Modernizing Medicine settled the allegations by the DOJ that it violated the Anti-kickback Statute in exchange for $45 million on November 1. US Attorney Nikolas Kerest, representing the District of Vermont, summarized the case in a press release, stating:
“It is imperative that medical providers be able to trust the health record systems with which they document important and sensitive patient information, and for too long electronic health record vendors have prioritized only sales. The government alleges that for years, ModMed, through a variety of schemes, engaged in illegal kickbacks that distorted both the EMR and pathology lab markets, in addition to providing its users with a deficient product.”[1]
Let’s start with the apparently unobvious. Kickbacks are bad in healthcare. You can protect yourself in a myriad of ways, but if you juice the expenditure of federal dollars for your product and encourage your customers and business partners to help with the juicing, you will get fined tens of millions of dollars (at least). What is a kickback? Well, anything could be, including, without limitation cash, credits, or heavily discounted items. This blog discussed the case when the DOJ filed its initial complaint-in-intervention, and I encourage you to read that post as background. If you just read “electronic health record” and “kickback” together for the first time, I recommend you start with “How to Sell Healthcare Technology Without Going to Jail.”
What were the kickbacks here? There were 2 primary issues in play. First, and the focus of this post, was a program between Modernizing Medicine and a lab to provide a heavily discounted electronic health record (“EHR”) systems in exchange for increased pathology tests referrals to said lab. Second, Modernizing Medicine allegedly reimbursed users, consultants, and others with market influence for referrals of its technology.
The Government would need to prove that Modernizing Medicine:
- Knowingly and willfully solicited, offered, paid, or received anything of value (indirectly or directly);
- In exchange for a referral or purchase of;
- Any good, facility, service, or item for which payment may be made in whole or part under a federal healthcare program.[2]
Allegedly, the lab in question would “donate” Modernizing Medicine’s EHR technology to certain healthcare providers. It made those donations based on projected referral volumes of pathology orders. This was not arms-length: rather, the Government alleged that the sales departments between the companies collaborated and coordinated rather extensively. The Government also alleged that Modernizing Medicine then attempted to drive pathology orders to this lab by improving its orders interface with it, but not making such improvements available with other labs. These improvements translated to less redundant and duplicative documentation for healthcare providers when submitting orders for pathology tests.
Here, Modernizing Medicine would have violated the AKS because it 1) received new customers and the recommendation of its software in the form of a donation (our indirect kickback), 2) in exchange for the purchase of new lab pathology orders by healthcare providers (this is the “volume” requirement to get the donation), and 3) lab pathology orders are reimbursed by Medicare and Medicaid.
I would be remiss if I did not mention the 21st Century Cures Act, which was passed after much of the conduct alleged in the complaint. That statute prohibits the material interference of the access, exchange, or use of electronic health information by certified EHR vendors. A practice of making certain interface features available to one business partner and not another, simply on the basis of receiving referrals from them, would certainly implicate information blocking. Information blocking carries a potential fine of $1 million per instance.
Healthcare technology vendors should have their guards up. Want to know what to avoid? Start here:
How to Sell Healthcare Technology Without Going to Jail
The Anti-kickback Statute and Healthcare Technology Contracts
Health IT Certification: When It Goes Wrong
[1] https://www.justice.gov/opa/pr/modernizing-medicine-agrees-pay-45-million-resolve-allegations-accepting-and-paying-illegal.
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