Allscripts Healthcare Solutions on Aug. 6 reached a tentative $145 million settlement with the Department of Justice to resolve civil and criminal investigations into certain business practices engaged in by Practice Fusion, an electronic health records company Allscripts acquired in February 2018.

Allscripts management announced the agreement as part of its second-quarter financial earnings. “We expect that a final settlement with the Department of Justice, if it were to be completed, would include other material non-financial terms and conditions, including a deferred prosecution agreement and a civil settlement agreement,” the company said in a recent securities filing.

The Justice Department launched its investigation into Practice Fusion before Allscripts acquired it last year. “The main focus has been on actions that occurred prior to our ownership and, thus, we were highly motivated to reach an accord with the DOJ as soon as possible so that we could put this chapter behind us,” Allscripts President Rick Poulton said during an Aug. 8 earnings call.

“A variety of material issues remain subject to further negotiation and approval by us and the government before the agreement in principle can be finalized, and the terms described … may change following further negotiation,” the company’s security filing stated. “We cannot provide assurances that our efforts to reach a final settlement with the Department of Justice will be successful or, if they are, the timing or final terms of any such settlement.”

Investigation details

The investigation concerned potential violations of the Health Insurance Portability and Accountability Act (HIPAA) and anti-kickback laws, as well as allegations that Practice Fusion wrongfully obtained certification for its software from the U.S. Department of Health and Human Services.

In March 2017, Allscripts received a request for documents and information from the U.S. Attorney’s Office for the District of Vermont pursuant to a civil investigative demand (CID). After acquiring Practice Fusion, the Justice Department investigations “continued to expand and required expanding levels of resources from us this quarter,” Poulton explained during the investor call.

Specifically, between April 2018 and June 2019, Practice Fusion received from the Justice Department seven additional requests for documents and information through four additional CIDs and three HIPAA subpoenas. The document and information requests received by Practice Fusion “related to both the certification Practice Fusion obtained in connection with the Department of Health and Human Services’ Electronic Health Record (EHR) Incentive Program and Practice Fusion’s compliance with the Anti-Kickback Statute and HIPAA as it relates to certain business practices engaged in by Practice Fusion,” the securities filing stated.

“In March 2019, Practice Fusion received a grand jury subpoena in connection with a criminal investigation related to Practice Fusion’s compliance with the Anti-Kickback Statute,” the securities filing continued.

Enforcement trend

“These investigations have many similarities to investigations that have either been settled or remain active with many of our industry competitors,” Poulton said. “While the amount we have agreed to pay of $145 million is not insignificant, it is in line with other settlements in the industry, and we are happy to have reached an agreement in principle.”

One similar enforcement action was announced in March 2017, when eClinicalWorks (ECW), an electronic health records software vendor, and certain of its employees reached a $155 million settlement to resolve a False Claims Act lawsuit alleging ECW flouted its certification requirements under the EHR Incentive Program.

Under the EHR Incentive Program, HHS offers incentive payments to healthcare providers that adopt certified EHR technology and meet certain requirements relating to their use of the technology. To obtain certification for their product, companies that develop and market EHR software must attest that their product satisfies applicable HHS-adopted criteria and pass testing by an accredited independent certifying entity approved by HHS.

In its complaint-in-intervention, the government contended ECW falsely obtained that certification for its EHR software when it concealed from its certifying entity that its software did not comply with the requirements for certification. The settlement also resolved allegations ECW paid kickbacks to certain customers in exchange for promoting its product.

With Allscript’s situation, Poulton said the company will work with the Justice Department to finalize details of the settlement in the coming months. “We were anxious to put this behind us,” he said.

In discussing the tentative settlement amount, Poulton responded, “We can’t speak to how the government thinks about what is fair for various entities, but what I can tell you, it was a long, protracted negotiation with the government, and we got to a place where we think both parties can stomach it.”