EHR Referral Kickbacks: Credits, Trips and Payments for Converted Customers

EHR vendor referral kickbacks use payments, credits or other benefits to buy recommendations and sales connected to federal healthcare payments. A customer credit can follow a signed contract. A trip can go to the executive who controls a large purchase. A reference can earn a fee while agreeing to keep negative information from the next buyer. If you work in sales, customer success or a medical practice, those arrangements may look familiar long before anyone calls them kickbacks.

The Department of Justice has resolved allegations involving these practices against NextGen, athenahealth, CareCloud, Greenway, eClinicalWorks and Modernizing Medicine. The useful comparison is what each payment bought: an introduction, a completed sale, a favorable account of the product or access to customers whose existing vendor was leaving the market.

What Law Prohibits Payments for Patient Referrals?

The Anti-Kickback Statute reaches payments intended to induce referrals, purchases, orders or recommendations involving items or services payable by a federal health care program. In the EHR cases, the government’s allegations turn on the purpose of the benefit and its connection to federal payments.

That connection runs through the practice buying the software. Providers used certified electronic health records to claim Medicare and Medicaid incentive payments. The government’s complaint against athenahealth alleged that the company submitted and caused its clients to submit incentive claims resulting from illegal payments for referrals. In the government’s account, taxpayer money was on the other side of the sales program.

The False Claims Act reaches a business that knowingly causes a false claim to be submitted. That is how an EHR vendor’s sales practices can become the subject of a whistleblower case over payments sought for the customer’s use of the product.

What Is the EHR Incentive Program?

The EHR incentive programs paid eligible providers for adopting and meaningfully using certified electronic health records under program requirements. Those payments made the choice of software consequential to the practice’s finances as well as its clinical work.

The Centers for Medicare & Medicaid Services describes the later changes: the separate Medicare EHR incentive program for eligible professionals gave way to requirements within the Merit-based Incentive Payment System. The Medicaid program ended on December 31, 2021. Medicare’s hospital Promoting Interoperability program continues.

What Are Some Examples of Kickbacks in Healthcare?

EHR referral and reference programs have produced allegations involving customer credits, per-physician fees, entertainment, paid endorsements and payments to competing vendors for converted customers.

NextGen Credits Tied to Completed Sales

NextGen agreed to pay $31 million in July 2023 to resolve allegations involving both certification and referral kickbacks. The Justice Department’s announcement described credits to existing customers whose recommendations produced new sales, together with tickets to sporting events and entertainment.

The government’s complaint explains how a software credit for an EHR referral was calculated:

In that account, the visit created the opportunity to sell, and the purchase triggered the credit. The alleged agreement made the credit contingent on a completed sale.

Athenahealth Per-Physician Referral Fees

Athenahealth agreed to pay $18,250,000 in January 2021 to resolve allegations about three sales programs: client referrals, hospitality and payments to companies discontinuing their health information technology products.

The government alleged that the client lead program paid up to $3,000 per physician, regardless of how much time the referring client spent speaking to or meeting with the lead. The complaint also alleged that athenahealth renamed the program Introductions while continuing payments based on the value and volume of referrals. The name changed. The alleged commercial bargain stayed.

Hospitality Based on Deal Value

EHR hospitality allegations reached the invitation list and the reason each person was on it. The government alleged that athenahealth reserved its most expensive events for high-value deals and limited Masters invitations to executives or decision makers from larger prospective purchases.

Its complaint quoted an executive explaining the expense:

The alleged benefits included airfare, luxury lodging and gifts. We see the point in the executive’s words quoted in the complaint: the bigger the prospective sale, the easier it was to justify the trip.

Payments to an Exiting Competitor

Payments to an exiting EHR competitor could buy both recommendations and a head start on migration. The government alleged that athenahealth paid SOAPware according to the value and volume of customers that converted to athenahealth’s products.

According to the complaint, athenahealth obtained customer lists and contacted those customers before other vendors knew SOAPware intended to discontinue its offering. The government also alleged that the companies developed a way to migrate data into athenaClinicals before the shutdown announcement, while customers choosing other platforms reported significant migration difficulties. The complaint alleged that the companies generally concealed SOAPware’s financial incentive to recommend athenahealth.

Switching difficulty gives that arrangement its industry context. A Panacea or a Problem? Electronic Health Records and the Complicated Politics of Its Stakeholder Network, a 2022 Vassar College senior thesis, argues that rapid adoption and expensive switching strengthened vendors’ position:

That helps explain why a customer recommendation and a workable migration route belong in the same sales story. In the SOAPware allegations, the preferred replacement vendor had access to both before the customer made the switch.

CareCloud’s Paid References and Restricted Answers

CareCloud agreed to pay $3,806,966 in April 2021 to resolve allegations involving its Champions Program. The Justice Department described cash-equivalent credits, cash bonuses and percentage success payments to existing customers who recommended the product.

