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Press Release

Modernizing Medicine Agrees to Pay $45 Million to Resolve Allegations of Accepting and Paying Illegal Kickbacks and Caused False Claims

For Immediate Release
U.S. Attorney's Office, District of Vermont

Modernizing Medicine, Inc. (“ModMed”), an electronic health record (“EHR”) technology vendor located in Boca Raton, Florida, has agreed to pay $45 million to resolve allegations that it violated the False Claims Act (FCA), 31 U.S.C. §§ 3729-3733, by accepting and providing unlawful remuneration in exchange for referrals and causing its users to report inaccurate information in connection with 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.  In a complaint filed in conjunction with today’s 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. 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 healthcare provider customers and to other influential sources in the healthcare industry to recommend ModMed’s EHR and refer potential customers to ModMed.  

As a result of this conduct, the government alleges that ModMed improperly generated sales for itself and for Miraca, while causing healthcare providers to submit false claims for reimbursement to the federal government for pathology services, and for incentive payments from the Department of Health and Human Services (HHS) for the adoption and “meaningful use” of ModMed’s EHR technology.

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.  2019 Press Release.

Additionally, under HHS’ EHR Incentive Programs, HHS offered incentive payments to healthcare providers that adopted certified EHR technology and met certain requirements relating to their “meaningful use” of that technology.  Eligibility for incentive payments required healthcare providers to use certified EHR technology that, among other things, utilized certain standard vocabularies for drugs (RxNorm) and clinical terminology (SNOMED CT) in order to conduct certain transactions.  The government’s complaint in intervention alleges that ModMed knew that its EHR did not always allow physician users to electronically record medical records using the required standard vocabularies, thereby causing certain of its users to submit false claims for incentive payments under that program.

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

“Today’s settlement marks the fourth resolution that our office has achieved as we seek to root out fraud in the electronic health record technology field,” said United States Attorney for the District of Vermont, Nikolas P. Kerest. “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.  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.”

The settlement with ModMed resolves, in part, allegations in a lawsuit filed in the District of Vermont by Amanda Long, a former Vice President of Product Management at ModMed.  The lawsuit was filed under the qui tam, or whistleblower, provisions of the FCA, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  The qui tam case is captioned United States ex rel. Long v. Modernizing Med., Inc., No. 2:17-cv-179 (D. Vt.). The Act allows the government to intervene and take over the action, as it did in this case.  As part of today’s resolution, Ms. Long will receive approximately $9 million.

The resolution obtained in this matter was the result of a coordinated effort between the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, and the United States Attorney’s Office for the District of Vermont.  Investigative support and assistance were provided by the Federal Bureau of Investigation and the Department of Health and Human Services, Office of Counsel to the Inspector General.

The investigation and pursuit of this matter illustrate the government’s emphasis on combating healthcare fraud, including in the healthcare technology arena.  One of the most powerful tools in this effort is the FCA.  Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, can be reported to the Department of Health and Human Services at 800-HHS-TIPS (800-447-8477).

This matter was handled by Assistant U.S. Attorney Lauren Almquist Lively and former Assistant U.S. Attorney Owen C.J. Foster of the United States Attorney’s Office for the District of Vermont and Trial Attorneys Kelley Hauser and Sarah Hill of the Civil Division’s Commercial Litigation Branch, Fraud Section. 
The claims in the Relator’s and the government’s complaints are allegations only and there has been no determination of liability.

Updated November 1, 2022

False Claims Act
Health Care Fraud