Inform Diagnostics, Formerly Miraca: Software for the Practice, Specimens for the Lab

Inform Diagnostics, formerly Miraca Life Sciences, agreed to pay $63.5 million to resolve allegations that the pathology laboratory provided improper electronic health record subsidies and free or discounted technology consulting to referring physicians. The alleged inducement went into the physician’s practice as software or technical help, while the laboratory stood to receive the testing business. For someone who approved a subsidy, sold the software or managed the referral relationship, that connection is the heart of the case.

The Justice Department announced the settlement on January 30, 2019. Inform Diagnostics was formerly Miraca Life Sciences, headquartered in Irving, Texas. During the period relevant to the case, it was a subsidiary of the Japanese company Miraca Holdings. The laboratory took the name Inform Diagnostics after majority ownership changed in 2017.

Why an Electronic Health Record Subsidy Could Influence a Laboratory Referral

An electronic health record subsidy could reduce a practice’s technology bill while giving the donating laboratory a way to compete for its testing business. Pathology laboratories receive tissue or fluid samples from healthcare providers, analyze them for disease and send their findings back to the ordering provider. The electronic connection between the practice and the laboratory therefore matters to the everyday work of ordering a test and receiving its result.

Buying the system was itself a substantial decision. The 2022 Vassar College thesis A Panacea or a Problem? Electronic Health Records and the Complicated Politics of Its Stakeholder Network describes cost and complexity as barriers to adoption, followed by federal incentives that helped drive uptake. It also examines how providers, payers and technology companies bring different interests to the same system. That is a useful way to understand this case: the physician’s chart was also a place where the laboratory and software vendor could pursue customers.

The federal electronic health record incentive programs paid eligible providers for adopting and meaningfully using certified technology. Against that commercial background, the Justice Department alleged that Miraca’s subsidies and consulting benefits crossed the conditions governing its financial relationships with referring physicians. The consulting allegation matters alongside the software subsidy because the benefit could arrive as help with technology, as well as payment for the technology itself.

What Law Prohibits Payments for Patient Referrals?

The federal Anti-Kickback Statute prohibits payments intended to induce referrals, orders or recommendations for services paid for by federal health care programs. The Justice Department’s Inform settlement announcement also cited the Stark Law, which restricts financial relationships between physicians and providers to which they refer patients.

The Department of Health and Human Services created conditional protection for electronic health record donations in 2006. The government alleged that Miraca violated those conditions. In its December 2013 rule, the department removed laboratory companies from the protected donors, effective March 27, 2014.

The rule explains the commercial concern plainly. Commenters described laboratories tying donations to referrals and targeting practices according to the volume or value of business they could send. The department also addressed arrangements that prevented competing laboratories from connecting to donated technology. It said that excluding competitors could lock in both data and referrals. The technology meant to connect health care could become a way to hold onto business.

Three Whistleblower Cases, One Laboratory Settlement

Three qui tam cases supplied the allegations behind Inform’s settlement. One came from a former senior vice president of commercial operations, another from a whistleblower entity, and the third from two individual whistleblowers.

The former commercial executive’s allegations also show what a concern could look like inside the business. In the Sixth Circuit’s account, he alleged that he confronted the chief executive about the donation and consulting programs. According to that account, the chief executive said Miraca would keep its practices and settle with the government if they came to light.

We see a plan to answer improper payments with another payment, if caught.

The Justice Department credited the investigation to its Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Offices for the Middle Districts of Tennessee and Florida, the Department of Health and Human Services Office of Inspector General and the Federal Bureau of Investigation.

The ModMed Connection Put the Laboratory Inside the EHR

Modernizing Medicine, known as ModMed, allegedly helped Miraca gain laboratory orders while gaining customers for its own electronic health record software. The vendor separately agreed to a smaller settlement of $45 million in November 2022 to resolve allegations involving that relationship and other conduct.

In that separate vendor case, the government’s complaint against ModMed connects the donation decision, the software features and the payments between the companies. The complaint places the alleged kickback schemes between January 2010 and July 2017. The government alleged that the arrangements caused false claims to Medicare and Medicaid.

The complaint also connects the Miraca referral arrangement to Meaningful Use incentive payments. It alleged that ModMed caused providers to seek payment for pathology services and electronic health record incentives while falsely certifying compliance with the Anti-Kickback Statute.

Donations Priced Against Expected Referrals

The Department of Justice alleged that Miraca chose donation recipients and amounts by projecting the laboratory business each practice would generate. Before approval, its sales force calculated the expected number and value of referrals. Management used that return-on-investment analysis to decide who would receive a donation and how much, with breaking even a significant consideration.

According to the complaint, ModMed and Miraca exchanged sales leads and information about provider behavior to target prospective customers. Each practice that received a donation could become a new software customer for ModMed and a source of pathology orders for Miraca. The complaint describes a practice willing to switch laboratories to secure a donation, and Miraca asking for laboratory business before investing in the practice.

That gives the subsidy a concrete sales purpose. In the government’s account, the decision turned on the business expected back from the recipient.

Better Features for One Laboratory

The alleged interface arrangement made useful software features available only when a physician chose Miraca. Under the agreement described in the complaint, Miraca agreed to pay ModMed $250,000 to develop enhanced ordering and results interfaces.

The ordering interface let physicians attach clinical histories and photographs to pathology orders. The results interface returned findings directly into ModMed’s software and automatically filled in results, action and plan fields. The government’s complaint described these features as saving physicians time and money and improving accuracy, but alleged that physicians could not use them for orders sent to another laboratory.

The practical attraction was built into the work. A physician could send more clinical information with a specimen and receive the result back into the chart, provided the specimen went to the favored laboratory. Competing laboratories allegedly faced a disadvantage inside the software the practice already used.

Payments Rose With Miraca’s Share of Orders

The Justice Department alleged that Miraca paid ModMed a fee for each specimen, with higher rates as a practice sent a greater share of its specimens to Miraca. The complaint alleged that even the lowest rate exceeded market rates. It also described a $20,000 monthly minimum payment if the specimen fees fell below that amount.

The complaint quoted a ModMed employee describing the incentive:

More specimens and a greater share of each practice’s orders meant more money under the alleged arrangement. The complaint also described paired sales teams, joint road shows and dinners aimed at winning laboratory customers.

When competing laboratories objected, the government alleged, ModMed instructed employees to describe the company as “lab agnostic.” That is a remarkable description for an arrangement alleged to reserve the better interface for one paying laboratory.

Can a Whistleblower Report EHR Fraud?

Yes. Inform’s case shows that an electronic health record whistleblower can come from the laboratory’s commercial operations. The separate ModMed case came from a former vice president of product management. The alleged relationship crossed sales, product design, contracting and laboratory referrals, so different people could see different parts of it.

We look at how those parts fit together. A subsidy approval can show the business expected from a practice. An interface agreement can explain why a competing laboratory could not offer the same features. Payment terms and referral reports can connect the benefit to the business it was meant to bring back. Your knowledge of how the arrangement worked can give those records their meaning.

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.

You Saw the Arrangement From Inside

If you worked on the laboratory subsidy, the consulting offer or the interface that favored one lab, talk with our whistleblower experts about the arrangement. We work beside you to connect the commercial decisions to the software and referrals, and bring in healthcare fraud whistleblower lawyers who understand laboratory and EHR kickback cases. You bring the inside knowledge; we bring the judgment and partnership to pursue the case with you.