CareCloud: Paid References and Contractual Silence

In the CareCloud kickback settlement, CareCloud Health agreed to pay $3,806,967 to resolve allegations that its Champions Program paid customers to recommend its electronic health records software while contracts barred those customers from giving prospects negative information. The government alleged that prospective buyers knew neither that the reference was paid nor that criticism was forbidden. The allegation reaches into a familiar part of electronic health records purchasing: the reference call that helps a practice decide which software to buy.

The U.S. Attorney’s Office for the Southern District of Florida announced the settlement on April 30, 2021. CareCloud was a Miami-based medical software company offering electronic health records products and other cloud services. A former CareCloud manager brought the whistleblower case, and the Department of Health and Human Services Office of Inspector General investigated it.

How the Champions Program Allegedly Worked

The government alleged that the earlier Champions Program rewarded existing customers for recommending CareCloud’s electronic health records software to prospective customers. The period covered by the settlement agreement ran from January 1, 2012 through March 31, 2017. The alleged payments took several forms: cash-equivalent credits, cash bonuses and percentage success payments.

The government’s account tied each form to the same commercial purpose: getting an existing user to recommend the product to a new buyer.

Then came the restriction on what the customer could say. The agreement describes the government’s allegation this way:

CareCloud settlement agreement, the government’s allegations, 2021

The next part of the agreement says prospective customers were unaware of the compensation and the contractual restriction. The alleged arrangement therefore shaped both what the reference had a financial reason to say and what the reference had promised to withhold.

We would want to know who was paying the reference and what the contract kept them from saying. Under the government’s account, CareCloud’s prospects got neither answer. An endorsement with the criticism removed.

CareCloud discontinued the previous version of the Champions Program, including the features described in the agreement.

Why a Candid EHR Reference Matters

The industry’s experience with restrictive contracts helps explain why the CareCloud allegation reaches beyond the bonus payment.

In its 2020 Cures Act final rule, the Office of the National Coordinator for Health Information Technology described health IT contracts that restricted discussion of usability and safety concerns through confidentiality and other provisions. It also identified non-disparagement clauses that barred statements reflecting negatively on the developer. The agency was describing an information problem within the industry: customers’ experience could be hidden by the terms of their contracts.

The economics make that information valuable before the purchase. The 2022 Vassar College senior thesis A Panacea or a Problem? Electronic Health Records and the Complicated Politics of Its Stakeholder Network argues that contractual restrictions and the expense of changing vendors weaken the pressure to improve the user’s experience:

A Panacea or a Problem? Electronic Health Records and the Complicated Politics of Its Stakeholder Network, Vassar College senior thesis, 2022

A buyer wants the experience of someone already using the system before making a commitment that may be costly to undo. In the CareCloud allegations, the vendor paid for access to that experience while contractually limiting the unfavorable information the prospect could hear.

Why Electronic Health Records Sales Reached Medicare and Medicaid

The government connected the alleged referral payments to federal electronic health records incentive claims. Its theory was that payments for recommendations violated the Anti-Kickback Statute, making the associated federal incentive claims false under the False Claims Act.

The agreement describes the payment programs behind that theory. The Department of Health and Human Services established Meaningful Use incentive programs under Medicare and Medicaid for health care providers. Congress later replaced Medicare Meaningful Use with the Merit-Based Incentive Payment System, commonly called MIPS, for certain types of clinicians. The government’s covered allegations expressly connected the Champions Program payments to incentive claims under Meaningful Use and MIPS.

The sales conversation could therefore affect more than whose software a practice bought. In the government’s account, payments used to win the recommendation also affected claims for federal incentive money. Under that account, practices chose software without knowing what their references were paid to withhold, and taxpayers funded incentive claims tainted by those payments.

What CareCloud Agreed to Pay

The agreement allocated $1,464,218 of the government settlement to restitution and required another $405,000 for the whistleblower’s legal fees, expenses and costs. CareCloud denied the allegations even as it agreed to these payments. We find that an expensive denial.

The Broader Case Behind the Settlement

The former manager’s case alleged more than paid references. The agreement records allegations that the defendants caused false federal incentive claims, caused inaccurate reporting about Meaningful Use objectives and measures in attestations to the Centers for Medicare & Medicaid Services, and paid for recommendations.

The United States joined part of that case. The agreement then defined the conduct covered by its settlement around the earlier Champions Program: the payments, the restrictions on references and the prospects’ lack of notice. The former manager’s wider case questioned what was reported to the government about use of the software. The covered allegations focused on how paid references helped sell it.

The underlying case named CareCloud Corporation and two individual defendants. CareCloud Health, formerly CareCloud Corporation, was the company agreeing to pay the settlement.

Paid References in Other Electronic Health Records Cases

The government alleged paid customer promotion in the 2017 eClinicalWorks settlement. Its complaint alleged that existing users received payments to host prospective customers at their facilities, with additional payment possible if the visiting practice bought the software.

The government alleged that eClinicalWorks tracked the recipients’ sales performance and classified customers by their willingness to endorse the product:

United States ex rel. Delaney v. eClinicalWorks LLC, government complaint, paragraph 85

That allegation shows another way a vendor could control the customer voices a prospect heard. In eClinicalWorks, the government described lists identifying users unwilling to give favorable statements. In CareCloud, it described a contract prohibiting negative information from paid references. Both accounts put the management of customer recommendations inside the sales operation.

Who Inside an EHR Sales Program Sees This?

A sales employee may recognize how a reference was selected and compensated. A participating customer may know what the agreement required, while a purchasing practice may know what it heard before choosing the product. Those are different views of the same alleged arrangement. Our whistleblower experts work with you to connect the part you know to the sales decisions and federal payments that make the case.

How Much of a Settlement Does a Whistleblower Get?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. In CareCloud, a former manager brought the qui tam case. The agreement directed the government to pay the whistleblower a share of the recovery.

You Know What the Reference Was Paid to Say

If you worked with a paid electronic health records reference program or received a recommendation shaped by one, speak to one of our Whistleblower Experts about the agreement, payments or sales conversations you know. We build your case around how the reference arrangement reached the buyer and the federal claim, and bring in healthcare fraud whistleblower lawyers who understand electronic health records sales and incentive payments. We stay beside you from the first conversation through the pursuit of a recovery.