As COVID-19-related testing capabilities increase along with other kinds of desired laboratory tests, clinical laboratories are encountering heightened volumes resulting from rising demand for services. Recovery homes and clinical treatment facilities may also see heightened demand for services stemming from the COVID-19 fall-out. In addition to this demand, these entities may wish to promote their services to other providers and the public.
However, in looking at potential marketing arrangements, these entities must remain mindful of the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”), an all-payor statute enacted in 2018 prohibiting kickbacks related to remuneration for referrals to recovery homes, clinical treatment facilities and laboratories. EKRA’s passage generated uncertainty surrounding its applicability and enforcement, particularly regarding the statute’s breadth and its interplay with permissible arrangements under existing federal health care laws. However, the Department of Justice announced its first conviction under EKRA at the beginning of 2020, signaling the government’s commitment towards enforcing the statute and emphasizing the importance of structuring compliant arrangements.
EKRA
EKRA was enacted in 2018 as part of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act of 2018 (“SUPPORT Act”), a comprehensive law seeking to combat the opioid epidemic throughout the United States. EKRA, Section 8122 of the SUPPORT Act, establishes criminal sanctions (up to $200,000 fine and 10 years imprisonment) for kickbacks related to the solicitation or receipt of remuneration for any referrals to recovery homes, clinical treatment facilities or laboratories. EKRA further criminalizes the payment or offer of remuneration to induce a referral to or in exchange for an individual using the services of such providers. Notably, EKRA is an all-payor statute, applying to services covered by any type of health care benefit program in or affecting interstate or foreign commerce, which includes commercial insurance plans.
EKRA incorporates several exceptions; some aligning with existing laws such as the Anti-Kickback Statute and the Stark Law but also including key differences. These inconsistencies pose challenges for health care entities and providers as EKRA may implicate longstanding industry practices and arrangements already in compliance with other federal health care laws.
For example, EKRA’s exceptions regarding payments to employees and independent contractors do not expressly exempt various forms of incentive-based compensation permissible under the Anti‑Kickback Statute, such as sales commissions payable to bona fide employees or payments made to group purchasing organizations. Rather, the statute contains a strict three-prong exception that appears to prohibit any type of volume-based form of payment arrangement with sales personnel. Please visit our previous article for a more detailed overview of EKRA and its exceptions.
First Enforcement Action
EKRA permits the Attorney General, in consultation with the Secretary of Health & Human Services, to promulgate regulations clarifying the existing exceptions and issuing new ones. In the approximate 18 months since EKRA’s enactment, the Attorney General has not provided any pertinent guidance nor has Congress further refined the statute. However, on January 10, 2020, the Department of Justice announced the first public EKRA conviction in the nation.
The enforcement action involved the office manager of a Kentucky substance abuse clinic who admitted that she solicited kickbacks from a toxicology lab CEO in exchange for urine drug test referrals from December 2018 through August 2019. The office manager further divulged that in August 2019, the lab CEO provided her a $4,000 check as part of a larger package of promised inducements. When interviewed a month later by law enforcement, the office manager denied knowledge of the check and stated that it was likely a loan from the lab CEO to her husband. The office manager contacted the lab CEO shortly after she was questioned and requested that he alter the lab’s records and label the check as “rent/loan” to align with her story. The office manager also pled guilty to making false statements and attempted tampering with records. Earlier this month, the office manager was sentenced to five months in prison followed by five months of home detention, and ordered to pay a $55,000 fine.
The Path Forward – Practical Takeaways
As the COVID-19 pandemic unfolds and the demand for diagnostic testing increases, clinical laboratories (along with recovery homes and clinical treatment facilities) should evaluate any new or existing relationships going forward to ensure they comply with EKRA. Management relationships, marketing deals, employee relationships and any types of incentive-based arrangements are especially prone to scrutiny under EKRA and should be carefully analyzed. Despite the initial uncertainty and lack of clear guidance surrounding EKRA’s applicability, the government’s recent enforcement action underscores the need to remain keenly aware of the statute and maintain compliant arrangements.
If you have any questions regarding EKRA or would like assistance evaluating any new or existing arrangements for EKRA compliance, please contact:
- Gregg Wallander at (317) 977-1431 or gwally@hallrender.com;
- Jennifer Viegas at (317) 977-1485 or jviegas@hallrender.com;
- Alyssa James at (317) 429-3640 or ajames@hallrender.com; or
- Katherine Schwartz at (317) 977-1432 or kschwartz@hallrender.com; or
- Your regular Hall Render attorney.
Hall Render’s attorneys and professionals continue to maintain the most up-to-date information and resources at our COVID-19 Resource page, through our 24/7 COVID‑19 Hotline at (317) 429-3900 or by contacting your regular Hall Render attorney.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.
