EHR Kickbacks: Who Pays Whom to Sell Software, Prescriptions and Lab Orders

EHR kickbacks buy influence over software purchases, prescriptions and laboratory orders through payments to vendors, customers or referring providers. The paid influence can reach a clinician through an alert, a software subsidy or a recommendation from another practice. If you work in sales, partnerships or product development, you may recognize the transaction before anyone calls it a kickback: a reference paid only when the prospect buys, a customer forbidden to criticize the product, or a pharmaceutical marketing department helping write a clinical prompt.

What Are Some Examples of Kickbacks in Healthcare?

EHR cases show payments buying influence at different points in healthcare. The direction of the money explains what each arrangement was meant to accomplish:

• Pharmaceutical company to EHR vendor: payment for a clinical alert intended to increase prescribing.
• Laboratory to EHR vendor: payment for recommending the laboratory and arranging orders from the vendor’s users.
• EHR vendor to customers or other recommenders: credits, cash or hospitality intended to generate software sales.
• Donor to medical practice: subsidized software tied to the business the practice sends back.

The same company can appear on more than one side. A vendor can take money to steer laboratory orders and pay money to recruit its next software customer. That is why the contract, the product decision and the resulting order belong in the same conversation.

What Law Prohibits Payments for Patient Referrals?

EHR kickbacks fall under the federal Anti-Kickback Statute. It prohibits knowingly and willfully offering, paying, seeking or accepting anything of value in exchange for referrals, orders or recommendations involving goods or services that federal health care programs may pay for. Credits against software fees, entertainment and subsidized technology also appear in EHR enforcement cases.

The federal money can arrive after the software sale. Under the historical Medicare and Medicaid EHR incentive programs, eligible providers received payments for adopting certified technology and meeting requirements for its use. The government alleged that vendors bought recommendations that generated software sales and caused providers to submit false incentive claims. In the laboratory cases, the connection also ran through claims for pathology services.

The False Claims Act reaches a company that knowingly causes a false claim as well as one that knowingly submits it. For an EHR insider, that puts the sales arrangement and the federal payment in the same picture. We examine what the payment bought, who made the recommendation and how the resulting business reached Medicare or Medicaid.

Pharmaceutical Companies Paying for Clinical Alerts

Practice Fusion’s admitted arrangement put pharmaceutical marketing inside a prescribing prompt. Under its deferred prosecution agreement, the company admitted soliciting and receiving kickbacks from an opioid company to use its EHR software to influence prescribing of opioid pain medication.

The Justice Department’s account of the criminal information describes a payment of nearly $1 million sought for an alert intended to increase prescriptions for extended release opioids. The drug company’s marketing department financed the payment and helped design the alert. Practice Fusion pitched the expected return on investment in terms of more opioid prescriptions.

We see a drug sales pitch built into the treatment decision. Patients came for medical advice, while the sponsor paid to sell more opioids. The government alleged that the arrangement also tainted claims to federal health care programs, putting taxpayer money behind the sponsor’s sales objective.

Practice Fusion separately agreed to pay approximately $118.6 million to the federal government and states to resolve civil allegations involving kickbacks and misrepresented software capabilities. Those allegations included thirteen other sponsored clinical decision support arrangements. The government alleged that pharmaceutical companies helped select guidelines, set the conditions that triggered alerts and, in some instances, draft the alert language.

For product and clinical staff, those details identify where the commercial purpose can become visible: who chose the guideline, who changed the trigger and who supplied the language. A sponsorship agreement explains the payment. The design discussion explains what the sponsor expected in return.

Laboratories Paying Vendors to Steer Orders

Modernizing Medicine, also called ModMed, agreed to pay $45 million in 2022 to resolve allegations of payments going both into and out of the vendor. The Justice Department alleged that Miraca Life Sciences paid ModMed to recommend its pathology services and arrange for ModMed’s users to send it laboratory business.

The government also alleged that the companies conspired to donate ModMed’s EHR improperly to providers. The alleged exchange was meant to benefit both businesses: more laboratory orders for Miraca, more software customers for ModMed. Separately, ModMed allegedly paid existing healthcare customers and influential industry sources to recommend its software and refer prospects.

The laboratory recommendation and the software recommendation served different buyers. One sold testing. The other sold the system through which a practice worked. Putting the arrangements together shows why a laboratory partnership can matter to someone on the software side of the business.

Clinical decision support, physician order entry and information exchange are among the functions built into the definition of a Base EHR. That industry structure gives the vendor a place inside the clinician’s work. In the ModMed case, the government alleged that the arrangements generated false federal claims for pathology services and EHR incentive payments. The commercial relationship reached both the order and the software purchase.

Vendors Paying for Software Recommendations

Paid EHR recommendations can look like a customer reference, a credit on a bill or an invitation to an event.

CareCloud’s Alleged Ban on Criticism

CareCloud allegedly paid existing customers to recommend its EHR while contractually barring them from giving prospects negative information. In its 2021 settlement announcement, the Justice Department described cash-equivalent credits, cash bonuses and percentage success payments under the Champions Program. Prospective customers allegedly learned neither about the compensation nor about the restriction on criticism.

