Practice Fusion, an electronic health records company owned by Allscripts, received a grand jury subpoena as part of an ongoing government criminal investigation, as disclosed in a public filing with the U.S. Securities and Exchange Commission last week.
Practice Fusion received the subpoena in March, according to Allscripts’ SEC filing, and relates to “certain business engaged in by Practice Fusion” and the company’s compliance with the Anti-Kickback Statute and HIPAA (Health Insurance Portability and Accountability Act).
The subpoena also requests information and documents about the certification Practice Fusion obtained for its health IT software in connection with the Electronic Health Record (EHR) Incentive Program overseen by the Office of the National Coordinator for Health IT.
Allscripts acquired Practice Fusion for $100 million in January 2018, a year after the company received an inquiry from the U.S. Attorney’s Office for the District of Vermont examining the company’s compliance with the EHR certification program as part of a criminal investigative demand.
Between April 2018 and January 2019, Practice Fusion received five additional requests for documents and information through another criminal investigative demand and HIPAA subpoenas, according to Allscripts’ SEC filing.
An Allscripts spokeswoman said Practice Fusion continues to respond to all government requests for information and cooperate in the investigation. “Because that investigation is ongoing, we are not providing additional information at this time,” the spokeswoman said.
Allscripts said in the SEC filing that these matters or any future government investigations could result in criminal liability, the imposition of damages, non-monetary relief, significant compliance, litigation or settlement costs, or any other losses.
Allscripts also said it is aware of other EHR providers who are responding to similar investigations by the U.S. Attorney’s Office, and two other EHR providers recently settled allegations by the Department of Justice that resulted from civil investigative demands and required significant payments and ongoing compliance costs in connection with long-term corporate integrity agreements.
In May 2017, EHR vendor eClinicalWorks settled with federal prosecutors for $155 million to resolve allegations that it falsified EHR certification. It represented the first time federal prosecutors have pursued an EHR vendor for falsifying Meaningful Use certification.
But there have been other investigations. Tampa, Florida-based EHR company Greenway Health settled with federal prosecutors for $57.25 million to resolve claims it falsely obtained EHR certification and incentivized clients in exchange for promoting or recommending its product to prospective new customers.
The outcome of the government investigation of Practice Fusion or any similar settlements could have a “material adverse effect on our business, financial condition, and operating results,” Allscripts said.
Word of the DOJ investigation into Practice Fusion came to light during Allscripts’ acquisition of the company and ultimately drove down Practice Fusion’s asking price, according to confidential documents obtained by Fierce Healthcare and reported last January.
Practice Fusion was once reportedly worth as much as $1.5 billion with goals of going public. In May 2017, Allscripts submitted a nonbinding letter of intent to purchase the company for between $225 million and $250 million, more than twice as much as it would end up paying for the company seven months later.
But Allscripts pulled its offer a month later when the eClinicalworks settlement was announced as it suddenly clarified just how expensive a similar legal battle could be.
Practice Fusion, unable to resolve the DOJ investigation into its EHR certification program compliance, ultimately accepted Allscripts’ offer of $100 million. Practice Fusion eventually declined two other offers to buy the company for as much as $145 million because Allscripts provided a key assurance: It would absorb any potential fallout from the DOJ investigation.
Allscripts also had experience with civil investigations, Practice Fusion noted in a letter to shareholders at the time. Health IT company McKesson was the subject of a similar DOJ investigation a month earlier when Allscripts agreed to buy the company’s health IT portfolio for $185 million, Practice Fusion noted in the shareholder letter.
A spokesman for the Vermont U.S. Attorney’s Office said he could not comment on nor acknowledge the existence of an investigation.
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