In its second quarter Securities Exchange Commission (SEC) filing, Allscripts addressed its announced agreement in principle with the Department of Justice (DOJ) to resolve investigations into certain alleged practices of Practice Fusion, an electronic health records (EHR) vendor acquired by Allscripts in February 2018 for $100 million. Allscripts indicated the agreement is still subject to further negotiation and government approval, and would likely include additional non-monetary terms, including a deferred prosecution agreement, if a finalized settlement is reached.

The $145 million settlement would resolve potential criminal and civil liability facing Allscripts for practices of Practice Fusion that allegedly occurred, and were initially investigated by the DOJ, prior to the acquisition’s consummation. In its first quarter report to the SEC, Allscripts disclosed the receipt of six civil investigative demands and HIPAA subpoenas from March 2017 to January 2019, and a related criminal grand jury subpoena in March 2019. The investigation pertained to Practice Fusion’s certification under the U.S. Department of Health and Human Services’ (HHS) Electronic Health Record Incentive Program, which was designed to encourage providers to utilize EHRs by offering incentive payments for meaningful use of certified EHR technology. Marketers of EHR technology, such as Practice Fusion, can gain certification by demonstrating that their technologies meet characteristics defined by HHS. However, misrepresentations of product capabilities by marketers to gain certification could lead to claims by the government that these misrepresentations caused providers using the technology to submit false claims. As noted in Allscripts’ quarter one filing, since 2017 two other EHR vendors were investigated by the DOJ for allegedly misrepresenting capabilities of their technology to gain certification that the DOJ claimed caused providers to submit false claims, resulting in settlements of $57.25 million and $155 million. In addition, the investigation into Practice Fusion further scrutinized Allscripts’ compliance with the Anti-Kickback Statute and HIPAA. The agreement reached in principle, as announced by Allscripts, would resolve the HHS’s investigations and the associated potential civil and criminal sanctions.

As HHS and other legislative efforts continue to incentivize EHR utilization, vendor compliance is likely to face continued scrutiny, and the DOJ has demonstrated continued commitment to enforcement actions involving healthcare technology companies.

This post was co-authored by Karen Rabinovici and Michael Lisitano. Michael is not yet admitted to practice law.