Modernizing Medicine: EHR Features and Alleged Pathology Steering

Modernizing Medicine agreed to pay $45 million in 2022 to resolve kickback and false incentive-claim allegations. The Modernizing Medicine Miraca kickbacks case reached both pathology referrals and the electronic health record business. The government alleged that Miraca bought more than a recommendation: it paid for software features competing laboratories could not use, and paid the vendor more as its share of pathology orders grew. For someone who built those interfaces or sold those accounts, the case runs through familiar product decisions, contracts and sales reports.

Modernizing Medicine, also called ModMed, is an electronic health record vendor based in Boca Raton, Florida. Its cloud-based product, EMA, served specialty practices, including dermatology. Miraca Life Sciences provided pathology services, analyzing patient samples and returning findings to the clinicians who ordered the tests.

The Justice Department’s November 1, 2022 announcement described three marketing programs: payments from Miraca to ModMed for pathology recommendations, electronic health record donations intended to grow both companies’ business, and payments by ModMed to customers and industry influencers for software recommendations. A separate allegation concerned whether EMA supported the standard vocabularies needed for users’ incentive-payment claims.

EHR Donations and Pathology Referrals

The government alleged that Miraca selected electronic health record donation recipients by the pathology business they could bring, while ModMed gained a software customer from each donation. From January 2010 through December 2013, according to the government’s complaint, Miraca required its sales force to calculate the expected return before approving a donation. Sales representatives projected the number and value of referrals. Management used those projections to decide who received assistance and how much.

ModMed allegedly helped find the practices. The complaint describes a sales manager sending Miraca a spreadsheet of nearly 150 prospective clients, selected because those practices were not already working with other pathology laboratories. Another exchange concerned a practice willing to switch its pathology business to Miraca. The software sale and the laboratory account were allegedly being pursued together.

The complaint alleged that ModMed understood the restriction against making donations dependent on referrals. It also described a salesperson expecting a small donation for a small practice with little volume. The alleged sales calculation was straightforward: the amount of help buying software followed the amount of laboratory business expected in return.

Miraca, renamed Inform Diagnostics, reached its own separate $63.5 million settlement in January 2019. That resolution concerned alleged electronic health record subsidies and free or discounted technology consulting for referring physicians. ModMed’s case also followed money in the other direction, from the laboratory to the software vendor for access to its users.

Miraca’s Exclusive Interface

The alleged preference reached the product itself. Under a September 2013 agreement described in the complaint, Miraca agreed to pay ModMed $250,000 to develop enhanced order and result interfaces. Those features made it easier for a physician to send clinical information with a sample and receive the findings back inside EMA.

The enhanced order interface could carry a patient’s history of present illness, family history of melanoma, previous melanoma history and staging, a continuity-of-care document and digital photographs. The result interface returned laboratory findings directly into EMA and automatically filled in results, action and plan fields for physicians.

The government’s own complaint said they improved accuracy, saved physicians time and money, and improved medical care and patient safety. It then alleged that physicians could not use them when sending a pathology order to another laboratory. The improvement, according to the complaint, came with a preferred destination.

According to the complaint, the contract kept those enhanced features unavailable for competing pathology laboratories for at least 180 days after ModMed gave notice that it was ending exclusivity.

That choice sits inside a large part of the laboratory business. Quest Diagnostics reported in its fiscal 2025 annual filing that it interfaced with more than 1,000 electronic health record systems. Laboratory access runs through software as well as sample collection and transport. In ModMed’s case, the government alleged that a contract reserved valuable parts of that software connection for one laboratory.

Miraca’s Share of Orders and ModMed’s Fees

Miraca’s alleged payments rewarded both the number of specimens sent through EMA and the share of a practice’s laboratory orders that went to Miraca. The complaint describes a sliding per-specimen fee: as Miraca captured more of the practice’s orders, ModMed earned a higher fee on each specimen. The government alleged that even the lowest fee exceeded what competing laboratories paid. In its account, competing laboratories lost a fair chance at those orders, and Medicare paid claims generated by the alleged steering.

The agreement also required a $20,000 monthly minimum, according to the complaint. If transaction fees fell short, Miraca owed the difference. And if another laboratory offered ModMed a higher transaction fee, the parties agreed to negotiate an increase so Miraca’s lowest fee would at least match that competitor’s lowest fee.

An internal observation quoted in the complaint put the vendor’s incentive plainly:

The government alleged that ModMed acted on that incentive. It shared physician-client information, including specimen volumes, with Miraca. Regional sales managers paired up across the companies, held calls every two weeks about prospects and sales, and conducted joint road shows and dinners. The government described a laboratory account and a software account becoming a shared sales project.

The government alleged that ModMed received and reviewed an advisory opinion from the Department of Health and Human Services’ inspector general about electronic health record arrangements favoring one laboratory over another. Competing laboratories then objected to its exclusive arrangement. ModMed allegedly instructed employees to tell them that it was “lab agnostic” and did not favor Miraca. Its own policies prohibited favoring one laboratory over another, according to the government. According to the complaint, enhanced features were reserved for Miraca inside the contract. Outside it, competitors were being told that no laboratory received a preference.

The government’s account traced the arrangement through Miraca’s share of orders, daily case counts and specimen volumes. It alleged that those measures improved with ModMed’s referral activity and connected that activity to Medicare claims for Miraca’s services. The companies ended the interface agreement in November 2016, according to the complaint.

The settlement also resolved allegations that ModMed paid customers and industry influencers to recommend EMA, generating software sales and claims for Meaningful Use incentive payments. The government separately alleged that EMA did not always support required standard vocabularies, causing users to report inaccurate information when claiming those payments.

Inside the Software Business

For a product or implementation employee, the difference between functions available for Miraca and functions available for other laboratories may be familiar work. For a laboratory sales employee, the connection may lie in the account data shared with the vendor. For someone working on certification, it may be the difference between the transactions the product supported and the use information reported for incentive payments.

Those views meet at the same point: what a practice was encouraged to buy or use, what the product actually did, and which payment followed. Our whistleblower experts work with you to connect that knowledge to the business decisions and claims it explains.

The Whistleblower Came From Product Management

A former ModMed vice president of product management brought the False Claims Act qui tam case in Vermont. The government joined it, and the Justice Department announced that the whistleblower would receive approximately $9 million as part of the resolution.

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

You Know the Interface and the Incentive

If you know why one laboratory received better software access, or how referral payments shaped a software sale, talk with our whistleblower experts. We build your strongest case with you, bring in healthcare fraud whistleblower lawyers who understand laboratory referrals and electronic health record incentive claims, and stay beside you through the pursuit of a recovery.