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Eliminating Kickbacks In Recovery Act

On Behalf of | May 15, 2019 | Articles, Blog, Business Law, Healthcare Law, Publications

By Alan H. Sonnenklar, Esq.

The newly enacted federal Eliminating Kickbacks in Recovery Act (“EKRA”) impacts the way healthcare providers may compensate certain employees and referral sources. EKRA prohibits healthcare providers from giving or receiving remuneration for referring a patient to a recovery home, clinical treatment facility or laboratory. For purposes of EKRA, a “clinical treatment facility” is defined as “a medical setting, other than a hospital, that provides detoxification, risk reduction, outpatient treatment and care, residential treatment, or rehabilitation for substance use, pursuant to licensure or certification under State law.” A violation of EKRA may lead to fines of up to $200,000 and up to 10 years imprisonment. Accordingly, healthcare providers should evaluate the structure of their current arrangements with certain employees and referral sources.

Scope Of EKRA

On October 24, 2018, the “Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act,” which included EKRA, was signed into law. Although originally intended to curb the opioid crisis, EKRA may have greater implications. An EKRA violation occurs when a healthcare provider: (1) knowingly and willfully solicits or receives remuneration, in return for “referring a patient to a recovery home, clinical treatment facility, or laboratory;” or (2) “pays or offers any remuneration to induce referrals to a recovery home, clinical treatment facility, or laboratory in exchange for an individual using the services of that recovery home, clinical treatment facility, or laboratory.” For example, if a laboratory intends to pay a marketing representative any compensation based upon the volume of specimens, or the amount the laboratory bills or collections as a result of referrals from that marketing representative, such an arrangement would potentially implicate the provisions of EKRA.EKRA is not specifically limited to laboratories that operate in connection with recovery or treatment facilities. Rather, EKRA incorporates the same definition of “laboratory” as the Public Health Services Act, and therefore many clinical laboratories will be impacted by this new law, including physician-owned laboratories. Lobbyists are currently moving to have Congress amend EKRA to narrow its scope so that it would apply only to referrals for treatment and recovery centers, but there has been no amendment as of yet.

Comparing EKRA to the Anti-Kickback Statute

EKRA’s scope is broader than the federal Anti-Kickback Statute (“AKS”). It is possible for healthcare providers to comply with AKS and still violate EKRA. Unlike the AKS, EKRA does not apply exclusively to federally funded programs. Rather, EKRA covers commercial health insurance programs as well. Therefore, EKRA’s broad language influences arrangements between laboratories and their referral sources, regardless of whether reimbursement to those laboratories originates from government funded programs, commercial insurance or private payors.EKRA contains safe harbor exceptions for certain permissible arrangements, some of which are not available under the AKS and others that contain important differences. For example, while the AKS includes a safe harbor exception that typically permits compensation as part of a bona fide employment arrangement, EKRA has no such exception. Under EKRA, any payment to an employee or independent contractor that is determined or varied by: (i) the number of individuals referred to a particular recovery home, clinical treatment facility, or laboratory; (ii) the number of tests or procedures performed; or (iii) the amount billed to or received from the health care benefit program with respect to the individuals referred, may result in a violation of EKRA. Such payments are specifically excluded from any safe harbor protections of EKRA. Accordingly, clinical laboratories that pay employees on a productivity basis may be in violation of EKRA. As a result, compensation to referral sources should be established in advance and not determined in any manner that relates to the amount of generated business. Also, clinical laboratories should review their arrangements with referral sources to ensure that they are not paying any compensation or remuneration to referral sources in exchange for referring federally funded, private-pay or commercially insured patients. ConclusionEKRA, as it is currently constituted, affects all laboratories. Therefore, clinical laboratories and healthcare providers should review their arrangements with marketing companies, referral sources (for both federally funded and private/commercially insured patients), employees, and independent contractors, and revise them as necessary to ensure EKRA compliance. Laboratories and healthcare providers should consult with attorneys familiar with EKRA to review specific arrangements and ensure they are not in violation of EKRA, and should additionally monitor whether the scope of EKRA is amended in the future.