Calfee, Halter & Griswold LLPHealth Records Vendor Pays $155 Million Settlement Related to False Claims

June 6, 2017

On May 31, 2017, the Department of Justice announced a $155 million settlement with eClinicalWorks (ECW), an electronic health record (EHR) vendor, and several of ECW’s employees. According to its website, ECW has 850,000+ users across all 50 states and 24 countries, with revenues for 2016 exceeding $440 million. The settlement resolved allegations that ECW misrepresented the capabilities of its EHR software and paid illegal kickbacks to customers. The settlement came as a result of a qui tam action filed by a software technician who was implementing an ECW records system at Rikers Island for prisoner health care who became aware of “numerous software problems” that he alleged “put patients at risk.”

The Law

The EHR Incentive Program: The American Recovery and Reinvestment Act of 2009 authorized the Centers for Medicare & Medicaid Services to award incentive payments to eligible professionals and providers who demonstrate “meaningful use” of a certified EHR (the EHR Incentive Program). To obtain certification for their product, companies that develop and market EHR software must attest that their product satisfies applicable criteria adopted by the U.S. Department of Health and Human Services (HHS) and pass testing by an accredited independent certifying entity approved by HHS.

The FCA: In very general terms, the False Claims Act (FCA) imposes liability on any person who knowingly submits a false claim to the government, or causes another to submit a false claim to the government, or knowingly makes a false record or statement to get a false claim paid by the government, or acts improperly to avoid having to pay money to the government. One who is liable under the FCA must pay a civil penalty of between $5,000 and $10,000 for each false claim (these amounts are adjusted from time to time; the current amounts are $5,500 to $11,000) and treble the amount of the government’s damages. The FCA allows private individuals (called “relators”) to file suit for violations of the FCA on behalf of the government (a “qui tam” action). The government may intervene in the action, in which case it will have the primary responsibility for prosecuting the action. The relator is generally entitled to receive between 10 and 30 percent of the amount received from the defendant.

The AKS: The federal Anti-Kickback Statute (AKS) is a criminal statute that prohibits the exchange (or offer to exchange), of anything of value, in an effort to induce (or reward) the referral of federal health care program business. Conviction for a single violation under the AKS may result in a fine of up to $25,000 and imprisonment for up to 5 years. In addition, convictions may result in mandatory exclusion from participation in federal health care programs. The government may also assess civil money penalties, which could result in treble damages plus $50,000 for each violation of the AKS. Although the AKS does not afford a private right of action, the FCA provides a vehicle whereby individuals may bring qui tam actions alleging violations of the AKS.

The Allegations of Violations

Violations of the EHR Incentive Program: The government contended that ECW falsely obtained the certification for its software when it concealed from its certifying entity that its software did not comply with the requirements for certification. One of the examples given by the government was that, in order to pass certification without meeting the certification criteria for standardized drug tests, ECW modified its software by “hardcoding” only the drug codes required for testing. Other examples alleged included that ECW’s EHR software did not accurately record user actions in an audit log, and failed to satisfy data portability requirements intended to permit healthcare providers to transfer patient data from ECW’s software to the software of other vendors. The government alleged that as a result of these and other deficiencies in its software, ECW caused the submission of false claims for federal incentive payments based on the use of ECW’s software.

Violations of the AKS: According to the complaint, ECW employed a “referral program,” a “site visit program,” and a “reference program”, under which ECW paid current users as much as $500 for each provider they referred who executed a contract with ECW, paid current users to host prospective customers at their facility, and paid current users as much as $250 to serve as references for prospective customers who wanted to speak about ECW’s software, respectively. According to the complaint, ECW also paid “consulting” and “speaking” fees and gifts and entertainment to physicians and other influential users to promote its product.

The Settlement: Despite agreeing to the settlement, ECW denied any wrongdoing. The whistleblower will receive a reward of approximately $30 million. The remainder of the settlement will be given to the Medicare and Medicaid funds in Washington, DC.

The Corporate Integrity Agreement

As part of the resolution, ECW entered into a 5-year Corporate Integrity Agreement (CIA) with the Office of Inspector General of HHS. The CIA requires ECW to, among other actions:

  • develop a compliance program and appoint a compliance officer, whose duties will include, among other things, developing and implementing policies, procedures and practices to ensure compliance with federal laws;
  • establish a compliance and quality assurance committee;
  • develop a written code of conduct for covered persons (ECW’s owners, directors, officers, employees, and contractors, subcontractors and agents);
  • develop a written training plan; and
  • remedy the deficiencies in the software.

Takeaways

The healthcare industry is one of the most regulated industries. The ECW settlement alone involved several major federal statutes – the FCA, the AKS, and the EHR Incentive Program. Healthcare providers and vendors should carefully review their policies and procedures to ensure compliance with all applicable laws.

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