NextGen Healthcare Inc. is a prominent electronic health record (“EHR”) technology vendor that provides software solutions and services to healthcare providers across the United States.  The company’s products are widely used to manage patient records, streamline workflows, and help with billing processes.  However, the company found itself being investigated by and paying a settlement to the federal government.

On July 14, 2023, the U.S. Department of Justice (“DOJ”) announced that NextGen agreed to pay $31 million to resolve the allegation that NextGen violated the False Claims Act (“FCA”).  NextGen is accused of “misrepresenting the capabilities of certain versions of its EHR software and providing unlawful remuneration to its users to induce them to recommend NextGen’s software.”  NextGen is not the first company to face FCA allegations for not delivering capabilities it declared it could or would deliver, especially since the DOJ’s Civil Cyber-Fraud Initiative would use the FCA to pursue cybersecurity-related fraud.

The FCA prohibits any person from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to the federal government.  The FCA also prohibits any person from knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim.  Using the FCA, the Cyber-Fraud Initiative aims to hold accountable individuals, government contractors, entities, and grant recipients who receive federal funds and put “U.S. information or systems at risk by knowingly providing deficient cybersecurity products or services, knowingly misrepresenting their cybersecurity practices or protocols, or knowingly violating obligations to monitor and report cybersecurity incidents and breaches.”

In March 2023, Chilivis Grubman attorneys wrote about Jelly Bean Communications Design, LLC (“Jelly Bean”), a tech company, which agreed to settle allegations it violated the FCA because of cybersecurity shortcomings.  In that matter, the government alleged that despite Jelly Bean’s agreement, invoices, and technological representations, Jelly Bean “did not provide secure hosting of applicants’ personal information and instead failed to properly maintain, patch, and update the software systems” to a government website, which made the website data vulnerable to attack.

In the recent press release involving NextGen, the government alleges that NextGen made false statements and misrepresentations in its submissions for certification to the U.S. Department of Health and Human Services (“HHS”).  Certification is a crucial step for EHR vendors to qualify for government incentive programs, such as the Medicare and Medicaid Electronic Health Records Incentive Programs.  These programs aim to encourage healthcare providers to adopt and use EHR systems to enhance patient care.  To obtain certification EHR vendors, like NextGen, must show that their EHR product meets the government’s certification criteria and must identify software components the EHR relies on to perform and meet the criteria.  The government alleges that NextGen’s software did not meet the required standards and functionality criteria as claimed in its certification submissions.  “Specifically, the government alleges that NextGen relied on an auxiliary product designed only to perform the certification test scripts, which concealed from the certifying entity that NextGen’s EHR lacked critical functionality.” According to the government, the investigation revealed that certain key features promised by the company were not fully functional or did not meet the standards set by HHS.  These key features included recording vital sign data, translating data into medical vocabularies, and creating complete clinical summaries. 

NextGen’s settlement also resolves allege FCA violations involving kickbacks.  The federal Anti-Kickback Statute (“AKS”) prohibits, among other things, knowingly and willfully paying or receiving remuneration in exchange for federally funded program referrals.  Remuneration includes anything of value.  The government contends that NextGen gave credits, tickets to sporting events and entertainment, and other remuneration to current customers whose recommendations of NextGen’s HER software led to a new sale.  The government alleges that the credits NextGen provided were often worth as much as $10,000. 

NextGen’s settlement resolves a lawsuit brought under the qui tam or whistleblower provisions of the False Claims Act.  The qui tam provisions provide financial incentives and a procedural structure to whistleblowers – or relators – so individuals could bring false claims act cases on behalf of the government.  In this case, two healthcare professionals at a facility that used NextGen’s software were whistleblowers.  The financial incentive can be significant for whistleblowers, as they have the right to receive 15% to 30% of the money the government recovers, based on several factors.  According to the settlement agreement in this case, the relators will share $5.58 million.

The government’s focus on healthcare fraud and the use of technology in the healthcare industry will continue, and press release confirms the “government’s emphasis on combating health care fraud,” particularly using the FCA as a tool.  Providers and companies should be familiar with their contractual obligations, certifications claimed, and any representations made by their employees.  Deviating from these obligations may result in a false claim (or reverse false claim).  Similarly, every company or person that offers rewards, gifts, or anything of value for a referral related to a federally funded program must scrutinize such actions using the lens of fraud, waste, and abuse laws, like the AKS. 

The qui tam case is captioned United States ex rel. Markowitz et al. v. NextGen Healthcare Inc., Case No. 2:18-cv-195 (D. Vt.).

The attorneys at Chilivis Grubman represent clients of all types and sizes in connection to False Claims Act litigation, government investigations, and cybersecurity fraud investigations.  If you need assistance with such a matter, please contact us today.