Miraca”) in exchange for recommending and arranging for ModMed’s users to utilize Miraca’s pathology services. Between January 2010 and December 2013, ModMed facilitated EHR donations to ModMed customers by Miraca that did not comply with the requirements of the AKS because the donation decisions took into account the volume or value of the referrals of laboratory tests or other business between EHR donation recipients that were ModMed customers and Miraca and therefore did not meet the requirements of the AKS safe harbor exception applicable to EHR donations, 42 C.F.R. § 1001.952(y).

ModMed customers submitted tainted claims for reimbursement to the federal health care programs for pathology services performed by Miraca from January 2010 to December 2013, and also submitted tainted claims for meaningful use incentive payments under the HHS EHR Incentive Programs (the “Meaningful Use Programs”) of the Centers for Medicare & Medicaid Services (CMS).

Second, ModMed conspired with Miraca to improperly donate ModMed’s EHR to healthcare providers to increase lab orders to Miraca and add customers to ModMed’s user base. In September 2013, Miraca paid ModMed an initial fee and increased transaction fees to develop and include in its EHR software, certain enhanced interface features that ModMed agreed, for a period of time, not to offer to any other pathology laboratory.

Third, ModMed paid kickbacks to its current health care provider customers and other influential sources in the healthcare industry to recommend ModMed’s EHR and refer potential customers to ModMed. As a result, the United States alleges that between January 2010 and July 2017, ModMed users submitted tainted claims for incentive payments under the Meaningful Use Programs.

The electronic health record industry has been the focus of False Claims Act investigations and enforcement actions.  DOJ’s focus recognizes EHRs are critical to informing physician decision making and ensuring that healthcare providers select EHR technologies free from improper influence.

According to DOJ, ModMed improperly generated sales for itself and for Miraca, while causing health care providers to submit false claims for reimbursement for pathology services and for incentive payments for the adoption of ModMed’s EHR system.

In January 2019, Miraca agreed to pay $63.5 million to resolve allegations it violated AKS and Stark Law by providing to referring physicians subsidies for EHR systems and free or discounted technology consulting services.

The False Claims Act was initiated by a qui tam relator, who received a payment of $9 million out of the $45 million settlement.

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