Allscripts to pay $9.7M in EHR reseller dispute

A North Carolina judge has ordered Allscripts Healthcare Solutions to pay more than $9.7 million in an arbitration award to settle a 19-month lawsuit with a health IT services provider over its former EHR system.

Etransmedia--a reseller of health IT products--alleged it had pre-purchased millions of dollars in MyWay licenses to resell after Allscripts promised its EHR would be certified to meet Meaningful Use Stage 2 requirements and upgraded to comply with the new ICD-10 codesets.

But then on Oct. 5, 2012, Allscripts announced plans to stop providing support for its MyWay EHR and offered its customers a no-cost alternative system.

In August 2013, the companies submitted their dispute to arbitration. Etransmedia alleged that Allscripts breached contract provisions, impeded Etransmedia's sales attempts and "stuck" the company with 684 prepaid software licenses and an additional 300 licenses the company had agreed to buy from Allscripts but had not finished purchasing. The licenses were among 1,378 total licenses that Etransmedia bought from Allscripts over several years.

Last month, Superior Court Judge Robert Hobgood confirmed the settlement determined by a three-member arbitration panel.

The panel found that Allscripts violated the North Carolina Unfair and Deceptive Trade Practices Act by knowingly making false promises that hindered Etransmedia's potential for business. According to the settlement award, Allscripts' decision to suspend MyWay support "immediately rendered Etransmedia's unsold inventory of MyWay licenses impossible to market."

The panel also found that Allscripts' alternative EHR product was not a reasonable substitute under the partnership agreement with Etransmedia. The panel denied the allegation that Allscripts committed fraud, citing a lack of evidence.

Etransmedia estimated that the unsold licenses were each worth about $3,865, which entitled the company to receive about $2,967,961 in actual damages.

The damages were increased to $8.9 million, and additional claims and interest brought the total settlement to more than $9.7 million. Hobgood denied a request from Allscripts that the decision and award be sealed.

Etransmedia President and CEO Vikram Agrawal called the settlement "a hard-fought victory for a company of our size against a giant $1.4 billion publicly traded company like Allscripts."

In its own statement, Allscripts said, "While we respectfully disagree with the panel's award, we look forward to putting this matter behind us."