Recent DOJ Settlement With NextGen Highlights Continued Enforcement Focus on Electronic Health Records Technology Vendors

On July 13, NextGen Healthcare Inc. (NextGen), an electronic health record (EHR) software vendor, reached an agreement with the Department of Justice (DOJ) and the Office of Inspector General of the Department of Health and Human Services (HHS) to pay $31 million to resolve alleged False Claims Act and Anti-Kickback Statute violations.^[1] The settlement is the latest in a series of enforcement actions brought by DOJ against EHR vendors, and reflects DOJ’s continued scrutiny of health care technology companies as networks and providers increasingly rely on third-party software to support patient care.

DOJ’s Recent Settlement With NextGen

The allegations regarding NextGen’s EHR system pertain to the Center for Medicare & Medicaid Services’ (CMS) EHR Incentive Program.^[2] That program made incentive payments to eligible health care providers that adopted certified EHR technology and demonstrated their “meaningful use” of that technology by meeting certain requirements. To obtain certification, the EHR developer must show that their product satisfies the applicable HHS-adopted certification criteria. The developer must also identify any software components on which their EHR system relies to meet criteria. An independent, accredited testing laboratory authorized by HHS tests the EHR’s capabilities. If the software passes that testing, a separate independent, accredited certification body decides whether to certify the EHR and conducts ongoing surveillance of its capabilities.

The action against NextGen dates back to 2018, when two health care professionals at a facility that used NextGen’s software brought a qui tam action alleging (i) that NextGen’s EHR system suffered from pervasive flaws that made it incapable of meeting CMS Meaningful Use standards, causing both NextGen and providers that used the system to have received incentive payments in violation of the False Claims Act, and (ii) that NextGen violated the Anti-Kickback Statute by providing remuneration to decision-makers to influence their decision to purchase NextGen EHR products.^[3]

DOJ’s complaint filed in conjunction with the recent settlement alleged that NextGen falsely obtained certification for its software.^[4] In particular, the government alleged that NextGen relied on an auxiliary product designed only to pass the certification test scripts and accordingly concealed from the certifying entity that NextGen’s actual EHR system lacked critical functionality, including the ability to record vital sign data, translate data into required medical vocabularies and create complete clinical summaries.

DOJ also alleged that NextGen violated the Anti-Kickback Statute, which prohibits anyone from offering or paying any remuneration to induce referrals of items or services covered by federally funded programs (including Medicare and Medicaid). DOJ alleged that NextGen violated this statute by knowingly giving credits, often worth as much as $10,000, or other remuneration (such as tickets to sporting events and entertainment) to existing customers whose recommendation of NextGen’s EHR software led to a new sale.

Under the terms of the settlement agreement, NextGen agreed to pay $31 million to resolve these allegations, which represented double the alleged injury suffered by the United States due to NextGen’s conduct, plus $1.2 million in attorneys’ fees.[5] Notably, the settlement agreement did not require NextGen to admit liability, submit to corporate monitoring or make changes to its EHR software.

DOJ’s Prior Enforcement Actions Against EHR Vendors

The DOJ’s recent settlement with NextGen is the latest in a series of negotiated resolutions with EHR vendors, and demonstrates the government’s continued focus on alleged fraud and abuse arising out of CMS’ incentive payment programs. In many of the prior actions, the relators’ initial complaints focused on alleged performance failures with the EHR software, while DOJ’s complaints in intervention and settlement agreements tend to highlight allegations of fraud or other misconduct during the certification testing process or detailed kickback schemes. DOJ often alleges that the EHR vendor violated both the False Claims Act because its software did not satisfy HHS requirements for certification and the Anti-Kickback Statute by either (i) receiving kickbacks from pharmaceutical companies in exchange for promoting certain medications to health care providers through the EHR software or (ii) providing kickbacks to providers in exchange for using or recommending the vendor’s EHR software. In several recent settlements, EHR vendors agreed to enter into multiyear Corporate Integrity Agreements, requiring vendors to retain an independent software oversight organization to assess the software’s quality control or to retain an independent review organization to ensure compliance with the Anti-Kickback Statute.

For example, in May 2017, EHR vendor eClinicalWorks paid $155 million to resolve allegations that it had violated the False Claims Act and Anti-Kickback Statute.^[6] As in its complaint against NextGen, the government alleged that eClinicalWorks improperly obtained certification of its EHR software by programming its software to pass only the certification test conducted by the certifying entity without actually meeting the broader certification standards. The government further alleged that eClinicalWorks paid kickbacks to certain customers in exchange for promoting its EHR software. As part of its settlement with the government, eClinicalWorks consented to a five-year Corporate Integrity Agreement and agreed to retain independent oversight organizations to assess the company’s software quality control and ensure compliance with the Anti-Kickback Statute.

In February 2019, EHR vendor Greenway Health paid $57.25 million to resolve allegations that it had violated the False Claims Act and Anti-Kickback Statute.^[7] The government alleged that Greenway Health falsely obtained certification of its EHR software by modifying its test version of the software to pass the certification test conducted by the certifying entity without actually meeting the applicable certification standards. The government further alleged that Greenway Health paid money and incentives to its client providers to recommend its EHR software to prospective new customers. Greenway Health also consented to a five-year Corporate Integrity Agreement and agreed to retain independent oversight organizations to assess the company’s software quality control and ensure compliance with the Anti-Kickback Statute.

