Compliance Perspectives: Avoiding Kickback Risks under New EKRA Law

A new law passed to deal with the opioid epidemic has significant ramifications for labs including but not limited to those involved in drug addiction and recovery programs. Specifically, the Eliminating Kickbacks in Recovery Act of 2018 (EKRA) impacts labs’ financial relationships with individuals or legal entities hired to generate business for the lab. Accordingly, it’s imperative to review all your current marketing compensation arrangements and make necessary modifications to ensure compliance with new EKRA rules. Here’s how.

What EKRA Says

Fraudulent business practices by drug addiction centers and toxicology labs contributed to opioid drug use and distribution. In October 2018, Congress passed EKRA as part of broad new opioid legislation (the Support for Patients and Communities Act) to address drug addiction center fraud and abuse. Specifically, EKRA imposes penalties of up to $200K and 10 years in prison for paying remuneration to induce or reward referrals to labs, clinical treatment facilities and recovery homes who knowingly and willfully:

• Solicit or receive any remuneration in return for referring a patient to a lab, clinical treatment facility, or recovery home; or
• Pay or offer any remuneration to induce a referral of an individual, or in exchange for an individual using the services of a lab, clinical treatment facility, or recovery home.

Problems with EKRA

Of course, all of these practices are already illegal under the Anti-Kickback Statute (AKS) and Stark Law (Stark). The problem with EKRA is that it’s so much broader than those laws. For one thing, EKRA applies not just to Medicare, Medicaid and other government health programs the way AKS and Stark do but also to commercial insurers. And among the things EKRA bans are common lab business arrangements that are currently permissible under both the AKS and Stark.

Beware Business Arrangements that Comply with AKS/Stark but Not EKRA

Perhaps the biggest practical concern for labs is that existing marketing arrangements that comply with Stark and the AKS may now be technically illegal because they don’t comply with EKRA, including: 

Marketing Bonuses/Incentives: Incentive and performance bonuses paid by labs to marketing personnel are problematic under the AKS and Stark because they’re pegged to the value or volume of referrals. However, both laws provide safe harbors (like the AKS employee-compensation and personal services and management contracts safe harbors) and exceptions for bona-fide marketing employees receiving productivity bonuses, notes attorney Andrew Wachler of Wachler & Associates PC. But EKRA has no safe harbors for such arrangements. Result: Marketing incentives that labs carefully vetted to ensure compliance with Stark and the AKS may now be illegal under EKRA.

Marketing Commissions: Also suspect are independent contractor marketing arrangements paid on a commission based on volume or value of lab services billed or collected.  Many labs hire independent contractor marketers on a commissions basis even though there are no applicable AKS safe harbors or Stark exceptions. But these arrangements are even more problematic under EKRA.

Doctor Offices with In-Office Labs: Stark allows for the creation of doctor’s offices with in-office labs provided that certain requirements are met. EKRA includes no such exception or safe harbor. Although EKRA’s language isn’t completely clear, Wachler suggests that the government could argue that doctors are receiving remuneration from lab work for patient referral in violation of EKRA.  “Certainly, we do not believe this was the intention of EKRA, and we would not recommend that doctors modify their in-office lab arrangements,” he adds.

Practical Impact: 3 Steps to Take

Labs need to gear up for EKRA now.

Step 1: Be Aware of EKRA: First, recognize that EKRA exists and that, technically, you may be in violation of it. It’s unclear how EKRA will be enforced. The fact that it took effect immediately after it passed with no grace period suggests that labs may get at least a temporary respite, experts suggest. Still, you can’t assume relief is coming. 

Step 2: Review Your Marketing Agreements: Revisit the compensation provisions of your marketing agreements with employees and independent contractors to ensure they comply even if you’ve already vetted them for AKS and/or Stark.

Step 3: Make Needed Modifications: If you identify problems, modify your agreements. In doing so, keep in mind that while EKRA doesn’t include any safe harbors, it does provide exceptions allowing for payments by a lab (or other employer) to an employee or independent contractor as long the payment isn’t based on: 

• The number of individuals referred to a particular lab, recovery home or clinical treatment facility;
• The number of tests or procedures performed; or
• The amount billed to or received from, in part or in whole, the health care benefit program from the individuals referred to a particular lab, recovery home or clinical treatment facility.

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This article originally appeared in G2 Intelligence, Lab Compliance Advisor, April 2019