Cases & Deals

MEDHOST obtains dismissal of qui tam action relating to alleged false claims under HITECH Act

Clients MEDHOST, Inc.

Jones Day obtained a dismissal on behalf of MEDHOST, Inc. (a developer of electronic health record ("EHR") software) in a qui tam False Claims Act action. The relators alleged that the defendants either submitted, or caused the submission of, hundreds of millions of dollars in false claims to the Department of Health and Human Services for federal incentive payments under the Meaningful Use provisions of the Health Information Technology for Economic and Clinical Health Act (the "HITECH Act").

The plaintiffs alleged that MEDHOST made misrepresentations to obtain the certification of its software, which was sold to the hospital defendants, who in turn relied on those certifications to obtain payments from Centers for Medicaid & Medicare Services ("CMS") for "meaningfully using" EHR software, all in violation of the False Claims Act. The allegations also included claims that MEDHOST violated the Anti-Kickback Statute by providing free software to the defendant hospitals to encourage the purchase of other EHR software.

After a lengthy investigation, the U.S. Department of Justice ("DOJ") did not intervene in the case, but the relators pursued the case anyway. Jones Day secured a complete victory on a motion to dismiss. In dismissing the claims against MEDHOST and other defendants with prejudice, Judge Robert N. Scola, Jr. of the Southern District of Florida ruled that "even when construing the universe of facts presented in light most favorable to the relators, the court is unable to reasonably infer that the defendants have engaged in the alleged misconduct." In doing so, the court made clear that it will take more than a high volume of general allegations to tag a company with potential liability in a FCA case. The court's holding also demonstrates that software defects alone do not suggest that an underlying software certification is fraudulent, and that instead specific factual allegations of misconduct will be required for cases like these to proceed.

United States of America ex rel. Derek Lewis and Joey Neiman v. Community Health Systems, Inc., et al., No. 1-18-cv-20394 (S.D. Fla.)

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