And in November 2022, EHR vendor Modernizing Medicine paid $45 million to resolve allegations that it had violated the False Claims Act and Anti-Kickback Statute.^[8] The government alleged that Modernizing Medicine paid kickbacks to health care provider customers to recommend its EHR software to potential customers and received kickbacks from Miraca, a pathology lab service provider, in exchange for arranging for Modernizing Medicine’s users to utilize Miraca’s lab services. The government further alleged that Modernizing Medicine knew that its EHR software did not meet certain “meaningful use” requirements, thereby causing certain software users to submit false claims for incentive payments.

Our Success in Achieving Dismissal of EHR False Claims Act Case

Our attorneys have successfully litigated a case alleging that our client, a hospital system, received over $385 million in meaningful use incentive payments in violation of the False Claims Act and Anti-Kickback Statute. We achieved full dismissal of the case, with prejudice, at the pleading stage.^[9] In that case, we conducted a thorough investigation of the relators’ allegations, and the government thereafter declined to intervene. The relators filed an amended complaint, alleging that the hospitals fraudulently attested to meeting the meaningful use requirements and received incentive payments from the government, even though they knew that required functions were missing or broken in the software. The relators further alleged that the health information technology company secured certification for its software, despite knowing that it did not meet mandatory requirements, and alleged that the defendants violated kickback prohibitions by arranging for the technology company to provide its financial software to hospitals for free in exchange for those hospitals purchasing licenses of the firm’s EHR software.

Defense counsel argued, and the court agreed, that the relators had failed to plead particular facts demonstrating any alleged fraud or knowledge of such fraud, as opposed to identifying that the defendants had received isolated reports of certain software performance issues. While the complaint alleged facts suggesting that the rollout of the EHR software at hospitals had been “chaotic” and that “many features did not work properly,” it did not explain how these performance issues resulted in the defendants failing to satisfy the meaningful use requirements or otherwise made their attestations fraudulent. Moreover, the relators failed to identify any person at any hospital or its related corporate entities who knew that any hospital attestation may have been false, or who hid or manipulated any concerns or knowledge of relevant software defects. The court also rejected the relators’ kickback theory, concluding that the alleged arm’s-length transaction fell outside the scope of the statutory prohibition because the relators had not alleged that any remuneration had been offered or paid to induce the hospitals’ purchase of the EHR licenses.

Conclusion

The government’s incentive payment program encouraging the development and adoption of certified health technology has resulted in significant outflows of federal funding to health technology companies and providers that incorporate this software into their practices. But the DOJ and relators continue to scrutinize such payments under both the False Claims Act and Anti-Kickback Statute and will likely continue to bring suits against EHR vendors who improperly obtain certification for their products or providers who falsely attest to meeting the required usage metrics. EHR vendors and providers who receive incentive payments for using EHR systems should be mindful of the government’s continued focus in this area and consider seeking guidance if they identify issues around either the certification process or the day-to-day functionality of such software.

^[1] _{Electronic Health Records Vendor NextGen Healthcare Inc. to Pay $31 Million to Settle False Claims Act Allegations, https://www.justice.gov/opa/pr/electronic-health-records-vendor-nextgen-healthcare-inc-pay-31-million-settle-false-claims (July 14, 2023).}

^[2] _{In April 2018, CMS added additional interoperability requirements and changed the name of the program to the Medicare and Medicaid Promoting Interoperability Program. 83 Fed. Reg. 41,144, 41,150 (2018). The Medicaid portion of the program has ended. See 42 C.F.R. § 495.310(a)(2)(v) (ending Medicaid payments in 2021). While the Medicare program is ongoing, it no longer offers incentive payments — instead, hospitals must attest to meaningful use to avoid a downward payment adjustment. See 87 Fed. Reg. 48,780, 48,786 (2022) (finalizing changes to Medicare program for 2023); CMS 2023 Program Requirements, https://www.cms.gov/regulations-guidance/promoting-interoperability/2023-program-requirements (Jan. 4, 2023).}

^[3] _{Complaint, U.S. ex rel Markowitz, et al. v. NextGen Healthcare Inc., No. 2:18-CV-195 (D. Vt.), Dkt. No. 1.}

^[4] _{Complaint in Intervention, U.S. ex rel Markowitz, et al. v. NextGen Healthcare, Inc., No. 2:18-CV-195 (D. Vt.), Dkt. No. 23.}

^[5] _{NextGen Settlement Agreement, https://www.justice.gov/media/1305766/dl?inline (July 13, 2023).}

^[6] _{Electronic Health Records Vendor to Pay $155 Million to Settle False Claims Act Allegations, https://www.justice.gov/opa/pr/electronic-health-records-vendor-pay-155-million-settle-false-claims-act-allegations (May 31, 2017).}

^[7] _{Electronic Health Records Vendor to Pay $57.25 Million to Settle False Claims Act Allegations, https://www.justice.gov/opa/pr/electronic-health-records-vendor-pay-5725-million-settle-false-claims-act-allegations (Feb. 6, 2019).}

^[8] _{Modernizing Medicine Agrees to Pay $45 Million to Resolve Allegations of Accepting and Paying Illegal Kickbacks and Causing False Claims, https://www.justice.gov/opa/pr/modernizing-medicine-agrees-pay-45-million-resolve-allegations-accepting-and-paying-illegal (Nov. 1, 2022).}

^[9] _{United States ex rel. Lewis and Neiman v. Medhost, Inc. et al., Case No. 18-cv-20394 (S.D. Fla. June 11, 2020), Dkt. 157.}