Spotlight on the False Claims Act

By John F. Libby, Partner, Corporate Investigations and White Collar Defense | Jacqueline C. Wolff, Partner, Corporate Investigations and White Collar Defense | Kenneth B. Julian, Partner, Litigation

Why it matters: Since our last newsletter, the DOJ has announced numerous resolutions under the False Claims Act with companies in the healthcare and other business sectors, but the one that caught our eye involved a large vendor of electronics health records software that agreed to pay $155 million and enter into an “innovative” corporate integrity agreement to resolve FCA allegations that it “misrepresented the capabilities of its software” in connection with obtaining necessary certifications under the Electronic Health Records (EHR) Incentive Program.

Detailed discussion: On May 31, 2017, the DOJ announced that Massachusetts-based eClinialWorks, described as “[o]ne of the nation’s largest vendors of electronics health records software,” agreed to pay $155 million to resolve allegations that it violated the FCA by “misrepresent[ing] the capabilities of its software.” The DOJ said that the settlement also resolved allegations that “ECW paid kickbacks to certain customers in exchange for promoting its product.”

The DOJ explained that its FCA settlement with ECW arises out of the EHR Incentive Program, which was established by the American Recovery and Reinvestment Act of 2009 “to encourage healthcare providers to adopt and demonstrate their ‘meaningful use’ of EHR technology.” The DOJ said that under the EHR Incentive Program, the U.S. Department of Health and Human Services “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.”

According to the allegations in the DOJ’s complaint-in-intervention filed in the District of Vermont, which were neither admitted nor denied by ECW, ECW “falsely obtained certification for its EHR software when it concealed from its certifying entity that its software did not comply with the requirements for certification.” The DOJ gave the following as examples of ECW’s software noncompliance:

“[I]n order to pass certification testing without meeting the certification criteria for standardized drug codes, the company modified its software by ‘hardcoding’ only the drug codes required for testing. In other words, rather than programming the capability to retrieve any drug code from a complete database, ECW simply typed the 16 codes necessary for certification testing directly into its software. ECW’s software also did not accurately record user actions in an audit log and in certain situations did not reliably record diagnostic imaging orders or perform drug interaction checks. In addition, ECW’s software 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 DOJ concluded that “[a]s 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.”

Under the terms of the settlement agreements, the DOJ said that ECW and three of its founders (the CEO, the CMO and the COO) jointly and severally agreed to pay approximately $155 million. In addition, an individual developer agreed to pay $50,000, and two project managers agreed to pay $15,000 each.

Moreover, the DOJ said that ECW entered into an “innovative” five-year Corporate Integrity Agreement with the HHS Office of Inspector General (HHS-OIG) that requires, among other things, that ECW must (1) “retain an Independent Software Quality Oversight Organization to assess ECW’s software quality control systems and provide written semi-annual reports to OIG and ECW documenting its reviews and recommendations;” (2) “provide prompt notice to its customers of any safety related issues and maintain on its customer portal a comprehensive list of such issues and any steps users should take to mitigate potential patient safety risks;” (3) “allow customers to obtain updated versions of their software free of charge and to give customers the option to have ECW transfer their data to another EHR software provider without penalties or service charges;” and (4) “retain an Independent Review Organization to review ECW’s arrangements with health care providers to ensure compliance with the Anti-Kickback Statute.”

The DOJ intervened in the qui tam lawsuit filed by a former ECW employee software technician, who will receive a whistleblower award of approximately $30 million.

Special Agent in Charge Phillip Coyne of HHS-OIG said of the settlement that “[e]lectronic health records have the potential to improve the care provided to Medicare and Medicaid beneficiaries, but only if the information is accurate and accessible. Those who engage in fraud that undermines the goals of EHR or puts patients at risk can expect a thorough investigation and strong remedial measures such as those in the novel and innovative Corporate Integrity Agreement in this case.”

Added Acting U.S. Attorney for the District of Vermont Eugenia A.P. Cowles, “[t]his settlement is the largest False Claims Act recovery in the District of Vermont and we believe the largest financial recovery in the history of the State of Vermont ... This resolution demonstrates that EHR companies will not succeed in flouting the certification requirements.”



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