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White Collar + Fraud + Investigations + Compliance

NextGen’s $31 M Settlement of an Alleged False Certification and a Kickback Violation

On Friday, July 14th, the DOJ announced its settlement with NextGen Healthcare (“NextGen”), an electronic health record technology vendor. NextGen agreed to pay $31 million to resolve allegations that it violated the False Claims Act by misrepresenting the capabilities of certain versions of its software and, separately, providing unlawful remuneration to its users to induce them to recommend NextGen’s software.

There are a few interesting takeaways here. First, this settlement demonstrates the expansive breadth of “healthcare fraud.” Indeed, healthcare fraud shows up in a variety of ways and may look a lot different based on how a business interacts with the federal government.  Here, the Government alleges that NextGen falsely obtained certification for its software. The American Recovery and Reinvestment Act of 2009 made incentive payments to eligible healthcare providers that adopted certified electronic health record technology and met certain requirements for the use of that technology. And, allegedly, NextGen was aware that its software did not meet the requirements for certification, and yet misrepresented its software’s capabilities in obtaining the certification. From the publicly available information, it appears that NextGen never submitted claims to the federal government for payment directly, but rather that NextGen obtained a certification for its software and then healthcare providers were paid incentive payments for usage of its deficient software. This demonstrates what practitioners in this space already know: what you tell the Government about your capabilities matters and it is unnecessary for a company to submit false claims directly to the government for payment if it allegedly caused such claims to be submitted.

Next, this settlement also resolves alleged Anti-Kickback Statute (“AKS”) violations by NextGen relating to (i) credits that NextGen paid to current customers whose recommendation of NextGen’s software led to a new sale and (ii) remuneration in the form of tickets to sporting events and entertainment, to induce purchases and referrals. Here, the DOJ alleges that NextGen paid up to $10,000 to customers for recommendations and tickets to entertainment events that likely amounted to less than $10,000 per customer, and yet NextGen faced exposure for its conduct under the AKS. This settlement once again demonstrates that companies may face AKS exposure for kickbacks that arguably seem nominal in the scheme of their overall budget, but could taint a large number of claims that resulted from the nominal kickback. The settlement agreement does not specify which portion of the $31 Million settlement relates to the alleged AKS violations and what portion relates to the falsified certification allegations, but $31 Million is nonetheless a sizable settlement (approximately 5% of the NextGen’s 2022 annual revenue). And, it demonstrates that even seemingly small AKS violations can add up and result in substantial exposure to companies. 

Companies that sell equipment, software and other services to healthcare providers should invest in ethical, well-reasoned, and well-equipped compliance programs, as they can help to negate exposure under the AKS as well as other issues.

A link to the press release is provided here.

https://www.justice.gov/opa/pr/electronic-health-records-vendor-nextgen-healthcare-inc-pay-31-million-settle-false-claims

  • Denise M. Barnes
    Partner

    Denise Barnes is a former U.S. Department of Justice (“DOJ”) Trial Attorney who focuses her practice on compliance, white collar and regulatory investigations, and complex commercial litigation.  She represents clients in ...

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