EHR Donation Kickbacks: When the Gift Comes With a Referral Target

The EHR donations safe harbor protects qualifying software donations under conditions that include a recipient contribution, interoperability and an eligible donor. The kickback question is what the donor expects back. A laboratory wants orders. A software vendor wants customers. The government has alleged that an EHR donation joined those ambitions in the same deal. If you work in a practice, a laboratory or a vendor’s partnerships team, you may know whether the promised software support depended on where the practice sent its business.

What the EHR Donations Safe Harbor Protects

The protection covers software, information technology and training services needed and used predominantly to create, maintain, transmit, receive or protect electronic health records. Qualifying cybersecurity software and services are included. The EHR donation rule addresses support provided through these items and services, rather than a cash gift.

The Anti-Kickback Statute safe harbor and the Stark Law exception are separate protections. The Department of Health and Human Services established both in 2006, and both appear in the government’s laboratory donation cases. A practice’s arrangement can raise questions under both laws.

Laboratory companies cannot donate under the current safe harbor. The recipient must contribute to the cost, and the software must be interoperable. The rule also prevents the donor from restricting the recipient’s ability to use the donated items or services for any patient. That last condition matters to health care practices caring for patients beyond the donor’s own business relationships. Failing to qualify for the safe harbor does not by itself establish an Anti-Kickback Statute violation.

The old ban on donating equivalent technology is gone.

What Does the 15 Percent EHR Contribution Require?

The recipient pays 15 percent of the donor’s cost for the donated items and services. For an initial donation or a replacement system, that contribution must be paid before the recipient receives them. The donor cannot finance or lend the contribution.

If a hospital finances physicians’ 15 percent EHR contribution, the donor is supplying the very payment the rule requires from the recipient. We examine who actually supplied the money alongside what the donation agreement says.

Quest Diagnostics disclosed its own donation arrangement. In the February 2017 civil penalty action, the Office of Inspector General at the Department of Health and Human Services alleged that Quest failed to meet documentation requirements for donations of EHR software, information technology and services to sources of laboratory referrals. It also alleged that Quest failed to collect timely second-year payments required by its EHR donation agreements.

For someone administering the program, those allegations put the donation agreement beside the billing and collection records. A promised contribution and a collected contribution are different entries in that story.

When EHR Donation Selection Follows Referral Volume

The Office of Inspector General’s allegations of EHR donation selection based on referral volume reached both who received the subsidy and how much the donor offered. The action concerned a Tennessee laboratory owner who was also a physician.

The Office of Inspector General alleged that the owner directly considered the volume or value of referrals and business between his laboratory and a physician practice when deciding whether to make a donation and how large it would be. It also alleged that he improperly considered the practice’s Medicare business.

The agency also alleged that the owner sometimes withheld agreed donation payments until the practice sent a specified number of cases or referrals. The practice had been promised help with its EHR. According to the allegation, that help waited for laboratory business to arrive.

We see a referral target doing the work of a payment term. The software is what the practice receives. The expected orders explain why the laboratory would pay for it. Someone approving a subsidy, tracking referrals or asking why an agreed payment has been held can see a different part of the same arrangement.

Why Laboratory Companies Lost EHR Donation Protection

The laboratory EHR donation exclusion took effect on March 27, 2014. The Office of Inspector General removed laboratory companies from the safe harbor, and the Centers for Medicare & Medicaid Services made the parallel change to the Stark exception. The rule followed complaints about the relationship between donations and referrals.

In its December 2013 explanation, the Office of Inspector General recorded a specific concern:

We see the absurdity in the complaints: the rule already barred tying donations to referrals, yet commenters described gifts that became repayment demands when the laboratory did not get enough business. The Office of Inspector General recorded support for excluding laboratory companies from across the laboratory industry, including small laboratory companies and a national trade association.

