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Huge Relief From eClinicalWorks Decision Not to Hold Customers Liable For Its Vendor’s Actions, But Providers Should Not Drop Their Guard

Posted in Health Information, Regulation

There are inherent risks in any vendor relationship. In the healthcare industry, with myriad regulatory pitfalls, the stakes can be even higher. Several customers of the cloud-based electronic health record (EHR) software vendor eClinicalWorks were relieved by a recent decision in which regulators decided not to take action against them as a result of the alleged wrong-doing of eClinicalWorks. While this decision offers a huge sigh of relief, it should not be seen as an open invitation to adopt a lax approach to vendor engagements.

eClinicalWorks recently agreed to pay $155 million and enter into a five-year Corporate Integrity Agreement to settle allegations that it violated the federal False Claims Act by concealing information indicating that its EHR software failed to meet certain certification requirements from its certifying entity. Such requirements are necessary for eClinicalWorks to meet the “Meaningful Use” standard for EHR under the federal HITECH Act.

Under the HITECH Act, providers can receive incentives for using certified EHR. Providers participating in the Meaningful Use program must attest to the certification of their EHR software in order to qualify for the grants. The United States Department of Justice claimed that eClinicalWorks caused its customers to submit false claims for federal incentive payments tied to the Meaningful Use of EHR when they relied on the improper certification of eClinicalWorks.

In response to the eClinicalWorks settlement, the Centers for Medicare and Medicaid Services (CMS) stated that it would not take action against eClinicalWorks customers who had otherwise acted in good faith with respect to eClinicalWork’s technology. The settlement and, more specifically, CMS’ reaction to it, highlights CMS’ position that providers that may reasonably rely on the representations of their software vendors for accuracy of reporting. CMS further indicated that it does not plan to audit eClinicalWorks customers based on the settlement.

Although CMS’ statement certainly relieves some pressure from healthcare providers who contract with third parties, it is important to note that this settlement is a single situation, and the regulators may take a different approach in the future based on different facts. Furthermore, the Office for Civil Rights (OCR), which is responsible for HIPAA compliance, has not issued an opinion on this topic, and CMS has not published formal guidance to support this position more broadly.

Despite the fact that HIPAA does not (currently) require auditing or any form of specific monitoring of business associates, some form of oversight and/or vendor vetting is often appropriate and may significantly help to reduce the risk of liability if there is a breach or some other issue with the business associate vendor.

Finally, providers cannot ignore issues if they learn of them—regardless of how issues are discovered. Indeed, healthcare providers remain responsible for taking corrective action (including making any necessary disclosures) when they become aware of any HIPAA and HITECH violations by their business associates.