Whistleblower Exposes Healthcare Kickback Scheme, Disclosure Led to $45 Million Settlement


Amanda Long, a former Vice President of Product Management at Modernizing Medicine Inc. (ModMed), filed a qui tam, or whistleblower, action in September 2017. She filed an amended complaint in May 2021, and the U.S. intervened in the case in March of this year. Now, Long will receive $9 million as part of a $45 million settlement ModMed will pay to resolve allegations that it violated the False Claims Act.

Background and Allegations

“ModMed is a privately owned vendor of health information technology including integrated electronic health record (“EHR”) software,” according to the settlement agreement. The U.S. alleged that ModMed “violated the FCA and the Anti-Kickback Statute through three marketing programs,” the U.S. Department of Justice (DOJ) press release states.

The Anti-Kickback Statute (AKS) “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,” according to the press release. The U.S. alleged that ModMed:

More specifically, the U.S. alleged that between January 2010 and December 2013, “ModMed facilitated EHR donations to ModMed customers by [Miraca] that did not comply with the requirements of the AKS because the donation decisions took into account the volume or value of the referrals of laboratory tests or other business between EHR donation recipients that were ModMed customers and Miraca.” This practice, according to the settlement agreement, “did not meet the requirements of the AKS safe harbor exception applicable to EHR donations.”

The U.S. alleges that ModMed customers who received EHR donations “submitted tainted claims for reimbursement to the federal health care programs for pathology services performed by Miraca from January 2010 to December 2013, and also submitted tainted claims for meaningful use incentive payments under the Medicare and Medicaid Electronic Health Record Incentive Programs…of the Centers for Medicare and Medicaid Services.”

Some of the U.S.’ allegations center around ModMed’s software: “In September 2013, Miraca paid ModMed an initial fee and increased transaction fees to develop and include in its EHR software, EMA, certain enhanced interface features that ModMed agreed, for a period of time, not to offer to any other pathology laboratory,” the settlement agreement states. In addition to this alleged behavior, ModMed “agreed to make dermatologists aware of the availability and benefits of the enhanced interface features that were, for a period of time, exclusive to Miraca. The United States alleges that during the period of May 2014 to December 2016, the arrangement violated the AKS and resulted in the submission of false claims to federal health care programs for pathology services performed by Miraca.”

Between January 2010 and July 2017, ModMed allegedly “made payments to customers, consultants, and other third parties in exchange for recommendations of its EHR software, EMA, that did not comply with the requirements of the AKS because they did not represent fair market value for personal services rendered.” Thus, the U.S. alleged that this led to ModMed users submitting “tainted claims for incentive payments under the Meaningful Use Programs.

Finally, the U.S. alleged that from April 2014 through July 2017, “ModMed’s EMA software did not always enable a user to conduct transactions using required standard vocabularies.” The U.S. then alleged “that ModMed users reported inaccurate information in connection with claims for incentive payments under the Meaningful Use Programs.”

The settlement agreement notes: “This Settlement Agreement is neither an admission of liability by ModMed nor a concession by the United States that its claims are not well founded. ModMed denies the United States’ allegations in Paragraph D and its complaint in intervention.”

Settlement and Whistleblower Award

Per the settlement, ModMed will pay the U.S. $45,000,000. As part of the settlement, the U.S. will pay Long, the qui tam whistleblower, $9,000,000, “plus interest accrued on that account.”

The settlement agreement also mentions that ModMed and Long have reached an agreement regarding payment of attorney’s fees.

The Importance of Qui Tam Whistleblowers

This huge settlement — and plenty of other qui tam whistleblower cases — show how whistleblowers are critical to uncovering waste, fraud, and abuse in the medical and health care industry. Fraudulent schemes can be particularly harmful to patients and erode trust in the medical system. In Fiscal Year 2021, qui tam whistleblowers helped the DOJ recover $1.6 billion in settlements. The DOJ highlighted health care fraud as “the leading source of the department’s False Claims Act settlements and judgments.”

Senator Chuck Grassley (R-IA), who has been consistently championed as the “patron saint” of whistleblowers, proposed amendments to the False Claims Act in 2021 that would strengthen protections for whistleblowers and clarify existing law. The amendment was widely supported by whistleblower organizations and advocates. However, WNN sources discovered that the pharmaceutical lobby intervened with the amendment’s passage. The National Whistleblower Center (NWC) is urging Congress to protect the False Claims Act: learn more here.

Read the DOJ press release here.

Read the settlement agreement here. 

Read more False Claims Act/qui tam news on WNN here. 

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