The government alleged that participating customers signed agreements prohibiting negative information about CareCloud’s EHR. Prospects allegedly learned neither that the reference received compensation nor that a contract restricted what the reference could say.

In that alleged arrangement, we see a buyer trying to check the sales pitch and a seller paying to restrict the answer. Due diligence with the criticism removed.

Greenway Payments for Prime Suite Recommendations

Greenway’s alleged referral program paid money and incentives to client providers who recommended Prime Suite to prospective customers. The company agreed to pay $57,250,000 in February 2019 in a settlement covering referral payments and software allegations.

Those software allegations included modifying the certification test build and leaving a known error in a meaningful-use calculation uncorrected so customers would receive incentive payments. The referral program sat beside allegations about the product customers were being paid to recommend. For a sales or implementation employee, the recommendation and the product’s actual behavior can be parts of the same story.

EClinicalWorks Referral and Site-Visit Payments

The Justice Department announced a $155 million settlement in May 2017 covering certification and customer-kickback allegations against eClinicalWorks, its three founders, a developer and two project managers. The founders were its chief executive, chief medical and chief operating officers. The government’s complaint alleged that existing users received as much as $500 for each referred provider who signed a contract.

Site visits had their own payment structure. The government alleged that hosting payments depended on the number of users at the visiting practice, with an additional payment available if that practice bought the software. Influential users also allegedly received consulting and speaker fees, gift cards, iPads, meals, travel and entertainment.

The complaint described how the company selected the voices prospects would hear:

A customer list could therefore show more than contact details. In the government’s account, it also recorded who would provide the endorsement the sales team wanted.

ModMed Customer and Industry Influencer Payments

Modernizing Medicine, known as ModMed, agreed to pay $45 million in November 2022 to resolve allegations involving customer promotion, laboratory arrangements and certification. The government alleged payments to existing healthcare customers and influential industry sources to recommend its electronic health records software and refer potential customers.

ModMed adds another participant to the comparison: a person or business whose influence extends beyond a single practice’s purchasing decision. The alleged promotion could come from an industry source as well as a current user.

Why Paid EHR Customer References Matter

Paid references shape what a prospective customer learns before committing to a system. In the CareCloud allegations, a contract barred negative information. In the NextGen complaint, reference-program members had to provide a positive showcase, and the company chose hosts partly for their satisfaction and the strength of the recommendation they would give.

NextGen’s complaint also alleged that those members often received extra services or faster technical support. Prospects allegedly were not told that a purchase would generate compensation for the reference. The buyer could therefore hear from a customer receiving both a financial incentive and different support from other users.

These allegations connect the reference agreement, the customer experience and the sales payment. Someone in customer success may know why a showcase account receives preferential service. Someone buying the system may know what the reference said. We examine how those accounts fit together with the company’s terms and payments.

When an EHR Referral Leads to a Laboratory

The ModMed allegations also involved payments flowing into the vendor. The government alleged that Miraca Life Sciences paid ModMed to recommend and arrange use of its pathology services. It separately alleged that the companies arranged improper EHR donations to increase laboratory orders and add ModMed customers. As alleged, the software sale and the laboratory referral served both businesses.

Laboratories once qualified for legal protection for electronic health record donations. The Health and Human Services Office of Inspector General excluded laboratories effective March 27, 2014, after concerns that donations were being conditioned on referrals. That exclusion remains in force.

Practice Fusion supplies a separate comparison. Under its criminal deferred prosecution agreement, the company admitted soliciting and receiving payments from an opioid company to use its electronic health records software to influence prescribing. The Justice Department’s account of the admitted arrangement described a clinical alert designed with the drug company’s marketing department. Here, the sponsor paid the software vendor for influence at the point of care.

What an Insider Can Recognize

Referral agreements, customer credits, event invitations and reference lists can connect the benefit to the sale. NextGen’s alleged payment trigger sat in its reference arrangement. Athenahealth’s alleged event selection followed deal value. eClinicalWorks allegedly tracked both referral payments and recipients’ success in obtaining sales.

The eClinicalWorks whistleblower was a software technician formerly employed by a municipal health agency that used the product. The Justice Department announced a reward of approximately $30 million. ModMed’s whistleblower, a former vice president of product management, received approximately $9 million from its settlement.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. We help you turn what you know about the recommendation and the benefit into your strongest whistleblower case.

When You Know What Bought the Recommendation

If you know how a customer credit, event invitation or reference agreement helped close an EHR sale, speak with our whistleblower experts about the arrangement. We work beside you to build the case around the payments and decisions you understand, and bring in healthcare fraud whistleblower lawyers who know electronic health records referral cases. We stay with you through the process, from making sense of the sales program to pursuing your strongest whistleblower case.