$45 million payoff to DOJ resolves claim company violated kickback laws 

Department of Justice officials announced that Modernizing Medicine Inc. (ModMed) agreed to pay $45 million to resolve allegations that it violated the False Claims Act (FCA) but the deal revived complaints that corporate payoffs should be prohibited as a way to sanction bribery and other white collar crimes.

The government alleged that ModMed improperly generated sales for itself and another company—which paid its way out of trouble for $63 million in 2019—while causing health care providers to submit false claims for reimbursement to the federal government for pathology services, as well as for incentive payments from the Department of Health and Human Services (HHS).

ModMed is an electronic health record (EHR) technology vendor located in Boca Raton, Florida, that has denied any wrongdoing and the settlement does not require any changes to the company’s products, EHR certifications, existing programs, or compliance policies, and will not require any government monitoring.

Lisa McCormick, who has previously called for a corporate death penalty, said that white collar criminals should not be allowed to simply payoff the government when they get caught.

“I am once again astounded by the injustice of America’s legal system,” said McCormick. “Judicial dissolution, or the corporate death penalty, a procedure in which a corporation is forced to dissolve or cease to exist, is a more appropriate penalty for serious white-collar crimes.”

“Another crooked company will go to work making money on the trust of unaware consumers because we do not have a corporate death penalty,” said McCormick.

Federal prosecutors alleged that the company violated the False Claims Act (FCA) by accepting and providing unlawful remuneration in exchange for referrals and by causing its users to report inaccurate information in claims for federal incentive payments.

The Anti-Kickback Statute prohibits anyone from offering or paying, directly or indirectly, any remuneration — which includes money or any other thing of value — to induce referrals of items or services covered by Medicare, Medicaid and other federally funded programs.

“Electronic health records serve a critical role in informing physician decision making, and it is therefore essential that health care providers select such technology free from the influence of improper financial inducements,” said Principal Deputy Assistant Attorney General Brian M. Boynton. “Vendors of electronic health records will be held to the same standards of compliance that we expect of everyone who provides health care services.”

In a complaint filed in conjunction with the settlement, the United States alleged that ModMed violated the FCA and the Anti-Kickback Statute through three marketing programs.

First, ModMed solicited and received kickbacks from Miraca Life Sciences Inc. (Miraca) in exchange for recommending and arranging for ModMed’s users to utilize Miraca’s pathology lab services. 

Second, ModMed conspired with Miraca to improperly donate ModMed’s EHR to health care providers in an effort to increase lab orders to Miraca and simultaneously add customers to ModMed’s user base. 

Third, ModMed paid kickbacks to its current health care provider customers and to other influential sources in the healthcare industry to recommend ModMed’s EHR and refer potential customers to ModMed. 

In January 2019, Miraca (now known as Inform Diagnostics) agreed to pay $63.5 million to resolve allegations that it violated the Anti-Kickback Statute and the Stark Law by providing to referring physicians subsidies for EHR systems and free or discounted technology consulting services.

Inform Diagnostics, formerly known as Miraca Life Sciences Inc., is headquartered in Irving, Texas, and was a subsidiary of Miraca Holdings Inc., a Japanese company, during the period relevant to the case.  In 2017, majority ownership of the company changed, and the company was renamed. 

A whistleblower lawsuit filed by Amanda Long, a former vice president of product management at ModMed, under qui tam provisions that permit people to sue on behalf of the government for false claims and to share in any recovery.

Long will receive about $9 million from the settlement.