An electronic health records (EHR) software company paid $45 million to settle false claims allegations levied by the Department of Justice (DOJ) it received kickbacks and made improper payments to providers to increase its business.

Modernizing Medicine (ModMed) violated the False Claims Act and Anti-Kickback Statute through three undertakings, the DOJ alleged Tuesday in its complaint. The whistleblower, a former vice president at ModMed, originally filed a complaint and will receive a share of the total paid to the federal government, the DOJ said.

ModMed conspired with Miraca Life Sciences to improperly donate ModMed’s EHR product to healthcare providers to increase orders, according to the complaint.

In exchange for recommending Miraca’s lab services to ModMed users, the latter sought and received kickbacks, the DOJ alleged.

ModMed also paid kickbacks to healthcare providers and influential people in the healthcare industry, the DOJ said, for recommending ModMed’s product and for referring new customers.

The illegal referrals and kickbacks artificially boosted sales of ModMed’s product, which was inferior, according to the DOJ.

The Department of Health and Human Services (HHS) has urged hospitals and doctors to switch from paper to EHR systems, and it provided incentive payments for them to switch that was certified to meet certain criteria.

ModMed’s product was certified but it did not meet the criteria, and ModMed knew it, the DOJ said.

It caused healthcare providers to receive incentive payments from HHS for using the ModMed product, even though the ModMed product didn’t actually meet the requirements for certification, per the DOJ.

Amanda Long, ModMed’s former vice president of product management, filed the original complaint against the company in 2017 in Vermont and will receive $9 million, according to the settlement agreement.

Miraca paid $63.5 million to the DOJ in 2019 to settle similar allegations.

“For too long electronic health record vendors have prioritized only sales,” U.S. Attorney Nikolas Kerest for the District of Vermont said in a statement included in the announcement.

“The government alleges that for years, ModMed, through a variety of schemes, engaged in illegal kickbacks that distorted both the (EHR) and pathology lab markets, in addition to providing its users with a deficient product,” Kerest said. “This resolution reflects the seriousness of the government’s allegations and the determination of the Department of Justice to restore integrity to the electronic health record field,” Kerest said.

ModMed response: “The company denies that any of the conduct violated the law, and the settlement agreement does not include any admissions of wrongdoing,” ModMed said in a statement posted on its website.

“The settlement fully resolves this matter and does not require any changes to ModMed’s products, EHR certifications, existing programs, or compliance policies and will not require any government monitoring. We have historically made substantial investments in our compliance programs and training and will continue to do so,” the company said.

Editor’s note: An earlier version of this story incorrectly referred to Modernizing Medicine as Modern Medicine.

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