The alleged arrangement bought more than an introduction. It bought control over what the reference could say. A practice seeking another customer’s experience was hearing from someone paid to help close the sale and contractually restricted from sharing the bad parts. We would call that a sales pitch dressed as a reference.

The HHS Office of Inspector General investigated the case, and the government joined a case brought by a whistleblower. The payment theory included alleged false federal incentive claims under the Medicare and Medicaid EHR programs and the Merit-Based Incentive Payment System. The reference agreement was part of the alleged path to public money.

NextGen’s Alleged Credits for Completed Sales

NextGen’s 2023 settlement resolved allegations involving certification and payments for recommendations. The government alleged that sporting-event and entertainment tickets also helped induce software purchases and referrals. Its complaint describes how the reference program allegedly worked:

United States of America ex rel. Markowitz and Ringold v. NextGen Healthcare, Inc., government complaint, paragraph 70

The government further alleged that reference customers had to present the product positively, often received extra services or faster technical support, and had a financial incentive that NextGen did not disclose to prospects. That matters to a buyer judging both the software and the support behind it. The customer giving the glowing account allegedly received treatment other customers did not.

Switching costs make that sales-stage influence consequential. A 2022 Vassar College senior thesis on EHR stakeholders argues that contracts and the cost of changing vendors weaken the pressure to improve the user experience:

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

That analysis helps explain the value of an honest reference before a practice commits.

Athenahealth’s Alleged Payments for Leads and Conversions

Athenahealth’s alleged programs reached prospects at several stages. Its 2021 settlement announcement describes all-expense-paid events, including trips to the Masters Tournament and Kentucky Derby with travel, luxury accommodations, meals and alcohol.

The government also alleged that Athena paid customers up to $3,000 for each physician who signed up through its lead-generation program, regardless of how much time the referring customer spent with the prospect. Another program paid competing vendors that were discontinuing their products, with compensation tied to the value and volume of practices converted to Athena.

The government’s complaint gives the conversion arrangement a practical dimension. It alleged that SOAPware supplied client lists and early access before other vendors knew it was leaving the market. Athena and SOAPware allegedly prepared a data-migration solution before the shutdown announcement, while customers choosing other platforms reported significant migration difficulties. The recommendation allegedly came with an advantage in moving the customer’s records.

The pattern also appears in the Greenway Health allegations, which concerned money and incentives for clients to recommend Prime Suite, and the eClinicalWorks allegations, which included payments to customers for promoting the product. Across these cases, the useful comparison is what earned the payment: a recommendation, a completed sale or the transfer of an existing customer base.

EHR Donations and the Business Expected in Return

EHR donation rules are meant to keep software subsidies from buying referrals. The EHR donation safe harbor sets conditions on those subsidies, including a contribution of 15% of the donor’s cost from the recipient. A donor cannot choose recipients or set the size of a donation directly by the volume or value of business coming back.

Laboratory companies have been excluded from that protection since March 27, 2014.

The Inspector General’s 2013 rule records commenters’ concerns about laboratory referral quotas and demands that practices repay donated technology costs if they missed those quotas. The Inspector General’s office explained that selecting recipients or determining donations directly by referral volume or value fell outside the protection. A practice supposedly receiving help with its software could face a demand for business in return.

In its 2019 settlement with Inform Diagnostics, formerly Miraca Life Sciences, the Justice Department alleged that the laboratory violated the conditions governing EHR donations through subsidies and free or discounted technology consulting for referring physicians. The vendor-side ModMed allegations and this laboratory-side case show why the donation agreement belongs beside the relationship that generates the orders.

Why Certification Appears Beside Kickback Allegations

The NextGen complaint alleged that the company used an auxiliary product built for certification test scripts to conceal missing capabilities in its EHR. Providers relying on the certification allegedly made false incentive attestations without knowing that the product lacked required functions.

For someone inside the vendor, that connects the product sold, the way the sale was won and the representation supporting the customer’s federal claim. A sales reference may explain why the customer chose the software. The test build and released product explain what the customer actually received.

What Sales, Product and Clinical Staff Can Recognize

The evidence sits wherever the commercial bargain meets the work. A sales employee may know which credit depended on a completed purchase. A partnerships employee may know what business a laboratory expected from a software subsidy. A product or clinical employee may know why a sponsor wanted particular alert language.

The ModMed whistleblower had been the company’s vice president of product management. The NextGen whistleblowers were healthcare professionals at a facility using the software. Knowledge of an EHR arrangement can come from building the product or working with it every day.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know What the Payment Bought

If you know how a referral payment, laboratory deal or sponsored alert worked inside the business, speak with our whistleblower experts about what the payment bought. We connect commercial decisions to product behavior and federal claims to build your strongest EHR kickback whistleblower case. We bring in EHR fraud whistleblower lawyers who understand software and kickback cases, and remain your partners throughout the process.