The original protections had taken effect on October 10, 2006, with laboratories eligible. The later rule removed the safe harbor’s expiration date effective January 19, 2021, and extended protection to cybersecurity software and services. It kept the laboratory exclusion and the recipient contribution. Laboratories still cannot donate EHR software under the safe harbor.

Inform Diagnostics and ModMed Show Both Sides of the Deal

The donation allegations involving Inform Diagnostics and Modernizing Medicine connect a laboratory’s pursuit of orders to a vendor’s pursuit of new customers. The Department of Justice described each company’s role separately.

Inform Diagnostics and the Referring Practice

Inform Diagnostics, formerly Miraca Life Sciences, agreed to pay $63.5 million in January 2019 to settle False Claims Act allegations over financial relationships with referring physicians. The Justice Department’s announcement described EHR subsidies and free or discounted technology consulting services that allegedly violated the Anti-Kickback Statute and the Stark Law.

The government alleged that these subsidies broke the conditions laboratories had to follow when they were still eligible to donate.

Technology consulting belongs beside the software subsidy here. For a laboratory or practice insider, the commercial relationship may be visible in the support being paid for as well as the software itself.

ModMed and the Customers the Donation Brought

Modernizing Medicine, known as ModMed, agreed to pay $45 million in November 2022 to resolve allegations involving kickbacks and its EHR’s certification. The government alleged that ModMed conspired with Miraca to donate its software improperly in an effort to increase laboratory orders to Miraca and add customers to ModMed.

The same announcement described allegations that ModMed solicited and received payments from Miraca in exchange for recommending and arranging for users to use Miraca’s pathology services. It also covered alleged payments by ModMed to customers and other influential sources for recommending its EHR. The settlement addressed these allegations alongside a separate allegation about required medical vocabularies in the product.

In the donation allegation, the laboratory and the vendor each had something to gain from getting the software into the practice. More orders for one. More customers for the other. That is why we examine the relationship between the donor and the vendor as well as the offer made to the physician.

Donated Software and the Reality of Interoperability

Donated software must be interoperable. The safe harbor treats it as interoperable if, on the date it is provided, a certifying body authorized by the National Coordinator for Health Information Technology has certified it.

For a practice, interoperability concerns whether information can move between systems and be used. The federal definition addresses secure exchange and use without special effort by the user. A laboratory result has to travel beyond the organization that produced it to serve the patient’s care elsewhere.

The 2022 Vassar College thesis A Panacea or a Problem? Electronic Health Records and the Complicated Politics of Its Stakeholder Network explains why shared information matters across those boundaries. Standard codes let a laboratory technician and a primary care physician use the same record for different purposes. The thesis argues that conflicting institutional interests, alongside technical differences, frustrate the promise of shared records.

That perspective helps explain the tension in a donation tied to referrals. The system is supposed to support information moving across organizations. A donor expecting the practice’s business back is pursuing its own commercial return. We examine both the technology being offered and the relationship the subsidy was meant to create.

What Evidence Is Needed to Report Fraud?

For EHR donation kickbacks, the useful evidence connects the donated technology, the money and the expected business. The donation agreement describes the arrangement. Donor-cost records and contribution payments show who paid for it. Recipient-selection decisions and referral commitments can show what the donor expected in return.

If you know why a practice received a subsidy or why a payment stopped, that knowledge can help us connect the arrangement on paper to the decisions behind it.

Can a Whistleblower Report EHR Fraud?

Yes. The ModMed case began with a whistleblower who had been its vice president of product management. That role put the whistleblower inside the software business at the center of the government’s allegations.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Our whistleblower experts work beside you to turn your knowledge of the product, the practice or the commercial relationship into your strongest case.

When You Know What the Donor Expected Back

If you know how an EHR subsidy was tied to laboratory orders, recipient selection or an unpaid contribution, speak with our Whistleblower Experts about the arrangement. We work beside you to build your strongest case around the technology, the payments and the decisions you understand from inside the business. We bring in healthcare fraud whistleblower lawyers who understand EHR kickbacks and stay with you through the whole process.